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

This user has validated their user name. by: VV

Thu Oct 3 08:43:03 2019

I will remit NOTHING.

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

by: ccstreasure This user has validated their user name.

Thu Oct 3 12:12:28 2019

So in short will this be a new monthly fee that shows up, lets say when I go to Seller Account, then I go down to Fees on a transaction that they collected tax on, It shows me a breakdown of FVF, Listing fees, first born fee, shoe size fee, etc Will that page now also show the processing tax fee?
If so then just let us continue collecting our taxes and submitting them ourselves like we used to.
Ebay gets worse and worse every month! This is why everyone is going to other sites like Etsy, Mercari, I think theres even a new one I just saw a commercial on tv for. What the Corporate diet coke heads dont realize is the more they keep charging us for new things the more they push us away and they will continue to loose business as we take our business elsewhere. Corporations always fail because of greed, itll happen with ebay soon enough.  

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

by: Silver Ice King This user has validated their user name.

Thu Oct 3 12:22:14 2019

@ccstreasure

This fee will not show up on the Ebay side but will be part of the Discount fee that Paypal charges you.  So if you have Sales Tax charges of $10 on an order, your cost will now increase by $0.30 on that order ($10 X 2.96%).  The bad part of all this is that as more and more states charge sales tax and Ebay just willy nilly charges Sales Tax on everything rather than charge it only on items that are actually taxable, more and more customers are going to be leaving Ebay but we will also be paying more and more in fees to Paypal due to this move.  I really feel for the very large sellers who sell $100k a month as the taxes on that could be around $10K and the discount fees they pay another $300 per month or $3600 per year.  I can definitely see more and more sellers moving to other sites (if any) that as of yet do not charge the tax or are creative enough in their pricing to absorb that cost as a cost of doing business on their end.

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

This user has validated their user name. by: NoMoreEbay

Thu Oct 3 13:14:05 2019

If you look at it from a macro economic standpoint - Online marketplaces, the govt. and the postal service are rapidly killing the concept of online independent sellers to the degree that they will be extinct within the near future.

Taxes, fees, service charges, money grabs, price hikes, theft and anything else they can think of are out of control. Greed has become an epidemic in America from healthcare, food prices, rental cars, housing, education, travel, cable, phone, the service industry and everything in between. All while customer service and quality are moved to the Philippines, China and India.

The United States of Business and all of it's counterparts is becoming one of the most corrupt and greedy developed countries in the world. I can't wait for the recession. That should give this country a soft reboot and hopefully get things back to just greedy instead of insanely greedy.

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

by: Smallseller This user has validated their user name.

Thu Oct 3 13:22:51 2019

Can somebody just confirm whether ebay will be charging the final value fee on the amount including taxes? This is not clear. Just the facts please. I am a Canadian reseller. I am not sure how this will affect me if at all. I pay GST and PST on the FVF for both sales and shipping. I hope that I will not be paying Canadian taxes on a gross amount that includes US sales tax. Please ebay, explain so that everyone understands. The message boards get filled with comments and everyone panicking because nothing is communicated clearly enough.

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

This user has validated their user name. by: Marie

Thu Oct 3 13:44:19 2019

@bb6

Ebay is not now charging sellers FVFs on taxes.  And Ebay has said that they aren't going to charge FVFs on taxes when this change with PP happens.  But other sites do.

@Mark4

Sales tax is not driven by where it is shipped FROM.  It matters what state it is being ship TO.

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

This user has validated their user name. by: Marie

Thu Oct 3 13:49:51 2019

@ccstreasure

"Will that page now also show the processing tax fee?"  Simple answer is NO.  Ebay doesn't now nor do they plan to in November to charge any fee for collecting the Sales tax due on a sale.  So there is no need to be upset with Ebay on this as they don't do it nor are they planning to at this point.  Of course we don't know what the future holds, but as of right now, we are all going to be just fine on this question.

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

by: Fahrenheit451 This user has validated their user name.
Web Site

Thu Oct 3 14:03:32 2019

It seems to me that eBay is doing a complete disservice to sellers by collecting sales tax for them, then charging a fee on the collection. Many sellers do not sell $100K a YEAR, never mind $100K a month. My state places $100K or 200 sales as the floor for collection of sales tax. eBay carries that liability since it does more than $100K a week. They should not be collecting a fee on the sales tax they owe to the states from the sellers. The onus for collection is on them, so penalizing sellers for their liability is a losing proposition.

One of the many reasons I don't sell on eBay.

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

This user has validated their user name. by: iheartjacksparrow

Thu Oct 3 14:24:14 2019

I'm so glad I only sell on eCrater where the sellers are responsible for collecting and remitting taxes. I don't trust eBay to get anything correct since it's obvious they don't care about small sellers, not to mention whether or not they are collecting the correct amounts on the correct items. I recently received an email from the California Department of Tax that from January 1, 2020, through December 31, 2021, diapers and feminine products are exempt from sales tax. I don't sell those items, but I assume there are individuals on eBay who do. I doubt seriously that eBay would worry if they are taxing items which shouldn't be taxed. Heck, that's just more money in their pocket.  

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

This user has validated their user name. by: Marie

Thu Oct 3 14:41:10 2019

@Fahrenheit451

"It seems to me that eBay is doing a complete disservice to sellers by collecting sales tax for them..."  The alternative is for Ebay to break the law and that isn't likely to happen.  This isn't a choice by Ebay.  They have laws in which govern this by each state that has passed a Facilitator Law and Ebay has to adhere to them or be in breach of that law.

"... then charging a fee on the collection."  You will be happy to know that Ebay has never done that and the upcoming changes do NOT change that.  Ebay does NOT charge a fee for collecting and remitting Sales Tax.

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

by: simerivergun This user has validated their user name.

Thu Oct 3 15:40:38 2019

If I am not mistaken, there is a threshold for collecting tax.  For most states you must earn $100,000 per year per State to qualify to pay State Taxes. I have looked this up but it is far too complicated for me.
Ina, please look this up for us.  The Supreme Court allows sales tax on Online sales, but each State sets the threshold for the amount of sales that qualify for paying State Taxes.  It is a mess!  Thanks sue

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

This user has validated their user name. by: Marie

Thu Oct 3 16:45:14 2019

@simerivergun

You are ABSOLUTELY correct about that.  But Facilitator Laws enable the states to get around those minimum thresholds for sites like Ebay, Amazon, Etsy, etc.  The Facilitator laws allows the states to consider these sites as a WHOLE, not as individual sellers.

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

by: Toledo Maude This user has validated their user name.

Thu Oct 3 17:02:56 2019

Charging state sales tax on shipping charges?

Does anyone know if some, all or no states require this?

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

This user has validated their user name. by: Marie

Thu Oct 3 17:19:47 2019

@Toledo

You'll need to do a little reading, but this should help.

https://www.avalara.com/us/en/learn/whitepapers/shipping-
handling-sales-tax.html

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

This user has validated their user name. by: CanBrit

Thu Oct 3 18:20:02 2019

@iheartjacksparrow

There is chance that eBay rolled out this tax collection correctly in the first place. I figure they are scrambling a bit now, because they've likely been doing their usually thievary of tax on tax on tax and not recognizing that there are many states, counties, cities where taxes are completely different. eBay is not a tax collector. If they had any brains at all they would use the available apps out there to do the work for them.

It could have been simpler, but eBay doesn't know how that works. I'm am sure they have more than a few of their lawyers looking into things in a hurry before someone comes after them.

Good grief!

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

by: Tiffee Jasso This user has validated their user name.

Thu Oct 3 21:33:03 2019

I f  you look at Ebay as the venue, it sells more 200 items per state, and so sales taxes apply. With the new managed payments Ebay becomes the seller, and the present sellers become the suppliers. I believe  Etsy, Amazon, and now Ebay, and any other venue that is collecting all the money for the sale, then disbursing what is left after their fees,, should be paying state income taxes to every state in the US that has income taxes.. If they are not, then state legislators are not very smart.  

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

This user has validated their user name. by: Philo

Thu Oct 3 22:35:34 2019

@Flying Childers
No problem.  Most don't think the small sellers gets double whacked by this move but, they are.

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

by: Whatever This user has validated their user name.

Thu Oct 3 22:45:33 2019

I follow this site religiously - post what I think and generally come back to the page a day or 2 later.  After reading all these posts I think we are all wading thru the muddiest waters yet.

How much will the average seller put up with? we're already paying alot to just a server robber. How many will stay? How many mega sellers have we already seen abandon the site? How many small sellers have gone long ago.

Ebay is just a mess.

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

This user has validated their user name. by: Marie

Fri Oct 4 01:51:00 2019

@Tiffee Jasso

Seller and Merchant of Record [which Ebay will be in MP] are two DIFFERENT things.

Ebay will NEVER be the seller unless they start selling product.

A merchant of record (MOR) is an entity that is authorized, and held liable, by a financial institution to process consumer's credit card and debit transactions on your behalf.  That is NOT the same thing as a seller.  That is a MONEY PROCESSOR.

So you think these states should collect double taxes for items sold by sellers in their state???  Dang!

@philo

"Most don't think the small sellers gets double whacked by this move but, they are."  How?  How are we getting "doubled whacked"?

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

by: Snapped This user has validated their user name.

Fri Oct 4 08:46:13 2019

"The alternative is for Ebay to break the law and that isn't likely to happen."

Ahh - the circular logic of a self fullfilling prophesy. Create a situation that one can then 'blame' for being 'handcuffed'.

No, the alternatve is for eBay to cease pretending they can suitably collect seller funds and process the tax aspects properly in the first place. They are not the seller. They are not qualified. They are not competent. They are nowhere near ready yet.

The ONLY reason they want to be MOR is to suck a drop or two more lifeblood from sellers by monitizing every element of the process possible. But as usual, their scheme is not thought through.

And when they discover it's going to cost them more to (maybe someday) get this 'right' than they are 'legally' skimming of the top, guess who's going to see a 'sorry-we-don't-have-a-choice' fee increase?

But it is eBay who continues to arrogantly overlook the fact that there is always a 'choice'. And the more they try to limit them for their 'customers' - actual or claimed - the more they will find themselves left on the shelf.

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