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Sun Mar 4 2018 16:03:28

Sellers Caught between eBay and States over Sales Tax

By: Ina Steiner

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eBay offers sellers a table to help them set their sales-tax rates for each of the states in which they may be required to collect taxes, and it's asking some sellers who collect sales tax for proof that they are authorized to collect the taxes. 

In December, we wrote about obvious cases of fraud involving sellers who were collecting sales tax. For example, we noted a seller who charged 12% sales tax for every single state - some states don't even charge sales tax.

We had pointed to a post from last year where an eBay moderator said, "Due to the volume of varying tax laws in different locations this is not something we are qualified to take action on."

But we've since learned that in some cases, eBay does require sellers to submit documentation showing they are authorized to collect sales tax - the email states, "eBay needs to verify your permits for collecting sales tax." (See this thread on the eBay boards.) 

We talked to one seller who received such a letter from eBay that stated that if the seller continued to charge sales tax without providing eBay with documentation, or if the seller overcharged sales tax, it would result in immediate loss of his selling privileges.

The seller told EcommerceBytes he believes eBay is overstepping their bounds, but he complied nevertheless. eBay then informed the seller that some of the documents he had submitted were not accepted - "We are unable to accept reseller permits and tax registration documents."

"For some uneducated person in their back office that looks at these and thinks they can determine if they are proper for us to collect the sales tax and remit on behalf of the buyer is beyond me," the reader said.

He was also concerned about the fact that in its notice, eBay provided him with instructions on how to stop charging sales tax in a particular state. "I guess it all boils down to the fact that there must be sellers out there collect that extra percent tax and pocketing it, but to tell me that the certificates I submit are not legit in their eyes and indicating I should remove the sales tax collecting is ridiculous."

If eBay were requiring all sellers who collected sales tax to provide documentation, we probably would have heard more about this, leading us to believe it only happens if an unhappy buyer or a rival seller reports someone to eBay (rightly or wrongly).

This seller's experience calls into question whether eBay has the expertise to evaluate state sales tax documentation, which leaves sellers to spend even more time on an unpleasant task.




Comments (14) | Permalink

Readers Comments

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

by: FeelingFroggy This user has validated their user name.

Sun Mar 4 16:27:45 2018

We have been selling for the past years and collecting our states sales taxes. Never has fleabay ever informed us that we had to prove that we can collect the tax. Seems like the unlevel playing field is getting more uneven. Who knows if I can, surely not ebay. But I'll tell ya I don't want the state I live in sending me a bill for taxes I should have been collecting. They know this cause I have a sales tax license. So Ebay is definately playing more games with some sellers but would also agree that someone probably complained to fleabay about the seller collecting the tax. Some people have nothing else better to do.

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

This user has validated their user name. by: Marie

Sun Mar 4 17:34:57 2018

That thread is almost a year old and the OP is no longer a registered user on Ebay.  Judging from some of the posts on that thread, the OP was not handling sales tax as they should have been.  It appears from some of the posts that that particular seller was sometimes charging sales tax illegally.  But hard to say now that they are shut down.

We recently had a discussion on this site regarding Sales tax and that there are sellers out there charging it on the Ebay site at rates that are ridiculous as well as sellers charging sales tax when they would not even be paying sales tax to those states.

I'm not sure how you can complain about that, then also complain when Ebay steps in to try and find out if a given seller has the legal right to collect sales tax in whatever state or states they say they are collecting them for.  You just can't have it both ways.  Complain that they don't do something, then turn around and complain when they do.

With that said, I do understand why Ebay did not accept the form called "resellers permit" as proof.  I know in the state that I'm from, the form called reseller's permit is filled out by me and submitted to those that I may be purchasing stock from or shipping supplies so that I don't pay sales tax myself.    

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

by: FeelingFroggy This user has validated their user name.

Sun Mar 4 18:19:00 2018

I would think that the reseller's permit IS NOT A SALES TAX License. At least in the state I live.,,, I also have a reseller's permit that I use when I purchase things for resale. I give the seller the permit number and I'm not charged sales tax.....On the other hand my SALES TAX LICENSE allows me to collect a sales tax on anything sold within the state I live and then remit it to the state once every quarter. And be sure the state knows I'm supposed to be collecting the tax as they check all sales tax license numbers against the state income tax forms that I send in.

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

This user has validated their user name. by: Marie

Sun Mar 4 19:39:50 2018

Yep, that is correct, a Reseller's Permit is exactly what it suggests, for the purpose of purchasing stuff for resale.  Which is why Ebay was unable to accept it as any type of proof.  The OP on that thread was just all kinds of confused on many things.

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

by: Golddustwoman This user has validated their user name.

Sun Mar 4 22:53:37 2018

I am glad eBay is finally doing SOMETHING about this issue. If the seller does not have a business account on eBay, I always ask for their Sales Tax ID number before I pay sales tax in my State. And it never fails, the seller will either ignore me or they will deduct the sales tax from my invoice. It's sickening to think of all the buyers who have paid fraudulent sales tax to scheming sellers. The pendulum swings both ways. It's not always about the buyer. eBay is saturated with dishonest sellers as well.

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

by: Silver Ice King This user has validated their user name.

Mon Mar 5 00:45:54 2018

I have a Resale License / Resellers Permit in my state and it is the same number for both issues.  The form that I received from my state shows the license number and is called a Resale Permit.  According the State of California, which is where Ebay is headquartered, if the person has that permit, they are required to collect sales tax on on sales that occur to residents of California.  Those permits can look different depending on how long ago they were issued, whether they were filed for online or if the seller went through a 3rd party to obtain it for them.   I also file my taxes online so there is nothing for me to send to them proving that I am filing and paying the tax collected to California.

Before Ebay gets into the game of accusing sellers of improperly collecting sales tax they better make sure they have personnel that are qualified to make that determination or that they have verified with the states that the seller is collecting tax in that this seller does not have a resale license or they are looking at some potential lawsuits.  Based on what we have seen from Ebay personnel in recent years very few seem qualified to do the jobs they are assigned to do.

But first they should get their ducks in a row and stop the Chinese sellers who they continue to support through partnerships with China, from collecting sales tax from all the various states when it is very obvious they are not remitting it to any state.  They are also some of the worst offenders at charging the same amount of sales tax for every state.

The fact that these Chinese sellers are allowed to continue collecting the extra revenue that they are not entitled to, leads me to believe that Ebay is somehow getting a percentage of that overpaid amount as Ebay leaves no stone un-turned when it comes to charging sellers more money and each countries contract as to what the fees are is different.  Since there would be no reason  to collect sales tax from an international sale - I am sure Ebay is getting their share of the bounty which is why they are in no hurry to put a stop to it.  

Nothing that makes money for Ebay ever seems to get fixed - or at least not promptly, which is why Ebay is in no hurry to correct the cart checkout for combined shipping as the sellers have to refund the overpayment but Ebay gets to keep their 10% FVF on the overpayment.  Why should they worry about fixing it?

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

This user has validated their user name. by: Marie

Mon Mar 5 02:56:12 2018

@Silver Ice King
License and Permits are not the same thing.  The License would be the proof Ebay needs to know if you are in good standing with your state or states and if you are currently an active entity.

The reseller's permit has NOTHING to do with your legal obligation to collect sales tax from anyone.  The reseller's permit is so that you as the entity can purchase stuff from vendors to using to become part of what you sell or actual items that you resell to others.  The reseller's permit ONLY keeps YOU from having to pay sales tax on stuff.  It has NOTHING to do with your customers.

Ebay NEEDS to be in the game of saying some sellers are improperly collecting sales tax because they ARE!  It is Ebay that needs to step up and get the correct records from sellers that have the obligation to collect sales tax.  It is after all their site.

But since the thread referenced in the article is almost a year old, I'm don't think Ebay is actively pursuing this issue.

Asian sellers are part of the problem, but they are not the whole problem. So while they should just stop ALL International sellers from being able to collect sales tax from Ebay customers unless they submit the correct paperwork to Ebay, I just don't think they will anytime soon.  It would be a great place to start that is for sure.

Ebay has NEVER collected FVFs on sales tax.  If you sell on Ebay, you should know this.

The shopping cart issues goes both ways.  Sometimes it is overcharged to the customer and sometimes it is undercharging.  But I'm with you, after all this time, you'd think we would have a functioning cart.

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

by: Barbbie This user has validated their user name.

Mon Mar 5 09:24:04 2018

I wish ebay would actually collect the tax from all the buyers it should. I have updated every listing at least twice with the tax but some always end up not being charged and the box not checked when I look.

On ebay, I lose more money paying taxes than I would like, this is because the state has their tax but the counties have anywhere from 0 on up and so since my state has extremely harsh penalties, I go with the least of the ones that have a charge and am obligated to refund any that are less. I generally have to pay 1 or 2 percent over what is collected.

Ebay needs to fix their tax charging technology to be more accurate.  

I would not mind providing my sales tax info; but, here your sales tax account numbers are printed on the reseller cert. as well and you cannot get or keep a reseller cert without also applying for, receiving and paying sales taxes. This state feels like reselling and paying taxes go hand in hand and that is probably true for other states as well.

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

by: Michael Fleming This user has validated their user name.
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Mon Mar 5 11:13:22 2018

This is actually a fairly big issue and we have been contacted by a number of sellers over the last year or so. Some of these sellers have had their accounts suspended by eBay. Others have been advised to start collecting tax without getting registered by their mentors. This is the cardinal sin of sales tax.

The problem seems most prevalent amongst those who are drop shipping, especially when purchasing from Amazon. The prevailing wisdom is that since they are paying tax to Amazon, they can collect the tax on eBay to reimburse themselves. Many do not even realize that this is wrong. Unfortunately this is not how it works. In order to collect tax you must be approved (registered). And the tax is never the seller's money,it is either the states money or the customer's money. The seller only collects it in trust. So when a seller puts it in their pocket the states view this as stealing and people do go to jail for tax collected and not remitted.

If you Google Florida sales tax and jail, you will see multiple examples. To the best of my knowledge, this has not yet happened with any eBay sellers, but my guess is that sooner or later the states will begin to start making examples of some of these sellers.

In some states, if you are registered to collect sales tax, the state will allow you to take a credit for the tax paid on the purchase and only the net difference would get remitted to the state.

In cases, where sellers, like the Chinese, are increasing profits by charging sales tax, I would think eBay will start cracking down, as ebay could have liability for allowing this to happen and is a prime target for class action or qui tam lawsuits especially in states like IL & NY.

I personally hope that those who have done this inadvertently adjust their business practices before the states or attorneys take notice.

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

by: Whatever This user has validated their user name.

Mon Mar 5 11:27:12 2018

Since I have a brick and mortar presence in Las Vegas and since 90% of our states population actually live in Las Vegas - I rarely sell to anyone in NV - they just show up and shop. I actually doubt that NV will get into the game until they are forced too.  Right now they can't - won't even process their own sales tax - they ask us to send everything off to Arizona who will process cheaper than Nevada - figure that one out.  Ridiculous - probably a case of there's not one to trust in nevada

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

This user has validated their user name. by: Don Wagner

Mon Mar 5 12:08:38 2018

In my state it's called a Retail Sales Tax Permit - a permit to collect state sales tax, and of course they put me on the hook to file statements of tax collected.

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

This user has validated their user name. by: Don Wagner

Mon Mar 5 12:10:34 2018

And use - this PERMIT is what some here are calling a LICENSE.

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

by: epuise This user has validated their user name.

Mon Mar 5 12:44:25 2018

I have had a Tax I.D. number since 1991.
I file/remit Sales Tax for my State 4x a year.
I have no problem 'proving' I collect/forward that tax.

Sellers Caught between eBay and States over Sales Tax   Sellers Caught between eBay and States over Sales Tax

by: Tiffee Jasso This user has validated their user name.

Mon Mar 5 21:34:23 2018

If you are collecting tax for states you do not live in you are committing a fraudulent crime against that state. Since all states do not have a 12% tax rate it is obvious the seller is committing fraud. No ifs and buts to it.



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