Does eBay include sales tax in the information it gives to the IRS on Form 1099K? eBay now touches all money paid by buyers now instead of PayPal, which used to handle payment processing on the eBay marketplace. And that means sellers need answers from eBay about the information it provides to the IRS on Form 1099-K.
Sellers have had questions for as long as eBay began issuing 1099Ks. This thread from the fall of 2020 shows how sellers received different answers about 1099Ks depending on who was speaking. (Every dollar eBay processes will show on eBay 1099Ks, said one seller replying to a seller’s question about sales tax inclusion in the form. Sales tax is not included in eBay 1099Ks, wrote another.)
Adding to the confusion have been remittance issues. States used to require sellers to collect the sales tax from buyers and remit the tax directly, then some states began to require online platforms to collect and remit the sales tax instead of sellers.
Questions about 1099Ks continue, especially with the attention on the new lower threshold that requires payment processors like eBay to issue 1099Ks for sellers who do a minimum of $600 in transactions for tax-year 2022.
Lo and behold, the topic of IRS Form 1099-Ks came up again during eBay’s weekly chat session on Wednesday: “why is Managed payments having so many problems still? You can’t get your 1099’s right. They aren’t even close to what my numbers should be,” a seller wrote.
Another seller responding raised a different issue, this one about whether eBay included all transactions in 2021 in the 1099K for 2021, or whether eBay included all transactions from payouts made in 2021.
An eBay moderator responded later in the thread with some clarification:
“I just wanted to clarify that we go off the date the buyer paid. It’s not the date of sale or the payout issued to the seller. I reached out to the Payments team to verify this once more, and they said per this help page here (the source of truth for the 1099-K form) it’s stated that we use the payment transactions within the calendar year.”
The page the moderator called the “source of truth” for 1099-Ks also included the following information about whether eBay includes sales tax on Form 1099Ks:
“Additionally, Form 1099-K does not include the sales tax when it is automatically collected and remitted by eBay.”
The complete section explains why the numbers may not seem accurate when sellers compare it to their own numbers:
“As Form 1099-K is an IRS information return, it includes the gross amount of all reportable payment transactions within a calendar year. This amount does not include any adjustments, for example, credits, discounts, fees, refunds, or any other adjustable amounts. This means that the gross amount on your Form 1099-K may not be the final reportable amount on your tax return.”
eBay also tackled the issue in a podcast with Manish Belsare, which you can access on this page.
Belsare took the opportunity to tell podcast listeners eBay is against the lower threshold for tax year 2022 and said, “You can also visit eBaymainstreet.com and learn how eBay is fighting burdensome legislation like this one on behalf of our sellers. You could voice your concern on that website and even send a letter to your member of Congress about it.”
We expect questions about Form 1099Ks to continue, especially as it now impacts low-volume sellers who may think of eBay as a hobby rather than a business.