Online sellers continue to struggle with state sales tax issues, and Minnesota just threw a monkey wrench into the mix. We encountered a thread on the eBay boards that shows how Minnesota's well-meaning provision is causing additional headaches for small sellers.
On January 1, 2019, eBay began collecting sales tax to comply with Marketplace Facilitator laws
in Washington and Minnesota and will expand compliance to additional states with similar laws in the coming months.
For most states, the Marketplace Facilitator laws make it easier for marketplace-only sellers, since it is the marketplace that deals with calculating, collecting, and remitting the tax, not the sellers. (Sellers who also sell on their own websites or other platforms are still burdened with compliance, however.)
Of the 8 states for which eBay said it would begin collecting sales tax this year (so far), only Minnesota added a qualifier. From eBay's help page:
"Small business exemption - Minnesota has enacted a small business exemption for out of state unregistered sellers whose taxable retail sales into Minnesota are less than $10,000 in the previous 12-month period. These sellers are not subject to the Minnesota marketplace tax laws, and eBay will not be collecting sales tax on these transactions."
That sounds good, however, it complicates things.
Sellers had lots of questions in this thread
on the eBay boards, but the Minnesota question initially flummoxed even the eBay moderator.
First he said, "regardless of a seller's potential eligibility for exemptions eBay will collect sales tax for all purchases and remit this to the state. A seller can request credits they may qualify for, however, we will not be making adjustments based on the seller's business size. Not only would this be difficult to calculate and predict for throughout the year, but a seller very reasonably could be doing additional business in that state that would put them over the limit."
But he later posted that the above statement was incorrect and added the following clarification:
"To clarify, we would monitor a seller's sales to determine if they qualify for exemptions and will adjust accordingly. We are aware that reporting is needed for seller's review and are working on future improvements.
"While we are working to collect and remit taxes on the seller's behalf where we can determine this is required, a seller my need to make adjustments if they have revenue outside of eBay that puts them over this threshold. This is something on our radar and enhancements may come in the future to further support a seller's business."
Let that sink in. eBay is forced to collect and remit sales tax as a marketplace hosting online sellers, but it's unable to determine if it should be collecting on behalf of a seller since he or she may or may not be exempt - and it lacks reporting capabilities for sellers that it acknowledges they need.
States say the Supreme Court ruling in Wayfair in which it overturned Quill's physical nexus precedent allows it to make such laws, but the Supreme Court also said the laws could not create "undue burdens upon interstate commerce." It sure looks like there are some significant burdens impacting small businesses around the country as each state creates its own laws and exemptions.