Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Mon Apr 9 2012 23:33:44

Would You Report Fellow eBay Sellers to Tax Authorities?

By: Ina Steiner

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In Tuesday's EcommerceBytes Newsflash newsletter, Kenneth Corbin writes about sales-tax compliance. He says state authorities are on the lookout for sellers in their states who fail to collect and remit sales tax on in-state transactions.

Verenda Smith, deputy director of the Federation of Tax Administrators, told him that tax agencies get information not only from the IRS, but from "angry ex-wives and disgruntled competitors." She also seemed excited about the prospects for the new IRS Form 1099-K in bringing non-filers into compliance.

Sellers who don't comply are at an unfair advantage - they don't charge in-state shoppers for sales tax. We spoke to a seller in California who said one-half to two-thirds of his competitors on eBay are not collecting in-state sales tax.

What do you think? Should sellers report non-compliant sellers to their state tax-collection agency?




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by: NullApps This user has validated their user name.
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Tue Apr 10 01:07:14 2012

There is a lawyer I read about who does nothing but buy from companies online and then turn around and sue them when they don't collect taxes from him.  This is actually how he makes his living.

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This user has validated their user name. by: TrentDep

Tue Apr 10 02:00:46 2012

It might make sense that he would contact these people, and offer to " represent " them should the need arise ( similar to ADA "lawyers" who will contact businesses not in compliance and offer to help them " should the need arise" - as opposed to turning them in - for a fee of course, but a private attorney isn't going to be able to sue someone for not charging them sales tax...

I used to reside and sell in CA, on line, fairs etc... I never added tax to purchases, but I did take the correct percentage of a total sale and forward it to the Franchise tax board as required - would have loved to have run into and been threatened by one of these scumbag "attorneys"...

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by: Another Coin This user has validated their user name.

Tue Apr 10 02:02:05 2012

Isn't it hard enough to make a living without having fellow sellers doing the dirty work for eBay and the tax man? Every cent I make is a revolving door going right back out to pay more bills, fees, taxes etc. Everyone wants a piece of the pie and too bad for them because I can't cook. With eBay, less is coming in but paying more.

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This user has validated their user name. by: TrentDep

Tue Apr 10 02:04:06 2012

With that said, it's really not my business as to whether another person is in compliance, nor would one really be in a position to know ( with the exception of a jilted spouse, ex partner etc ) so no - I wouldn't consider turning anyone that I *suspected* in - they are already at a disadvantage if they are skirting tax code / ethics ...  

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This user has validated their user name. by: Ming the Merciless

Tue Apr 10 02:30:41 2012

And if the reporter is wrong?

I say expend the energy reporting ebay to every possible government and media agency that might put an end to their organized crime business practices.

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by: used2luv2sell This user has validated their user name.

Tue Apr 10 04:30:36 2012

I'm surprised Ebay isn't telling us that buyers WANT sellers to charge state taxes.  

Then, Ebay can steal 9% of the taxes collected as a ''fee'' and the seller can pay the rest out of pocket just like we do with postage.  

No way I would consider reporting a seller for non payment of state taxes.

Do Ebay China sellers pay taxes to sell in the U.S.?  I'd rather get on that bandwagon any day.  

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This user has validated their user name. by: Nan
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Tue Apr 10 08:17:40 2012

Not all states require that you collect sales tax.  Here in NM, we have Gross Receipts Tax where the merchant _may_ collect it from the customer, but it is not required.  The only thing that is required is that the state gets their cut.  I don't chose collect it from in-state sales, but I do pay it to the state out of the earnings.

And no, I would not report a non-compliant seller. Murder, abuse, kidnapping, hit-and-run yes.  Tax evasion, no.  

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by: BetterThingsToDo This user has validated their user name.

Tue Apr 10 08:20:57 2012

People need to get a life. We are to business to worry about someone else's business.

People stick their nose into someone's business and then whine when they get their own nose cut off.

Mind your own business.

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This user has validated their user name. by: basset

Tue Apr 10 08:42:23 2012

No.
If someone wants to play Inspector Javert we can assume their life is so empty that they have nothing better to do. And most will know what Javert's end was like.

Even if a seller does not collect local tax from their buyers at the end of the sale does not mean they are not keeping track of local sales and paying the tax on their own. It is said that to  Assume usually makes a** out of u and me. Don't we all have more pressing things to worry about. I think taxpayers actually PAY people to worry about these things. Lets let them earn their salaries.  

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by: exdwh This user has validated their user name.

Tue Apr 10 13:50:24 2012

As a buyer, the real issue is not whether the seller collects sales tax when required, but whether they actually remit it to the state. As a buyer, am I required to remit 'use tax' in any case where sales tax was not spelled out in the invoice? What if the state gets paid twice?

As a Florida seller, we collect the base tax rather than the maximum and eat any local surtax. How is the buyer to know? If the rate charged does not match the rate due, then is the buyer responsible for the difference? How do I get a credit from sellers who charge the maximum?

Has anyone ever reported a seller who charges more tax than your actual local rate?

--David

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This user has validated their user name. by: Marie

Tue Apr 10 17:41:59 2012

A private citizen such as an attorney mentioned in the first comment on this thread would have no standing to sue a person or company for not charging them sales tax.  He or she would have no standing to do that, even if they were that state's attorney.  If it were that state's attorney that discovered it, it would just get turned over to that state's tax authority for audit and of course penalties would be imposed if appropriate.  But you don't sue people for not charging sales tax.

With that said, I agree, it is not our responsibility as sellers to be policing the policy and procedures of other sellers.  That is Ebay's job.  They could easily fix it by forcing sellers to charge the tax in the proper states, but they choose not to do that.  

Ebay could easily force sellers to charge appropriate sales tax and then yearly report to individual states a list of sellers that did business in their states.  I'm not talking about some complicated, useless, form.  Just a simple list of names and addresses of those sellers operating in their state that collected sales tax from their buyers.  Just a double check so the states could verify the sellers filed proper forms and paid proper taxes.

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by: sparky This user has validated their user name.

Wed Apr 11 00:30:50 2012

Is this the Soviet Union? Spy and tell on everyone? Managing my own life is full time.

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This user has validated their user name. by: thehosst
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Wed Apr 11 00:57:32 2012

How do we declare the paypal rolling reserve? Is eBay considering the thousands of dollars that many sellers have on hold ( meaning, partial payment never got to the seller account, took possession or was able to manage it ). I ask this because we usually make 20% profit, paypal keeps 10% or half of it, we have to  do all kinds of things to manage the business without this money and in a 6 month period, will the IRS make us responsible for declaring this money? Everyone knows that paypal is not a secured bank, how can legally and technically one can declare something that is not sure will get? That is imaginary stuff that I'm sure does not fly with the IRS, they want black and white and in the paypal rolling reserve case, is not. Any ideas?
By the way, reporting a seller to the IRS is like killing your Mom, we pay them to take our money and they should do an investigation before auditing people. Putting someone down does not make you go up, trust me.  

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by: BonzSeller This user has validated their user name.

Wed Apr 11 02:25:23 2012

In a nutshell, No I would not. My view on this is if the different states want ME to do THEIR collecting, then they can dam_ well pay me for it.

On line selling is hard enough. Maybe if I were one of those that make several hundred a week, but I'm not.
If the Feds or States want THEIR tax laws enforced, then they can get their PAID employees to do it !!!

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by: thigamajig This user has validated their user name.

Wed Apr 11 02:47:20 2012

No, I wouldn't report someone else.  However, maybe because I'm new to selling on Ebay, I'm selling used stuff even if it's NWT.  Why would I pay sales tax on stuff I've already paid sales tax on?  It's a yard sale environment without the setup in the yard.

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This user has validated their user name. by: Marie

Wed Apr 11 03:53:58 2012

@thehosst
This thread wasn't speaking to the PP problems or IRS.  It is in regards to state sales tax and state authorities, Not IRS.  With that said, I'm not sure how or why PP would be getting half your profits on each item you sell.  PP charges just about 3% on US funds, so if that 3% represents half your profit, then you are not pricing your product correctly and most certainly are losing money on every transaction since Ebay gets a minimum of 7.5% FVF.  So if you feel the 3% PP collects is literally half your profit, then that would mean you are losing 4.5% on every transaction.  7.5 - 3 = 4.5

You are responsible NOW to claim your income to IRS.  If you have not been, that is irresponsible of you.  But if you don't report the income for 2011, now IRS has a way to catch you for not claiming income when you should.

But if your numbers are correct as originally stated, you don't have a profit, so you won't have any taxes to pay.  You still need to claim your sales and then state your expenses.

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by: frustrated This user has validated their user name.

Wed Apr 11 07:49:16 2012

okay are you SERIOUS??

1st: how would you know if they collect tax? Unless you purchase one of their items (so you can leave them 1s DSR ratings, naturally)

2nd) okay so they collected it, how on EARTH would you know if they sent it to the state?

JC don't people have enough to do already?

If you have that much free time, spend it trying to find the workers comp and medicare scammers, for which there is a payment involved.

Or, go into a crummy neighborhood and pick up trash. Volunteer at a soup kitchen.

Call for a charity and collect old clothing. (you get paid for that one too)

Oh shoot, that sounds like actual WORK. That explains why these folks don't make on ebay, it's actual WORK.

GET A LIFE.

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by: JackieBlue This user has validated their user name.

Wed Apr 11 09:25:45 2012

Sales tax is between the seller and the state.  I have no idea whether it matters whether you collect it or not, as long as you pay the tax.  We do not collect sales tax on Amazon purchase in our home state, but we pay sales tax on every purchase from our home state.  

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by: pace306 This user has validated their user name.

Wed Apr 11 09:45:15 2012

I ONLY report the following people:

eBay
Paypal
Chinese Megasellers
Any of the ''chosen'' Platinums

Everyone else gets a free rie!

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This user has validated their user name. by: Tula

Wed Apr 11 09:46:19 2012

I don't buy from competitors, so I don't know if they're charging sales tax. And none of my competitors (that I've seen) are located in my state, so it's a moot point. I can sympathize with the CA seller in the article, though. They have a high sales tax and a lot of sellers in that state, so his business was at a clear disadvantage due to the other tax cheating competitors. In that case, I would probably do the same, since it's an unfair advantage due to breaking the law. His own business was suffering by the illegal actions of others, so it's only fair to ensure that they all play by the same rules.

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