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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.



Comments (33) | Permalink

Readers Comments

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This user has validated their user name. by: iheartjacksparrow

Fri Jan 18 00:06:42 2019

I got an e-mail from a buyer in California who thought I had a B&M because I was charging sales tax on his online purchase. I explained to him that I am required to collect sales tax if I sell more than two items to California residents.

I think, because a lot of eBay sellers don't charge any tax on sales no matter where they live or to whom they are mailing items, that anyone selling on an online marketplace is looked at suspiciously when they charge tax on sales.  

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This user has validated their user name. by: toolguy

Fri Jan 18 00:45:29 2019

@iheartjacksparrow

"I explained to him that I am required to collect sales tax if I sell more than two items to California residents."

Who told you this? Because it isn't true!

You may voluntarily apply for a Certificate of Registration—Use Tax if you so desire but you are not required to do so if you don't have a presence in California!

https://www.boe.ca.gov/formspubs/pub77/

Here
's
another good read about California sales tax.

https://www.taxjar.com/states/california-sales-tax-online/
#do-you-have-sales-tax-nexus-in-california

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This user has validated their user name. by: The End

Fri Jan 18 05:49:17 2019

That's nonsense.
We pay tax on our components from other states.
Organized Criminal Government is now in control.
Trying to deal with it at tax time just raises Red Flags.
They got us right where they want us.

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This user has validated their user name. by: iheartjacksparrow

Fri Jan 18 10:39:39 2019

@toolguy - I live in Los Angeles County (since 1959). My packages are shipped from Los Angeles County. So I definitely have a "presence" in California. The information I got, that you question, was from video by the State.

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This user has validated their user name. by: RKTOYS

Fri Jan 18 11:07:45 2019

This entire situation is just stupid beyond belief.

I still do a small amount of resale business with the retail side of my former distributor.  They've started charging sales tax and in a puzzlingly inconvenient way.  You can pay for your items and let them pile up in the warehouse to save on shipping.  Well, they decided to charge tax at the time of _shipping_ for some ridiculous reason.  Better still, the warehouse holding period is a 90-day countdown.

So, I had some long-delayed item fall into the warehouse about 2 days before the tax grab was effected.  I've been in touch with customer service on what to do to have a resale exemption recognized.  3 months have gone by and they still have no answers for me.  Although I think some of the stupidity is on them (taxing already sold items, inability to reset the clock, not being able to do this _despite_ having run a wholesale operation, etc), that whoever they're consulting on their end can't deliver answers is inexcusable.

Didn't the dolts in government have any of this worked out before they chose to throat-punch small businesses?  If not at the time the mandate came down, why the hell not 3 flippin' months later?  What are they dragging their feet for?

Irritating to have to choose between hurting the distributor and my customers and enriching the idiotic state.

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by: Whatever This user has validated their user name.

Fri Jan 18 13:00:54 2019

Well I had my first "tax" related sale go thru yesterday - since I am an extremely small seller (thanks ebay) I always figured that this tax thing was going to be a mess and when the powers that be figure it out they can take care of it.  So far so good.  Yesterday I see a sale go thru for Washington state. Under my SOLD table it showed an amount of $197 but when I went into paypal it showed I was only paid $168. Ok stop the bus. I called ebay to help figure it out.  So ebay automatically billed the buyer for the total amount plus the state sales tax. I questioned whether or not ebay was  taking FVF on the 197 or the 168.  The rep walked me thru it to the invoice accounting and I was only charged a FVF on the 168.  I think this method of discrepancy is going to cause ebay more than one little headache and for sure confusion on the buyers end.  And will the end of the year 1099 reflect the total amount collected or the sales amount? It's going to be a big nightmare I think but praying for the best and hoping this whole tax thing doesn't hurt the sellers.  Perhaps buyers are already used to the big "A" collecting taxes? I sure hope so because I don't want the buyer to think I got that $16.

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This user has validated their user name. by: toolguy

Fri Jan 18 13:02:47 2019

@iheartjacksparrow

I thought you lived here.

So the 2nd link I provided would fit you and I.

I don't sell $100,000 or 200 items to Californians in a 12 month period.

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This user has validated their user name. by: toolguy

Fri Jan 18 13:08:36 2019

@Whatever

Keep track of those sales taxes!

eBay has added to the bottom of the 2nd column of your total collected.

Right now they have NO way to show you how much they have collected from you (no link to total amount)

They say they're working on it ~ ROTFLMAO

I'm writing the amounts on my calendar, so far only 1 sale to Washington state for $2.64 taxes

But I'm sure it will start to add up once more states jump on board. . .eBay has a list of states they are collecting for and those that will be added in the months to come.

I SEE A NIGHTMARE IN THE WORKING

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This user has validated their user name. by: Rexford

Fri Jan 18 15:36:07 2019

"I don't sell $100,000 or 200 items to Californians in a 12 month period."

Things that make you go hmmmmm.

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This user has validated their user name. by: Rexford

Fri Jan 18 15:37:56 2019

Whatever,

Did eBay tell you that they are submitting the tax to Washington state or are they expecting you to do that?

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This user has validated their user name. by: iheartjacksparrow

Fri Jan 18 15:39:45 2019

@toolguy - From Publication 109 (Internet Sales);

" If your business is located in California, retail sales of tangible personal property that you make over the Internet to California customers are generally taxable unless the sales qualify for a specific tax exemption or exclusion (see Nontaxable Sales), and you are required to register for a permit and report and pay tax to the same extent as any other retailer in California."

If you aren't collecting tax from California residents, I hope you have a good attorney.

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This user has validated their user name. by: Lightning

Sat Jan 19 05:26:21 2019

@Toolguy
''I don't sell $100,000 or 200 items to Californians in a 12 month period.''

I'm reading that guide, and It doesn't say TO Californians only.  It doesn't mention Californians.  It just says $100,000 sales or more than 200 items.  That is their way of determining the size of your business, and qualifying it as a nexus.  I'm thinking you sell more than 4 items per week, so you are over their minimum standard.  You are required to collect taxes and remit to the state.  If your ebay listings are not set up to collect in your home state, you are opening yourself up for a world of hurt (interest, penalties, filing a pile of past year forms, etc.)

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This user has validated their user name. by: Lightning

Sat Jan 19 06:04:15 2019

After further reading, I have to backtrack my statement a bit.  The $100,000 sales and 200 items is the test to see if you have a California nexus even though you are NOT in CA.  So if you exist in Wyoming, but sell that much stuff into CA, you are determined to have a nexus in CA due to the amount of activity.  

If you are already in CA, based in CA, have your stuff in CA, you have a nexus in CA no matter what amount of sales you do, regarding the obligation to collect taxes on CA sales.  You have to get a permit, collect the tax, and remit the tax to CA.  Like the rest of us in most other states.  

I think some states, like NH for one, don't have a sales tax at all, so that makes it pretty easy.

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by: comments This user has validated their user name.

Sat Jan 19 08:33:43 2019

I was actually checking the feedback of a large seller. It seems they have sold a few taxable items and got lots of negative and neutral feedbacks from buyers complaining about the lack of transparency on them being charged tax. Given that there were quite a few similar complaints I expect this will indeed be a huge problem going forward, until the community begins to understand it is neither ebay's fault nor is it the sellers. Tough ebay does have some responsibility because they could have lobbied and fought against the law the same way walmart fought for it.  

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

Sat Jan 19 10:14:35 2019

We live in GA.

1. At this moment in time, we are supposed to declare all online out of state purchases on our end of year tax forms because we 'owe' the state we reside in the 8% sales tax they have not collected.  As we all know, Amazon/ebay type customers probably rare do this, but nevertheless, that is the tax requirement.

2. If websites such as ebay/amazon, etc are now going to collect and remit to individual states what appears to amount to an unconstitutional export tax (see below), where does this leave individuals at end of year tax submissions?  Will states now get to double-collect this tax?

3. Amazon, in particular, and it seems ebay shortly, will start collecting sales tax from small-time sellers to whatever state they are shipping to, even though seller does not reside in, nor have a presence in, said state - Amazon's just done this on a sale of ours to PA, and, it appears, charged the tax on the cost of the item PLUS the shipping charge - so customers out of state to us appear to be paying tax on their postage/shipping charge as well now.

Yet, The Constitution is VERY clear about no taxation being levied on out of state exports, as pasted below.  

Does a Supreme Court ruling up end The Constitution all of a sudden?  

Surely, it requires a constitutional amendment in the first instance?

This entire situation is a bad dream becoming a nightmare for smaller online sellers, let alone the original post about bad feedback/customer relations - as a customer I feel this way when I buy something from someone out of state from a small seller I know has no presence in my state, yet is overnight charging sales tax, like the Hong Kong registered company selling ebay's shipping supplies on ebay have started to do.

I am also now of the opinion sales tax is slowly being tagged onto every online sale by many sellers who have no intention of remitting it to the State in question - how can anyone even check this has happened to the tax they have been charged?  There's probably now a window of opportunity for bogus and never remitted tax collection by many sellers/online venues - I contacted ebay's seller of supplies to ask them why they charged me tax for a State they are not in, and they did not reply to me [a-typical ebay customer service of course] - so there's no transparency in this matter at this time.

And how are the individual States going to chase this up with out-of-state sellers?  I can't even begin to imagine the cost and legal ramifications of chasing some small seller from the other side of the USA who, say, two years hence but has long since moved elsewhere, but collected from customers but never remitted to the State small/medium amounts of supposed state sales tax.


https://www.heritage.org/constitution/#!/articles/1/es
says/65/export-taxation-clause

Export
Taxation Clause
No Tax or Duty shall be laid on Articles exported from any State.

ARTICLE I, SECTION 9, CLAUSE 5

Cases interpreting the Export Taxation Clause have made clear that the clause ''strictly prohibits any tax or duty, discriminatory or not, that falls on exports during the course of exportation,'' and that the protection extends to ''services and activities closely related to the export process.'' United States v. IBM Corp. (1996).  

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by: thebobman This user has validated their user name.

Mon Jan 21 00:27:12 2019

Due to the skew in population for people in CA, if you sell more than 2,000 orders a year, chances are, you will probably hit 200 sales in CA.Most states, you have to be doing 6,000 to 10,000 orders a year to be hitting a 200 sales threshold. 5.5 Sales a day isn't a lot, and we could be talking about $50-$100 a day in revenue.  

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by: rachel This user has validated their user name.

Mon Jan 21 01:08:54 2019

Remember that in California when collecting sales tax in CA, eBay only has the ability to charge the base sales tax rate. Many counties and cities add additional taXes called city and district taxes that change or are removed only to be added back again. eBay does not have a way to collect these additional taxes at checkout. My volume can it justify taxjar or other checkout so it's generally less expensive for me to pay the additional district taxes when applicable. Adding CA sakes tax through outside vendors is not inexpensive. If anyone ows if a reasonably priced checkout, I would love to know about it.

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by: rachel This user has validated their user name.

Mon Jan 21 01:16:07 2019

Correction:: My volume cannot justify what they charge for the use of sales tax software. Most buyers try to  buy from out of state sellers to avoid sales tax. I end up paying the CA district tax out of pocket to the state unless they are in a hurry and prefer to buy in state for faster shipping. Any ideas?  

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by: Moonwishes This user has validated their user name.
Web Site

Mon Jan 21 03:25:03 2019

>>Most buyers try to  buy from out of state sellers to avoid sales tax<<

I have heard this off and on over the years since the big issues with sales tax. How can anyone prove this? I know I have never considered whether or not I would have to pay sales tax when purchasing something online.  Unless someone has proof positive about this, people shouldn't be saying it or thinking it. To confirm this 'fact' you would have to survey each and every buyer post-sale to find out why they choose that particular seller. Was it price, the items closeness to the buyer, feedback, and way down the list, whether or not they charge sale tax to the buyer's state.

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by: val2525 This user has validated their user name.

Mon Jan 21 03:41:47 2019

I sent a message to eBay via eBay for Business and they had no idea what I was talking about when I asked when eBay would have the ability to set more than one tax rate per state. I was told one rate was adequate. I replied that in ten states, yes, one rate was fine as those states were origin tax states. The other 30+ states were destination tax states and tax was supposed to be charged based on buyer location.

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