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: Paul W This user has validated their user name.

Fri Oct 4 10:32:00 2019

If you don't sell on eBay, why do you keep commenting on eBay threads?  Your opinions are pretty useless to those of us who DO sell on eBay.  Statements like "I'm so glad I don't sell on eBay" do not add anything useful to the discussion.  

As to the tax questions, it's clear as mud.  Hopefully end-of-year reports from eBay and PayPal will be sufficient to file proper returns.

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

by: JohnGermaine This user has validated their user name.

Fri Oct 4 11:34:49 2019

WTH?????  My state charges me NOTHING to send in the sales tax I collect!!!!  Greedy b*stards!!!  Enough already!  I see all the time where sellers have had ENOUGH and are leaving. Keep piling it on while you are at it and pretty soon you won't have jobs.  Who thinks this crap up??????  As it is, between USPS and eBay GREED, I get home with about half of what I sell.  Not happy at all.

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 18:56:18 2019

@JohnGermaine

"My state charges me NOTHING to send in the sales tax I collect!!!!"  I with you on that, my state doesn't charge anything either.  You will also be happy to know that EBAY does NOT charge anything for collecting and processing sales tax.

I think you are confusing what PP is doing with what Ebay isn't doing.  And Ebay ISN'T charging any fees, but PP will be come November.

It is a reason to consider moving to MP if it is a significant cost for you.

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

by: ebayout This user has validated their user name.

Fri Oct 4 22:53:45 2019

I'm over 70 and had 3 hours of Basic language in the 70's.
That being said...how many lines of code does it take to separate the tax from the total + shipping, add 10% or whatever to the total + shipping, and add back any tax?

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

by: Snapped This user has validated their user name.

Sat Oct 5 02:13:41 2019

"Statements like "I'm so glad I don't sell on eBay" do not add anything useful to the discussion."

Setting aside the 'usefulness' of that statement itself, (which seems to attempt to discredit the source because one can't discredit the content), it might be 'useful' to bear in mind the fact that amoung the 15K or so eBay employees, most of them don't sell on eBay either. But if it weren't for the absurdity of their dictates on how sellers should and should not sell, NObody's opinions would serve any purpose either.

As to the usefulness of inactive seller opinions, any who (should) care, ought to be asking: why? Why did selling stop then? What was the cause? What can be done to mitigate, or better, eliminate that cause? That's just off the top.

Not that it stops eBay from repeatedly trying, but no one can't credibly claim expansive vision by limiting focus.


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

by: Junkyardog This user has validated their user name.

Sat Oct 5 15:14:03 2019

Can not buy anything with out paying sales tax that is not due today.
Attempted to buy several items, some came up sales tax due only in sellers state and ebay added tax unjustly.

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

This user has validated their user name. by: Marie

Sat Oct 5 16:40:51 2019

I personally don't mind the comments from those that no longer sell on Ebay in general.  But when they pass around incorrect information, I take issue with that.  As we all should.

Often what I see happen is a previous seller commenting about a change, issue or something on Ebay but they don't know or understand the change or issue due to whatever site change is at hand.  And why should they.  They are no longer a seller so no need to stay current of the endless changes Ebay seems to make.  

If a prior seller is staying current on the site changes as they come up, then that is a whole separate issue that prior seller has.  

It is hard enough for those active on the site to stay current on policy changes much less understand them.  But when someone that doesn't even sell on the site assumes they know how the change affects members, they are sometimes wrong.  Pass around incorrect information which can hurt those that are selling on the site if they believe their interpretation.  I doubt there intent is to hurt anyone, but it has happened.  Some may believe what they are saying and the run with that.

I do think it is interesting that for whatever reason previous sellers have, some just can't seem to let go.  

There has been a few other sites I've dabbled with selling on.  For one reason or another I didn't like, site, rules or whatever my reason was and I left.  I've never looked back and stayed on their threads or continue to complain about them.  It wasn't a good fit for me, so I moved on and found sites in which I'm fine with selling on.  Still some issues of course, but overall they work for me.

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

by: Shanna This user has validated their user name.

Sat Oct 5 20:34:31 2019

@Marie

"And Ebay has said that they aren't going to charge FVFs on taxes"

Like when they said DSRs would not be held against sellers? Or when they said returns would not be held against sellers, or what about the time that they said defects would not be held against sellers?

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

This user has validated their user name. by: Philo

Sat Oct 5 22:11:12 2019

@marie
double whacked-
Whack #1-  If this article and ebay practices are true. The tax portion will be for the seller to pay the payment process fees.
Whack #2
If you live in a state where you can get a rebate for collecting tax, you now lose that.  NY where I live give you a 5% credit on the sales tax you collect.  I no longer will see this check now because of marketplaces collecting sale tax.

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

This user has validated their user name. by: Marie

Sun Oct 6 01:46:50 2019

@Shanna

Anything can be What If'd to death.  I've never said Ebay is an angel in anything.  I've had many complaints over the years.  But on this specific subject, Ebay has not been charging a fee on Sales tax and their most recent announcement verifies that.  So if you want to worry about what they may do in the future, that is your right.  For me, I've got plenty of things that are happening currently, so my worry list is plenty full.

@Philo

Point 1:  You are correct.  PP is will be charging their process fee.  But as we all know, PP is NOT Ebay.  

Point 2:  Still not Ebay's fault.  You need to take that up with your state representatives.

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

by: Snapped This user has validated their user name.

Sun Oct 6 12:11:05 2019

"Point 2: Still not Ebay's fault. You need to take that up with your state representatives."

Take 'what' up? It comes down to who bears 'responsibility' doesn't it? You think eBay's gonna wear that hat?

eBay is MOR, but is only remitting 'on behalf' of the 'seller'. (Who can only 'pray' eBay gets it right). So they do the 'work', and then reap any 'rebate' (via discount variable per state) - but - any money processng fees (even if they're not assessing FVF on 'tax paid' portion), still are assessed based on TOTAL paid by buyer. And the seller STILL has to do the accounting (taxes assessed even if not physically collected). Yet receives no lawful compensation for it, nor any rebate of any of that 2.7% on that portion.

State Reps can't mitigate that "whack".

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

This user has validated their user name. by: Marie

Mon Oct 7 21:54:10 2019

@snapped

On this specific subject, Ebay did not pass these laws nor did they lobby to get these laws.  In fact it was exactly the opposite.  All you need to do is Google it and you will see that Ebay tried very hard to prevent these laws coming into being.

I never suggested that Ebay do anything.  Their hands are tied and they must adhere to the laws.  If you don't like what your state is requiring Ebay to do, then you need to contact your state legislators.  And if your state legislators are listening to you and others that don't like it.  Well I'd say when it comes time to vote again, you need to find someone to run that you agree with what they stand for and get others to vote for them too.  Get rid of those that the majority feel needs to be replaced.

Ebay is the MOR on a SMALL portion of transactions on Ebay.  So I'm not sure what that has to do with anything we are discussing here.  Whether they are MOR or not means nothing in regards to sales tax collection.  They have to collect it on ALL transactions that involve the states that have passed Facilitator laws.  It has NOTHING to do with being MOR or not.

If Ebay gets it wrong, that's on Ebay, not the sellers.  

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

This user has validated their user name. by: Bill

Tue Oct 8 00:22:47 2019

Marie,

You are absolutely correct on your last post.
They are handling the sales tax for the states that have a facilitator law on the books and the money for anything bought using their "mangled" payments.
PayPal is now handling the sales tax for everything else that is paid through PayPal.
For that "service" they both will get the extra "vig" from the seller on the processing fees.

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

This user has validated their user name. by: Marie

Tue Oct 8 01:44:09 2019

@Bill

NO.  It is ALL sales that happen on Ebay.  It is NOT specific to transaction using Ebay's Managed Payments.

The PP is NOT subject to a Facilitator Law, they are solely a money processor, they are NOT the marketplace.  That would be Ebay.

For those sellers not in MP, their payments as you know run through PP.  What Ebay was doing was when a transaction happened on Ebay for one of the affected states with the Facilitator laws, is two transactions were processed.  One the payment that went to the seller and two the sales tax was a separate transaction.

What they have done is make in ONE transaction instead of two.  This serves two purposes.  One it makes things easier for Ebay and PP.  Two it enables PP to collect the processing fees from the seller on the sales tax amount.

The actual money for the sales tax is never literally given to the seller.  It does go to pay the appropriate state.  Clearly Ebay and PP have come to some arrangement, but I don't know the particulars of it.  I'm not sure it matters.

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

by: Snapped This user has validated their user name.

Tue Oct 8 07:32:06 2019

Marie, the point is, how much tax would eBay be 'forced' to collect if they had not wrested control of the payment process so to monitize it? And how much less would every payment cost sellers then?

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

This user has validated their user name. by: Bill

Tue Oct 8 23:23:38 2019

Marie:

That is what I said. They are washing their hands on filing the sales tax and letting PayPal and or Ayden do the collecting and filing.

You do need to read the comments better and not look to deep into them. All that does is cause you problems and raises your blood pressure.

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

This user has validated their user name. by: Marie

Wed Oct 9 01:32:54 2019

@Snapped

That has already been decided.  And we will be paying PP 2.9% on the sale tax portion of a buyer's payment.

We do NOT pay Ebay anything on Sales tax.

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

This user has validated their user name. by: Marie

Wed Oct 9 01:35:58 2019

@Bill

They can't.  The facilitator laws are for Marketplaces, NOT money processors.

PP has always collected and processed the money from buyers for sales tax.  They gave the money to Ebay.  Come November they are just changing how these transactions present and instead of two separate transactions, one for the purchase price and one for the sales tax, they are combining it into one transaction through PP.

Ebay is still by LAW required to collect and pay the states that have Facilitator laws.

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

by: Mamak This user has validated their user name.

Sun Oct 13 02:05:59 2019

So many of the states had requirements that you had to sell xxx amount of items or $00 amount in sales for a state to require you to have to pay sales taxes.  We all complained about the burden it would cause the small seller when in reality most small sellers would not be required to collect or remit to all 50 states.  At least my sales are spread out enough that it would not have affected me and I currently remit to my home state.  SO now the burden was put on ebay and so thousands and thousands of small sellers who would not have been required are being bundled into  and burdened with the fees and higher costs because the market place is now doing it.  I don't think I understand how the reporting will work so I can file my taxes with my own state.  Sure hope this does not come back on me if ebay does not get this right.  

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

by: purpleiris This user has validated their user name.

Wed Nov 6 01:21:36 2019

The marketplace facilitator laws that states are enacting are unconstitutional and even illegal because they are trying to hold a business responsible for another business's transactions that entail selling a product that only ONE of them owns. A state should NOT be allowed to consider any business's products as the property of another business.

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