Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Tue Feb 12 2019 00:02:45

eBay Sales Tax Error? Washington Says Contact the Seller

By: Ina Steiner

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Readers are asking us questions about eBay's new practice of collecting state sales tax for Washington and Minnesota (it began collecting Iowa state sales tax this month), as required by Marketplace Facilitator Laws. eBay has not yet replied to our inquiry sent last week.

Many sellers who buy inventory for resale have obtained resale certificates that allow them to make tax-exempt purchases, but sellers in Washington State say eBay is charging them sales tax on their purchases regardless. On Thursday, a reader said, "Bad enough that I am being charged WA sales tax on items bought for resale, but also being charged 10% when the actual rate for my location is 8.6%."

We're still hearing reports that users are having problems with the way eBay is collecting Washington State sales tax, so we sent an inquiry to its Department of Revenue (DOR) today. We asked if there were problems on eBay's end and what buyers could do in those cases.

A spokesperson for Washington's DOR responded with the following (see update below):

"We can't by law talk about specific businesses and if or how much they collect. We also can't speak about a business' practices. At this time, purchasers should contact the seller about any incorrect sales tax collection. If there is no resolution, the purchaser can apply to the Department of Revenue for a refund."

That advice could make things worse, since *sellers* aren't the ones collecting Washington's sales tax and are in no position to do anything about it. One seller has already said he's had several angry customers from Washington contact him complaining they were overcharged. 

On the DOR website, it advises consumers who believe they have paid sales tax in error to "first seek a refund directly from the seller" because the seller has records to verify that sales tax was paid, etc., and says it "may" grant refunds of sales tax directly to consumers in certain cases.

We hope the state will update its website to reflect its new requirements around marketplaces!

Even if eBay is collecting state sales tax for Washington, Minnesota, and Iowa 100% correctly under the new Marketplace Facilitator laws, eBay sellers are spending a lot of time worrying about the ramifications of the new practice. Just read this thread on the eBay boards, "What we Need as Members to Enhance the Sales Tax Collection process by eBay."

The original poster said they'd appreciate a report that shows by state what taxes were collected on sellers' behalf. Another poster shared a tip, saying sellers could use eBay File Exchange to download sales reports, saying File Exchange could be difficult to use for uploading listings, but was easy for downloading reports (good to know!) - see post #74.

An eBay moderator came in to the thread and answered questions. In post #92 on page 5 he addressed some questions and concluded with the following:

"In closing, most sellers do not generally need to figure out the tax rules that apply for states where eBay is collecting and remitting sales tax - eBay is taking over this process for the seller and while a seller should still address buyer concerns by directing them to eBay resources, additional questions can be handled by eBay Customer Service or by the buyer contacting the state tax authority. Some sellers may need to look further into these regulations, particularly for states where the seller has revenue from sources outside of eBay. A local tax authority is the best resource for additional questions."

And in post #94, he wrote that reports for sellers were "definitely something on our radar. I am not able to provide a timeframe, but reporting tools are a top priority for us to provide for our sellers."

Sellers have also been discussing the issue on the AuctionBytes Blog.

Up next: Connecticut, New Jersey, Alabama, Oklahoma, and Pennsylvania.

Update 2/12/19: The spokesperson for the Washington Department of Revenue provided us with additional information in response to our followup:

"Since the facilitator is the agent for the seller, we mean that they should contact the marketplace facilitator. We will be taking a look at our website to see if and what needs to be updated.

"Another point to note: The issue of items being purchased for resale is a different issue. We have a deduction from sales tax that businesses take on their combined excise tax return called tax paid at source. Our answer was directed at consumers, not businesses."

Also: EcommerceBytes think it's worth noting that the Marketplace Facilitator laws were supposed to take the burden off of small businesses and individuals selling on online marketplaces. 

Constructive comments about what challenges you're facing and what the states and marketplaces could do to alleviate them are welcome. Don't assume non-sellers understand how difficult and anxiety-inducing this can be.

Update 2/12/19: Here's a post on the eBay boards from a seller today who says eBay is charging Washington buyers sales tax for certain coin and bullion purchases that are EXEMPT from sales tax.

Comments (37) | Leave Comment | Permalink
Readers Comments

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

This user has validated their user name. by: Lightning

Wed Feb 13 15:13:16 2019

@Number 6
Many states have a ''Sales and Use tax''.  If the Sales tax doesn't apply, the Use tax kicks in.  I used to work for a furniture retailer.  If we delivered $10k worth of furniture to the next state, we didn't collect sales tax.  BUT, the buyer was supposed to report it to his home state and pay a Use Tax on it, which coincidentally happened to be the same exact rate.  

Maybe this is how the states worked around the problem.  The tax you are paying supposedly having nothing to do with the purchase from another state, but the use of the goods in your own state.  Some states and cities get creative.  Like to avoid property tax caps, they start to charge user fees for trash collection, sewer services, municipal water, etc., things that were formerly paid by the property tax dollars.  Now they still reach the property tax cap, but have other streams of added income to work with.

The laws are changing constantly.  Hard to believe the constitutionality of state sales taxes, or export taxes if you prefer to call them that, has gone unchallenged, or unchanged if there was a challenge.  No shortage of lawyers laying in wait for a misstep.  I guess it comes down to how you define ''exports'' in the law.

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

This user has validated their user name. by: Number 6

Wed Feb 13 17:14:29 2019

Lightning says 'the buyer was supposed to report it to his home state and pay a Use Tax on it,'

You're right - THAT is how sales/use tax is meant to be collected, within the State by the said State.  If the customer doesn't report it that's between him and his State - and that's the way it should be.

Now we have a double-tax scenario, if I buy something in another State online, pay tax to THAT State as being collected by sellers and websites, my own State, in theory, could still demand their sales tax for the purchase can't they?

Of course, the irony of it all is it's only 'The United States' when it suits the States to be so, any other time they like their own States laws and rules to apply exclusively to anything within their State.

Also, the idea that States find ways of collecting unconstutional taxes via 'workarounds' and that's ok', but it's not ok if the individual does the same, he's usually breaking the law and can end at the State's mercy behind bars.

This whole mess has only just begun and there's already wrong taxes/rates being collected, taxes for States that don't have a sales tax, and a one-size fits all sum being applied that is higher than the rate that should be collected.

I do wonder where this will lead to in the coming years, and how much of the money collected will actually ever be remitted to the States in question - and quite what individual States will do to pursue non-payment from individuals/businesses not even in their own State.

Oh well, the only two things certain in life have always been death and taxes.

The Beatles nailed it decades ago.

''Let me tell you how it will be
There's one for you, nineteen for me
Cos I'm the taxman, yeah, I'm the taxman

Should five per cent appear too small
Be thankful I don't take it all
Cos I'm the taxman, yeah I'm the taxman

If you drive a car, I'll tax the street
If you try to sit, I'll tax your seat
If you get too cold I'll tax the heat
If you take a walk, I'll tax your feet

Taxman!
Cos I'm the taxman, yeah I'm the taxman

Don't ask me what I want it for (Aahh Mr. Wilson)
If you don't want to pay some more (Aahh Mr. Heath)
Cos I'm the taxman, yeah, I'm the taxman

Now my advice for those who die
Declare the pennies on your eyes
Cos I'm the taxman, yeah, I'm the taxman

And you're working for no one but me
Taxman!''



Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

This user has validated their user name. by: Lightning

Wed Feb 13 22:24:22 2019

@Number 6 Re:
''Now we have a double-tax scenario, if I buy something in another State online, pay tax to THAT State as being collected by sellers and websites, my own State, in theory, could still demand their sales tax for the purchase can't they?''

I don't see a double tax in your example.  
If you buy something online from another state and pay a tax, it is because a tax is collected for the state RECEIVING the delivery of the goods, your state.  Let's presume you are in FL, buying from CA.  If tax is collected it is because the site required tax to be collected on behalf of FL.  So THAT is where the tax payment is supposed to go.  CA doesn't get the money.

I certainly see the possibility that the site was not supposed to collect the tax for FL if they are not required by FL, or if they are not authorized by FL, as in never having obtained a permit to collect for FL.  I also see the potential that they don't remit the tax.  Both of those scenarios are bad behavior at best, criminal at worst.  But I don't see 2 states collecting on the same sale, or you having to pay both states.  If FL approaches you as to where your tax money is, you can point to the seller in CA.  He's got it.  I don't know how FL would know you bought something anyway, unless the seller in CA reports it.  If he reports and doesn't send it, that's no too bright.

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

This user has validated their user name. by: Marie

Thu Feb 14 01:50:04 2019

@number 6

For it to be an Export tax, the SELLER would be the one that paid the tax to the state.  It would be assessed on the seller and paid by the seller.

For example.  A seller in WA shipped to CA.  To be an EXPORT tax, it would be the Seller in WA that was charged a tax by the state for shipping something OUTSIDE the state.

Sales tax is NOT an Export tax, nor is any state charging an Export tax to a US internet seller.

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

This user has validated their user name. by: cfrphoto

Thu Feb 14 01:50:44 2019

I have sales tax accounts in Washington, California, Massachusetts and Connecticut plus a few other inactive accounts. So far, WA collections by eBay have been accurate. I have checked each one manually using their GIS tool. According to the State of California, sales tax collections for sellers with an "economic nexus" will start on April 1st. Most sellers must collect sales tax at the base rate if the number of transactions in the previous year or the current year to date is 200 or more or if total sales exceeds $100,000. See https://blog.taxjar.com/economic-nexus-california/ and https://www.cdtfa.ca.gov/industry/wayfair.htm

It seems unlikely that eBay will be prepared to start collecting on April 1, 2019, so major sellers are on their own. It is possible that sellers who don't comply, may be reported to CDTFA by competitors. In any case, when eBay starts collecting on behalf of sellers, they still must register with the state. Connecticut also requires sellers who meet their thresholds register and file a tax return even if 100% of sales are through facilitators: https://portal.ct.gov/-/media/DRS/Publications/OCG/OCG-8.pdf?la=en


The
bottom line for sellers is that accurate reporting to sellers will be required at the item level granularity. If eBay collects tax when they should not, sellers will be at a competitive disadvantage. I would guess that consumers in some states may file complaints against eBay to their Attorney General. While eBay may believe that they can collect sales taxes on non-taxable items like clothing in Massachusetts or face value postage stamps, there will be pushback from buyers or sellers or those segments of the marketplace will disappear from eBay.

I am also concerned that some information provided by TaxJar or Avalara may not be accurate. I am not sure that jurisdictions like the Commonwealth of Massachusetts can effectively collect tax from out-of-state sellers until legislation is updated to reflect Wayfair criteria instead of asserting that website cookies imply a physical nexus.

It is my understanding that sales tax reporting was recently added to the eBay API, but third party applications like the SixBit eCommerce Solution did not have sufficient lead time to be ready for the January 1st launch.

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

by: Chicago48 This user has validated their user name.

Thu Feb 14 02:20:11 2019

Don't blame Ebay. Blame the stupid Supreme Court justices who have no clue what ecommerce is and how difficult it would be to collect tax from different regions and counties, because they don't have internet knowledge. Oy Voy!  I see a class action lawsuit coming.

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

by: maxmad This user has validated their user name.

Thu Feb 14 03:01:37 2019

contact the seller ,,,,,,,,,,,

https://www.ebay.com/

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

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

Thu Feb 14 03:32:19 2019

I think the blame should go to our INACTIVE Congress and Senate legislators. They are too busy trying to stomp on each other and taking lobby money to take care of business. The Internet is under Federal jurisdiction, and that is where the tax should be. One stable percentage in tax fees for all sales, no matter if you are buying the item for use or resell. The government could then disburse the fees to the states the buyer lives in. A computer program can be set up with filters for each state, and electronic deposits would be paid out to the states. No biggie.
What we have right now is chaos and windfall profits for those who are collecting taxes but have no intention of paying them to the states. As for those who complain sales taxes will cause instability in the market is hogwash. I think the rising fees from Amazon, Ebay, and Etsy, along with the galloping raises in US Post Office shipping costs  will be the death of ecommerce, long before sales taxes make a difference.  

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

by: Whatever This user has validated their user name.

Thu Feb 14 06:07:57 2019

For buyers who have a resale certificate but get charged sales tax - well it's a chore but it's also a business deduction - just keep tracking it and add that expense to your return unless you've been screwing everyone all along and not declaring your internet sales for the last 20 years. then it's your problem. The business tax deductions afforded by the IRS far outweigh cheating the IRS out of a couple of bucks.

For the sellers who think they owe this state or that state sales tax - well how much do you estimate that you owe them? $5 - 10$ at the end of the year? I'm not losing any sleep over that one - let them figure out who you are - where you are yada and come find me.  Trust me they do not have the financial power or will to come and get the money. All this tax baloney is B/S.  They all missed the boat - their about 10-15 years behind the old 8 ball. But after all it's the government - they can screw anything up.

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

This user has validated their user name. by: Philo

Thu Feb 14 09:20:24 2019

Here is my proposal again- make it a flat 3% tax for all cross state transactions.  3% is better then 0% today.

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

by: timeaftertime This user has validated their user name.

Thu Feb 14 10:01:13 2019

@Whatever - just a thought, but deducting sales tax wrongly collected by eBay on purchases made for resale is helpful, BUT you do NOT get it back dollar for dollar - you just reduce your total tax bill.  The only way to get the actual amount is by getting a refund.  

I live in New York, and assume most other states are doing the same - ''my'' sales tax rate is 8% - of which 4% goes to the state and 4% goes to the COUNTY where I live.  

Philo has a very good point - why not, at least in the beginning, charge only the STATE portion - which is a flat rate across the state, then once that system is ''working,'' expand to include the ''LOCAL'' taxes.  

The only good thing about this mess is that it is coming out how incompetent eBay is being and how badly they are mishandling everything!!!

My own sales tax submission is due in a couple of weeks. THANKFULLY the software I can use, provided by the state, so far has worked perfectly and is easy to use.  BUT --  I must break down every single sale into the county in which my customer lives. NOT ONLY THAT but sometimes the municipality as  well - there are DOZENS of taxing jurisdictions within this state, and New York City is an entity unto itself - and to make it worse, sometimes there is a ''temporary'' tax levied within a municipality.

Example: the city of ''Metropolis'' enacted a .25% ADDITIONAL sales tax that only took place between July 1 and July 31. This requires me to look at the date(s) of any sales to Metropolis residence and  if any took place during those 30 days, I have to input the sale on that line of the form -- not the  line that covers the other 11 months of the year.

And eBay is supposed to be doing THIS kind of calculations - AND GET IT RIGHT?????????  I dread the day!!



   

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

This user has validated their user name. by: Bidonmine

Thu Feb 14 10:03:44 2019

Surprise! eBay doesn't know how to do simple math... anyone really surprised?

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

This user has validated their user name. by: iheartjacksparrow

Thu Feb 14 12:22:43 2019

@timeaftertime - Your example of Metropolis is exactly what is going on in California. Say I made several sales to San Fransokyo. Maybe there's one district tax rate for January to March (which is noted as being expired), one from April to October (also noted as expired), and another that began on November 1st. Luckily I keep a spreadsheet with every possible bit of information (and the ability to "highlight" in different colors to separate dates and locations). You're lucky that you have so much time to submit you tax reports; in California they are due on January 15th.  

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

by: val2525 This user has validated their user name.

Thu Feb 14 16:31:48 2019

Sorry Number 6, but the Supreme Court did not agree with your constitutional interpretation. You can give up your losing argument.

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

This user has validated their user name. by: NoMoreEbay

Thu Feb 14 17:51:46 2019

Then there's the millions of annual returns where the taxes must be refunded to the buyers.





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

Sun Feb 17 10:34:05 2019

@iheartjacksparrow

When did the Sales Tax become due on January 15th??  It used to be that you had until January 31st for the 4th quarter and I know that I have until July 31st to file mine as i only have to file once a year due to most of my sales being on the East Coast, especially now that their is zone pricing for shipping.  I don't expect to ever make a sale on Ebay on the West Coast ever again because they make more money if they only show my items on the East Coast so that the Buyer has to pay more shipping costs, thus Ebay makes higher FVF on the shipping.  

I have not kept up on the due dates since i retired but quarterly sales tax was not due until the end of the next month during my tenure dealing with them for clients.

Perminate Link for eBay Sales Tax Error? Washington Says Contact the Seller   eBay Sales Tax Error? Washington Says Contact the Seller

by: Eliot This user has validated their user name.

Fri Feb 22 11:10:33 2019

@Marie: charging sales tax across state lines was unconstitutional for 200 years; then a few months ago, boom, it's suddenly Constitutional thanks to the current crop of nutjobs on the SCOTUS. Your interpretation that ''export'' didn't apply across state lines wasn't valid EVER until now. Take it from a history major with an MA; you're turning centuries of precedent on its head for your own amusement, but I don't care how amused you are. It isn't right. http://law2.umkc.edu/faculty/projects/ftrials/conlaw/interstatetax.htm https://www.jstor.org/stable/1067618?seq=1#page_scan_tab_contents http://thefederalist.com/2018/06/25/online-sales-tax-decision-supreme-
court-completes-inversion-commerce-clause/

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