Now that eBay is processing payments (rather than allowing buyers to pay sellers directly), it is required to file Form 1099K to sellers and to tax authorities in the US.
A reader who is now enrolled in the program reached out and asked how eBay was handling 1099Ks with regard to sales tax that it's required to collect and remit to states.
"I've contacted "Charles" on eBay's Managed Payments community board and posted the question below but have not received an answer:
""Is eBay reporting gross income including the taxes that were taken out to the IRS on our 1099's?"
"My gut feeling is that they shouldn't as sellers never are in possession of this tax money but no one will answer my question. Does anyone have any info on this for eBay sellers?"
This help page
that explains how eBay handles 1099Ks includes the following information:
How to use a Form 1099-K
Form 1099-K includes the gross amount of payments made to you within a calendar year, so refunds, shipping costs, sales tax, etc. aren't subtracted from the total amount. This means that the amount reported on your Form 1099-K may not be fully reportable on your tax return. You should consult with your tax advisor to determine how best to use the information on your Form 1099-K.
Starting in 2019, any sales tax collected by eBay on sales made by you in the various marketplace states will not be on your Form 1099-K. This is because eBay automatically collects and remits such sales tax directly to the state (i.e. the sales tax for these states isn't paid to you).
Please see 1099 forms and income tax on eBay sales for more information.
However, it's not clear that page offers the most up-to-date information. As we wrote in May 2020
, eBay began charging FVFs on the total amount processed, including sales tax. "Under the new fee structure, instead of paying a Final Value Fee (commission) on price-plus-shipping and a payment processing fee on the total transaction amount (including sales tax), sellers will pay a single percentage fee on the total transaction amount, including sales tax
"We charge one final value fee when your item sells, and you don't have to worry about third-party payment processing fees. This fee is calculated as a percentage of the total amount of the sale, plus $0.30 per order.
"The total amount of the sale includes the item price, any handling charges, the shipping service the buyer selects, sales tax, and any other applicable fees."
But on another eBay help page about tax policy
, it states: "Once eBay starts to collect tax in the required states, no action is required on your part, and there will be no charges or fees for eBay automatically calculating, collecting, and remitting sales tax
It appears that eBay may not be updating help pages when it makes changes in the way it handles sales-tax collection and fees, leading to seemingly contradictory information.
A thread on the eBay discussion boards
shows our reader wasn't the only seller wondering how eBay was handling tax on 1099Ks.
Another issue that sellers raised in the thread: when should they expect eBay to make Form 1099Ks available to sellers for tax year 2020? Colleagues pointed to the same help page as above where it states:
If you're a managed payments seller, we'll mail you a Form 1099-K by February 3rd if you exceed both of the following thresholds:
- You received more than $20,000 in gross payments from the sale of your items.
- You had more than 200 payment transactions.
Sellers should also be aware that some states have instituted lower threshold amounts, such as Massachusetts and Vermont, which require payment processors to send them Form 1099Ks for sellers who have processed gross payments as low as $600 (the last time we checked).
Sellers would be wise to proactively check all payment processing services they use, including marketplaces like eBay and Etsy as well as PayPal and credit card merchant accounts - and seek tax assistance from a professional if you need help with Form 1099K.
Update 1/25/2021: A reader posted the following in a comment below: "The Payments Team has confirmed "Seller collected sales tax will be included on the 1099-K form. eBay collected sales tax will not be included on the 1099-K form.""