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Thu Jan 17 2019 23:04:43

Sellers Who Collect Sales Tax May Face Unexpected Hurdle

By: Ina Steiner

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Sellers who collect sales tax on transactions from out-of-state buyers may face an unexpected hurdle: buyer distrust. The issue came up on a thread on the eBay discussion boards.

A buyer expressed concern when an eBay seller charged sales tax on his (or her) purchase. "Curious, have I missed a new rule? I thought sales tax was only assessed on in-state purchases or for those States requiring declaration."

It's easy to understand the confusion. Merchants are only required to collect a state's sales tax if they have nexus in the buyer's state, which under the Supreme Court "Quill" 1990s ruling, meant a physical presence - such as operating a brick-and-mortar store in the buyer's state. 

But the Supreme Court overturned the Quill ruling last year, and numerous states are requiring all but the smallest of sellers to collect sales tax when selling to their residents.

But while the news is penetrating down to sellers, it appears the news may not have reached the ears of shoppers. On a marketplace like eBay, buyers may be especially wary, where there's indication that some sellers are committing sales tax fraud, as we detailed in 2017.

On a site like eBay, it's difficult for a seller to present reassuring messages to shoppers - it's up to the marketplace to crack down on sellers who are obviously abusing sales tax and to educate shoppers about sales tax policies and practices.

It's certainly not helpful to a marketplace if its buyers think sellers are incorrectly or fraudulently collecting sales tax.

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by: val2525 This user has validated their user name.

Mon Jan 21 03:43:27 2019

Number 6, you really need to read up on Wayfair vs South Dakota, internet sales tax, and marketplace facilitator tax. You're quoting the wrong laws.

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by: Chicago48 This user has validated their user name.

Mon Jan 21 05:56:46 2019

I honestly don't see how many small sellers can comply because each state to my knowledge requires applying for some type of revenue tax certificate (Certificate of Registration—Use Tax) or something like that.  Who in the tarheel has time to apply to 50 states for a tax certificate???  GEEZ!  I'm not collecting taxes period.  Let them catch me.
I don't make more than $10,000 a year in sales, let them catch me.

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by: Chicago48 This user has validated their user name.

Mon Jan 21 06:01:24 2019

I see more listings and store owners going to Mercari (Japanese own) and Posh and sites like that.  I sell on the REALREAL and I don't recall that they take out taxes.  So this seems to be unique to the big boys like AMZ and Ebay.  Our congress is a mess....and people want to come to America?  Goo luck.

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by: marty This user has validated their user name.

Mon Jan 21 08:38:22 2019

It is a total mess. In my state I do declare the approx amount of purchases I got online and am taxed a sales tax. So now as a buyer I have to keep a log of which of my purchases were taxed and which were not?

If an online seller charges me a sales tax and I do not declare that purchase on my tax form and it turns out that the online seller did not remit the sales tax to the state, do the state bureaucrats go after me and I have to prove that I did pay the sales tax?

As an online seller, I do not collect any tax. ebay should do it, not me.

Otherwise, come and get me. I believe I won' t be the first on their list of the 50 mil seller they will try to go after. And good luck with that too.  

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by: eastwestphoto This user has validated their user name.
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Mon Jan 21 09:57:41 2019

As a business ebay should be totally responsible for meeting all 50 states and territories tax requirements automatically. The seller should be required to do NOTHING!  

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This user has validated their user name. by: Number 6

Mon Jan 21 10:54:07 2019

val2525 says: "Number 6, you really need to read up on Wayfair vs South Dakota, internet sales tax, and marketplace facilitator tax. You're quoting the wrong laws."

I'm not quoting any 'laws', I'm well aware of Wayfair and the recent Supreme Court fiasco - My quote is directly taken from The American Constitution.  Which says individual states cannot collect export taxes from other states - what's a book bought from NY by someone on CA, if not an export?

I was not aware the Supreme Court could overturn the Constitution - it is the Constitution that requires an amendment to make this inter-state tax legal.

The state in which the buyer resides can require the buyer/resident to pay sales tax at his state's rate to his state for purchases made out of state - but he cannot collect on behalf of the state he is exporting from.

And who is remitting what to whom now this tsunami of 'tax collection' has started online - how can a resident prove his tax has been collected and remitted when he previously paid it himself, as "Marty" notes "It is a total mess. In my state I do declare the approx amount of purchases I got online and am taxed a sales tax. So now as a buyer I have to keep a log of which of my purchases were taxed and which were not"





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This user has validated their user name. by: iheartjacksparrow

Mon Jan 21 11:03:24 2019

marty writes: "I believe I won' t be the first on their list of the 50 mil seller they will try to go after."

If all these states are so desperate for the few dollars they are going to receive from small online sellers, you know they are not going to spend hundreds of thousands of dollars to prosecute them.

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This user has validated their user name. by: Philo

Mon Jan 21 11:31:57 2019

So what happens if I am buying to resell with my (reseller cert) and ebay auto collects tax?

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This user has validated their user name. by: iheartjacksparrow

Mon Jan 21 14:33:14 2019

@Philo - Send your question to the AskeBay twitter account.  

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This user has validated their user name. by: cfrphoto

Mon Jan 21 15:33:15 2019

I don’t believe that eBay collection of taxes in Washington state is as useful without reporting. Washington state businesses must pay additional B&O taxes on gross receipts on in-state transactions. Assuming eBay fails to provide detailed reports, Washington state sellers may not have enough information to file an accurate tax return. The “one rate fits all” eBay state tax table was useless for accurately collecting the Washington destination-based sales tax. Tax rate boundaries don’t coincide with ZIP code or city/county boundaries. Washington State sales were a small percentage of my sales. Reporting and paying sales tax included in the price seemed the best strategy for maximizing sales. When estimating transaction counts, will eBay count instant payment sales as separate transactions? Will PayPal regard each payment as a separate transaction? It is not uncommon for users to pay for sales in a combined order separately. How will transitions from direct sales tax collection to eBay collecting as a market facilitator work if no reporting is provided?

California economic nexus rules kick in on April 1, 2019. I have a California Sellers Permit for in-state selling events. Combined-order shipments last year exceeded the 200-transaction threshold last year and I will be required to collect sales tax. Fortunately, California does not require remote collection of local sales taxes unless the 200-transaction threshold is met in that district. When eBay starts collecting California sales tax as a marketplace facilitator, they may be required to add on local taxes in all districts.

Most states include a 200-transaction minimum for reporting, but Massachusetts and Minnesota drop the minimum to 100 and a few states base their threshold on gross sales only. Sales requirements vary from $10,000 to $500,000. A few states, like Washington, have "Notice & Report" requirements allowing some sellers to notify buyers subject to use tax. Transition rules creating an economic nexus differ and may require reporting sales tax for part of the current year for states like California of the following year for states like Washington. Sellers who participate at bourses in out-of-state bourses face even more complex situations. Will show-host states rule that having a physical nexus, even for only a day, creates an economic nexus?

https://blog.taxjar.com/economic-nexus-laws/

http
s://www.avalara.com/us/en/learn/sales-tax/south-dakota-wayfair.html

And
for more detail:

https://blog.taxjar.com/sales-tax-nexus-every-state/>

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by: Opalie This user has validated their user name.

Tue Jan 22 23:35:05 2019

@cfrphoto

Re your first paragraph. Yes, the WA destination based sales tax is a nightmare, which is why I never charged it and just remitted any in state sales from my profits. It was a lot faster and less stressful that way lol

But as ebay is now collecting and remitting it with very little in the way of reporting or transparency, I have just added another column to my sales spreadsheets to indicate an in state to WA sale ( and started yet another ebay hard copy file) and the amount collected and remitted by ebay.

It's a PITB to have to use FE but it works for now or until ebay coughs up the moolah to get their monkey coders up to speed on what small business needs for tax filing purposes.

And yes the B&O should be fun this year (not)

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by: mcposty This user has validated their user name.

Wed Jan 23 12:49:56 2019

honestly, its how it should be. in california, you collect california tax NO MATTER WHERE THE BUYER IS FROM. This is what the supreme court should have told pennsylvania, that they have every right to demand taxes from their own online sellers...except the supreme court are corrupt.



NOT collect tax in california for whatever state the buyer is from, thats rediculous. If i'm from utah, and go to texas, i cant demand the 7-11 there collect utah taxes by showing them my id, nor can I demand to pay no taxes because im not a Texas resident.





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This user has validated their user name. by: iheartjacksparrow

Thu Jan 24 00:24:30 2019

@mcposty - You're confusing people from one state walking into a store in another state, with a seller in one state mailing an item to a buyer in another state. I've had a few buyers from California purchase items to be mailed as gifts to people in other states, and that does not add California sales tax to the total of the merchandise. If I walk into a store in Arizona and buy something, of course they are going to charge me Arizona sales tax because I'm physically in that location.  

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