Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Wed Oct 2 2019 11:00:13

eBay Changes Sales Tax Practices Midstream

By: Ina Steiner

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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.

eBay explains the current process on its website as follows: "eBay will calculate and add the applicable sales tax at checkout. The buyer will pay both the cost of the item along with the sales tax. eBay will collect and remit the tax."

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.

Amazingly, eBay only provides sellers with reports going back 90 days. From a FAQ on its Tax Information help page:

"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."

Comments (82) | Leave Comment | Permalink
Readers Comments

Perminate Link for eBay Changes Sales Tax Practices Midstream   eBay Changes Sales Tax Practices Midstream

by: SenseiSez This user has validated their user name.

Wed Oct 2 21:38:27 2019

And yet, one may ask, WHY is eBay collecting sales tax on purchases that buyers make from China?  Why is that?!!!    Maybe, just maybe, a ... glitch.  No, that's doubtful, tremendously doubtful.  How about it's just another method that eBay just robs your money.  Yes, that's it!  Glad I answered my own question. I suppose many others guessed the same, as well.

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This user has validated their user name. by: Lightning

Wed Oct 2 22:17:38 2019

Really wish there was a blog post in the thread when there is a change or update to the Original Post.  Once I've read the original and have the gist, I then view posts in response.  I don't go back to the original to see if it mysteriously morphed.

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by: comments This user has validated their user name.

Wed Oct 2 22:37:47 2019

I am not confident this story is accurate or that the finger is pointed in the correct direction.

I received notification of this change from paypal and not from ebay. Ebay is only forced to comply with paypal's policy just as the rest of us are.

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by: Davina T This user has validated their user name.

Thu Oct 3 00:24:53 2019

Lunacy. Plain and simple. I don't sell any more, and no way am I getting a tax number.Greed is a nasty bedfellow. I'm kicking him to the gutter where he belongs.  

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This user has validated their user name. by: cfrphoto

Thu Oct 3 00:43:19 2019

How will sellers who failed to download eBay collected sales tax amounts in the Orders accurately report 2019 income tax? Unfortunately, eBay did not start including amounts collected until mid-April, too late for state of Washington sales tax that started January 1st. Unfortunately, the API, did not work correctly until the end of September, leaving the possibility that tax amounts reported on combined orders is missing or wrong.

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This user has validated their user name. by: DeathFromAbove

Thu Oct 3 00:45:46 2019

I'm dubious of this announcement.  There was an email from Paypal.  If ebay used the "marketplace facilitator" nonsense that is rolling out to collect sales tax, made us pay transaction fees on it, and then did not give us a 50-state itemized sales tax report so we can go to every state and file a return, then they are not doing it right.  My state allows a deduction for the cost of administrating and remitting the taxes.  I'm sure other states do the same.  eBay should be happy with that and the 10% plus they are already taking in exchange for less and less return.  Paypal will also probably get a legal microscope on them from government employees if they decide to charge transaction fees on sales tax.  Antitrust anyone?

The last 2-3 years have just been terrible for this business.  Are these companies actually TRYING to spark a recession?  Shipping rates, payment processors, marketplaces, all pushing things that aren't possible or sustainable to show "growth".  That's what they are going to do if they don't quit with the constant policy changes and money grabs.  That cost has to be paid by someone - so someone in the chain of retail takes a pay cut, whether it be the buyer, seller, or 3rd party.  Getting so tired of these things.  They roll them out with no chance to adapt.  If it keeps going, all that will be left is things like amazon and walmart - no one else will have the money to even participate.  Is that what we really want?

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by: Moonwishes This user has validated their user name.
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Thu Oct 3 01:30:36 2019

What I find interesting is that somehow, eBay and Amazon as well have found a way to get around the need for small sellers who do not have 200 orders to a state, or $100,000 in sales to a state, or whatever each state has decided that those with less sales than that DO NOT have to collect or pay sales tax except in their home state. I have been tracking my sales by state for several years now and with CA sending me the most orders, I still haven't sold 200 orders to CA in any one year, so technically from what I have seen of most states rulings on this subject, none of my sales should have sales taxes applied. Since, at least currently, Amazon collects and remits sales taxes independently of trying to steal money out of our sales income, I don't care since when it collects sales tax except my home state, it doesn't affect me at all. But it sure sounds like eBay has their hand in the cookie jar.

For several years all people could talk about was the number or orders or the total amount of orders would be what was the deciding factor on whether we had to collect sales taxes, at least for us smaller sellers. Now since eBay and Amazon started charging buyers for the sales tax, everyone seems to have forgotten the rules as to who has to collect sales tax. What happened?  

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by: Vigilant Eye On eBay This user has validated their user name.

Thu Oct 3 02:14:10 2019

Simply reaffirming in abbreviated form what was already stated in eBay's original message, the PayPal email arrived some time after the one that was sent from eBay did.

Likely due to the the site's focus on managed payments, there was no reference to PayPal in eBay's email.

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This user has validated their user name. by: Marie

Thu Oct 3 02:31:51 2019

It makes sense that Ebay would make this change.  For them it is a solid business decision, so I get that.  I sure as heck don't like it, but I understand it.

IMHO PP nor any other money processor should be charging processing fees on Sales tax.  Yet they do.  Amazon has done it for years as has PP when sellers in previous years have received payments from that the buyer paid sales tax too.

@tool

Checks and money orders is a non starter.  Most buyers don't want to wait 2 or more weeks to get their items even shipped much less received.  Using snail mail to send a payment, the seller getting it and having to go to the bank to deposit it, wait for it to clear the bank, then finally the seller can ship it.

It is a big process for both buyer's and sellers. Then there is the drawback as to how do these sites collect sales tax from the buyer??  How do they know the buyer paid?  Or that their payment cleared?  What if the buyer files an INR instead of paying?  Or what if the buyer files an INR and they did pay?  How is the site going to know that payment didn't bounce or cleared?  Can the buyer file a SNAD?  Again, how do they prove payment?  And the list just goes on.  It is way to complex.

I don't know how many checks you write in any given year, but for me it might be one or two, but that would be it.  Most people pay many things electronically whether that is with a site like PP or with a CC.  Checks and money orders for most people is a thing of the past.

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This user has validated their user name. by: Philo

Thu Oct 3 04:03:53 2019

In NY, as with other states, they give you money back for the burden of collecting sales tax (ny=5% back).  With the new law, eCommerce companies are collecting this money and thus getting that credit.  If Ebay is now going to charge or pass on the costs associated with that, they are double dipping a bit and getting the sales tax  discount and passing the costs on to sellers.  I don't think when they passed the law they thought about this loop hole.

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by: bb6 This user has validated their user name.

Thu Oct 3 04:22:09 2019

Any lawyers around? Is this even legal?

Do I have this correct?  Basically ebay is changing it around so that we pay fees to both ebay and paypal now on the tax. But they will still be submitting it to the states?  

This is all very frustrating for a small business owner. I currently sell on several marketplaces including my own website and as of right now places like ebay are making it very fuzzy to figure out the who, what, where and when for documenting and reporting taxes. At the end of the day the local, state and government don't care what your issues are as a business owner or that everyone has made documenting and reporting taxes confusing, they want their money.

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by: Flying Childers This user has validated their user name.

Thu Oct 3 05:19:47 2019

Etsy already charges a fee to collect sales tax.  Not sure if EBay just now figured out the scam because it’s very simple.

Etsy includes the sales tax in the sale and takes their percentage of commission on the entire amount.  I questioned whether or not that was legal in NY and was told by the Tax Dept. that it was okay.

So they are charging a fee on the service of collecting sales tax.  Wonder if Etsy and EBay are paying tax on the money they make for that.

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by: lancecorp This user has validated their user name.

Thu Oct 3 06:02:51 2019

Actually 11% of the people in the US don't use the internet and more than 20% still pay with checks. That's why there are still so many check companies in business. Many people use them to avoid the convenience fees of online payments.

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by: tcpjs This user has validated their user name.

Thu Oct 3 06:41:29 2019

What irks me is that I have yet to read any state's remote tax guidelines that would indicate my sales actually hit the threshold for remitting the taxes to their jurisdiction. As far as ebay is concerned, there essentially is no threshold, and all sellers are liable from day one. Much as they may wish otherwise, eBay is a selling platform with individual sellers operating on it, and yet, the taxes collected on sellers behalf are remitted as though individual sellers are ebay-controlled shipping centers rather than autonomous businesses. If that is the case, why am I still picking up the employer's portion of FICA, etc? I don't see eBay stepping up to help with any of the other employer responsibilities that would apply if I truly worked for them rather than with them. Why are ebay sellers treated like a cog in their machine rather than an individual entity when it comes to remote sales tax remittance?

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by: hawk This user has validated their user name.

Thu Oct 3 06:46:47 2019

the corruption continues !!  the rich and powerful corrupt shysters keeps stomping on honest hard working people to line their pockets. it's not a matter of working hard and honestly to get wealthy. it's now who has the power to get away with corruption. the American dream has faded with these thieves. let's get it back !!

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by: Mark4 This user has validated their user name.

Thu Oct 3 07:03:53 2019

And yet we get order after order from state's where ebay is required to collect sales tax  but does not on a regular basis, some orders get charged tax, others from the same state on the same day do not. Ebay is a mess.  

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by: Vigilant Eye On eBay This user has validated their user name.

Thu Oct 3 07:07:09 2019

This new sales tax arrangement might also provide a means for eBay to show its investors that the gross sales figures of its sellers are rising, even though this growth might now be attributable to the fact that any state sales tax collected by the site is going to be lumped together with the shipping cost and the actual price(s) of the sold item(s).

How is it that eBay is unable to forward managed payments to a seller's PayPal account, but can not only remit the sales tax its collected to such an account, but also debit the tax amount post transfer?

Is it because it is simply not profitable to do so?

And or, it is because it now provides eBay three regularly verifiable means (i.e., a bank account, a credit card, and a PayPal account) of debiting money from its sellers?

Not only is this new arrangement profitable for eBay, whether or not sellers are enrolled in managed payments, it is now possible to regularly confirm the site's ability to debit funds from sellers' PayPal accounts, .

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by: Flying Childers This user has validated their user name.

Thu Oct 3 08:30:28 2019

Philo-  thanks for reminding me about New York’s 5% credit for collecting sales tax!  I had completely forgotten about that.

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by: Geetar This user has validated their user name.

Thu Oct 3 08:31:55 2019

Someone mentioned it here, when you collect sales tax for the state, they let you keep a small portion of it as reimbursement for you doing the work for collecting it. I know for a fact that this is how it is done in New York, and from what another said on there Illinois.

So my question is, where is that money going. Why are we going to be charged a transaction %?? Why cant that money go to that??

And doesnt ebay collect the tax money?? If so why do we pay the trans %???

Now, with the state reimbursement, ebay will be making money off of this sales tax stuff.

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by: Geetar This user has validated their user name.

Thu Oct 3 08:35:47 2019

This is BS. This is what ebay doesnt understand. Business partnerships are a two way street!! NOT 1 WAY! OTHERWISE THE PARTNERSHIP WILL BE OVER SOONER OR LATER.

Dont you people at ebay understand this. You keep shooting yourself in the head (screwing sellers), and then when you bleed (sellers hate you) you dont understand why.

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