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Sat June 1 2019 20:56:15

More States Hop on Online Sales Tax Bandwagon

By: Ina Steiner

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It's been almost a year since the Supreme Court threw the ecommerce industry into chaos by overturning the physical nexus mandate that had limited states from requiring out-of-state retailers to collect sales tax on their behalf.

Since then, state Marketplace Facilitator laws have been growing ever more popular, requiring marketplaces to collect sales taxes rather than third-party sellers.

On Friday, Etsy updated sellers with a list of states for which it collects sales tax and invited sellers to help advocate for a federal solution. 

As of June 1st, Etsy is collecting for 3 additional states, and as of July 1, it will collect for an additional 8 states, bringing the total number of states for which it will collect to 21.

"We expect more states will attempt to pass similar laws or regulatory changes in the future," the marketplace noted in Friday's announcement.


Etsy said the laws create a patchwork of requirements - "Because each state has their own set of rules and requirements, Etsy must make a determination about how to proceed on a case-by-case basis."

Etsy said its experience thusfar has shown how hard it is to properly classify the 50 million handmade, craft, and vintage goods available on its marketplace into taxable item categories. 

eBay seems to be lagging Etsy's compliance timetable. Note that it's easier for Etsy to comply with Marketplace Facilitator laws than it is for eBay, since Etsy handles payment processing. eBay currently handles payments for 5% of total dollar sales that take place on its marketplace.

Though many sellers prefer to offload the collection and remittance of out-of-state sales tax collection, there have been numerous reports of problems resulting from implementation of these laws.

The latest report we received was from a reader who said that when a friend received a refund from PayPal for a return on eBay, he received the purchase price but not the New Jersey sales tax eBay had collected from him - and he is having trouble getting the sales tax refunded.

Let us know if these "patchwork" laws are making your lives easier, or if you're seeing wrinkles in how they're being implemented.



Comments (13) | Permalink

Readers Comments

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

Sun Jun 2 19:15:13 2019

That's unfortunate.

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This user has validated their user name. by: cfrphoto

Mon Jun 3 00:36:37 2019

eBay reporting of sales tax collected has lagged. The Orders did not include eBay collected sales tax until late April, too late for Washington State sellers because the reports only go back 90 days. Unwary eBay sellers based in Washington state may not be able to complete sales tax and B&O tax returns correctly without the information from eBay. Reports including sales tax collected by eBay should be available for at least seven years, not 90 days.

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by: Chicago48 This user has validated their user name.

Mon Jun 3 01:07:25 2019

The NJ sellers should talk to his local legislator.  Only until sellers start hounding their local legislators will anything be done.  I expect anyday that a class action lawsuit will be filed against some State or even PP/EB/AMZ because of this tax conundrum.  
And god forbid the counties and cities decide to get tax happy.  in Chicago we are taxed on streaming services ("entertainment") and our State is looking to take us also ("Netflix tax").
Are overseas sellers paying state tax?

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by: Sierra This user has validated their user name.

Mon Jun 3 02:02:43 2019

@Chicago48 - Yes, international sellers who ship to states with marketplace sales tax laws are seeing those orders come thru with sales tax being collected by the marketplace.

Also, on Etsy (and maybe other sites?) Australian buyers are subject to 10% GST.

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by: Moonwishes This user has validated their user name.
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Mon Jun 3 03:37:20 2019

>>The latest report we received was from a reader who said that when a friend received a refund from PayPal for a return on eBay, he received the purchase price but not the New Jersey sales tax eBay had collected from him - and he is having trouble getting the sales tax refunded.<<

In this case, what needs to be determined is who collected the tax and who is remitting it. If the seller is in NJ, then he should have collected the tax and be prepared to remit it to NJ. So in that instance, yes he needs the whole amount refunded so the tax could be refunded to the buyer.

However, if the seller was in SD and the sale went through eBay to a buyer in NJ, with eBay collecting the sales tax and would also be remitting it, then the seller never received that amount (Or at least shouldn't have) and it is eBay that has to refund the tax to the buyer. Unless the seller wants to deal with refunding a 97 cent tax refund which means with PP current rules you would lose 30 cents of that to PP. You still end up with 97 cents to refund as well as 30 cents to give PP, so you are out $1.27 because of the sales tax that you did not even collect.

If you collected the sales tax yourself, no matter what venue you sell on, then you need to be the one refunding it in full or partially depending on the type of refund. However if the venue collected the sales tax and would be remitting it, they do not have to refund the tax amount to you. They collected it not you. They need to give it back to the buyer.

I have seen several questions of this kind and the sellers always seem to think that they should be refunded the sales tax even though they didn't collect it in the first place. Hopefully, the venue will do the correct thing and refund the buyer. Unless you are collecting and remitting sales tax for more than one state, the only state that you need to deal with is your own, but even places like Amazon (I don't sell on eBay or Etsy)  that may collect your state sales tax, don't give it to you to remit to the state, they do that themselves.  Refunding sales tax by the venues is probably going to be a big mess as especially with smaller sales, who wants to deal with a refund less than a $1? It would be nice if they told you that the sales tax had been refunded, but I doubt that will ever happen. Can you imagine eBay giving back money that is probably going into the bar slush fund? The buyer has to remember that they paid sales tax which means they approach the sellers first, who doesn't have the money and so they have to try an get it back from eBay who will lose track of the request in the shuffle. Granted a seller might want to give it back to escape a neg feedback, but on items that have $5 or over in sales tax, do you really want to take it out of your own pocket? I sure don't want to.!

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This user has validated their user name. by: Philo

Mon Jun 3 06:28:22 2019

I get money back from NY for the sales tax I collect (sales tax discount).  When we sell is ebay making that payments or am I still?  Are they keeping the money?  The official term I believe is called the sales tax discount.

This would be a money grab if they are keeping the 1-3%.  26 states allow for this.

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This user has validated their user name. by: RKTOYS

Mon Jun 3 06:55:03 2019

This sales tax grab is just going to wreck the independent seller.

Does it occur to any of these fools why e-commerce took off?  Greedy landlords made physical retail impossible for many and not having to pay some illiterate clown a fortune just for a place to set up was a godsend.  Slowly but surely, rent-seeking crept in and ruined it like everything else.  PayPal, eBay, shippers, state government, etc all say "gimme gimme!"  Well, sorry, there's no more left to give.

Seriously, remember when eBay charged a quarter to list plus 2% of the item price, a money order cost 50 cents, and USPS shipped for $3 flat?

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by: Moonwishes This user has validated their user name.
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Mon Jun 3 08:14:47 2019

>>When we sell is ebay making that payments or am I still?  Are they keeping the money?<<

As I mentioned above, I don't sell on eBay, but when you get a payment through PP, is the sales tax included in the payment? If not and you can tell by the invoice in eBay that the sales tax was charged for and NOT included in your payout, then eBay collected it in a separate charge to PP and is supposed to be turning each and every sales tax collected into the proper state.

In PA if we file our state sales tax prior to a certain date each quarter we also get a discount, but I only report what I have personally collected and am turning in. If one of the venues charged for it and collected it they are supposed to turn it over to the state.  Thus the problem if a refund has to be done. If you didn't collect the sales tax but eBay did, they are responsible to refund the sales tax back to the buyer.

I can see just to keep a buyer from being unhappy that a seller might want to pay the sales tax back out of their own pocket, but that can run into 'real' money depending on the price of the item.

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by: leathermermaid8 This user has validated their user name.

Mon Jun 3 08:19:08 2019

@Moonwishes

Glad you posted this.  I've mentioned it before and I see it isn't a glitch:  in my state fabric isn't taxable, patterns and notions are.  Fur coats, not ordinary cloth.   Antique garments are taxable but not "used."  So I re-checked our state's website to see what it said.  

I put a some fabric in my "cart" to see if it was all fabrics or just the one I'd bought earlier labeled "doll" fabric, which WAS taxed.  Sure enough about $8.00 in tax would have been collected and it was a woolen.  

I haven't been refunded for any tax on non taxables so far.   That it has only been a few cents here and there,  I've said before it adds up.  Then I went to Amazon to try out the same idea...they're taking tax too.  They've always taken it out on books, pens, etc. but now fabric??  Is nobody paying attention?

Can you imagine trying to sell higher end fabrics and sales are slow enough and now this.  

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by: epuise This user has validated their user name.

Mon Jun 3 10:01:39 2019

Buyers will need to get used to NOT getting Sales Tax BACK on a RETURN... The TAX... was on the SALE... The SALE... was COMPLETED... Because I the Buyer then decides to RETURN has NO EFFECT on the FACT an ONLINE SALE was made... If Buyers don't like this... Go back to B&M... Where Tax IS refunded... {Fine w/ me !}.... SUPPORT your LOCAL SMALL BUSINESSES !

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This user has validated their user name. by: NoMoreEbay

Mon Jun 3 12:20:12 2019

Me Me Me Gimmee Gimmee Gimmee Hands out Hands out.

The United States of Greed rocks on!

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by: val2525 This user has validated their user name.

Tue Jun 4 18:26:26 2019

@RKTOYS, most states have always had use taxes that residents were supposed to pay on outside purchases being shipped to that state. It's nothing new. The problem is buyers were not reporting and paying those taxes, so now the states want the sellers and/or marketplaces to collect the taxes.  

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by: Moonwishes This user has validated their user name.
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Wed Jun 5 08:19:22 2019

"The TAX... was on the SALE... The SALE... was COMPLETED... Because I the Buyer then decides to RETURN has NO EFFECT on the FACT an ONLINE SALE was made... If Buyers don't like this... Go back to B&M... Where Tax IS refunded..."

Which is part of the problem. If you buy something with a sales tax at a B&M and then return it, you get ALL your sales tax paid refunded. It should be working the same way here with online venues. If it is the venue collecting the sales tax to remit, they should refund the sales tax as well. I have seen nothing that says sales tax should be handled differently for online refunds. But the seller, unless they collect the sales tax themselves, do not get a sales tax refund as it goes to the buyer who paid it and it comes from the entity that collected it.

The problem I have is that they are collecting tax on things that they shouldn't for my state. But then a lot of folks in my state collect or don't collect tax when the should or shouldn't be. At the thrift store one day, one of the lead volunteers, said they didn't have to collect sales tax if the price was 10 cents or less! So if you bought 50 items for ten cents or less (so around $5) there is no tax on the order according to her which is not right as there is nothing I have found that has the price of the item as the guide as to whether something is taxable or not.

Because of the problems of being charged tax when I shouldn't be and not being charged when I should, I figure at the end it is a wash so I don't rock the boat by trying to complain.



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