eBay is changing the way it collects sales tax where it's required to do so, complicating what is already a confusing process for sellers. It also appears it will shift payment-processing fees to sellers.
As of November 1st, however, eBay explained: "order totals sent for processing will reflect the gross order amount inclusive of tax. Once settled, the tax amount will be automatically deducted for remittance to the applicable taxing authority."
eBay announced the change on October 1st
, but one seller called the announcement "clear as mud." Another seller on the eBay boards wrote, "How about a "dumbed down" step by step explanation of what today's message means."
An EcommerceBytes reader interpreted the announcement to mean that eBay is shifting the payment processing fees to the seller instead of eBay. In a comment on the EcommerceBytes blog
, Vigilant Eye On eBay wrote (toward the bottom of page 3):
"If eBay's plan is to remit the entire amount collected (i.e., inclusive of any mandatory site collected sales taxes) to sellers PayPal accounts, then debit the tax portion of the payment after transfer, the taxes collected will be subject to PayPal fees and (for some sellers) PayPal Working Capital loan repayment requirements."
Sellers were also displeased that eBay would roll out the change as holiday sales shift into high gear. In response to a seller asking pointedly, "why November?" an eBay moderator responded
"Historically our goal has been not to have any major disruptions in 4th quarter. There is no process change for either buyers or sellers when this change goes into effect. Both parties will continue to transact as they do today. Because of this, we do not consider it a major change that would cause disruptions to business on the site."
But that response doesn't take into account that sellers will have to track the sales tax payments differently (not to mention the added fees). In its announcement on Tuesday, eBay had written, "We understand that the holiday selling season is nearly upon us and we are working to make this transition as smooth as possible."
The change is not only confusing, but it comes as eBay continues to develop adequate tools for sellers who are accountable to local, state, and federal tax authorities for both sales tax collection and revenue reporting.
"Sellers can periodically download the data and save it to a personal drive in order to accumulate a full year's worth of data. Later this year, we'll expand the reports beyond 90 days.
"You will need to use the buyer's address information to determine sales by state and which taxes they collected and must remit. Later this year, reports will show sales tax collected."
It's not clear how the reporting will change once the new process takes effect on November 1st.
And some sellers wondered if the change would mean that the sales tax eBay is required to collect and remit now appear on *sellers'* 1099K. That's the form payment processors (including PayPal) are required to send to the IRS and state Departments of Revenue showing sellers' gross revenue.
Update 10/2/19: The eBay moderator returned to the thread and wrote:
"In states where eBay is required to collect Internet Sales Tax from buyers, order totals sent for processing will reflect the gross order amount inclusive of tax. The PayPal processing fee applies to the gross transaction value (item value, shipping and sales tax). eBay Final Value fee's will be based on item price and shipping cost. No eBay Final Value fee will be charged for sales tax.
"Sellers will need to contact PayPal for more information about PayPal fees and the 1099 form."