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: pace306 This user has validated their user name.

Wed Oct 2 11:35:18 2019

SOMEONE figured out that somewhere - its costing eBay money to do all the tax collection and came up with the "well its the seller thats making the sale, and so then its the seller thats responsible to pay the tax(es), so why are we doing all this work for FREE? Just because its the law - doesnt mean anything - we are eBay - the worlds biggest thieves - laws dont apply to us!".

Beyond that (Hey Sweetums - Hows it going? LMAO)

Exactly what differs between the 2 senarios ... what (new hidden) gimmick is up with the announcement?????

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

by: b86fiero This user has validated their user name.

Wed Oct 2 11:52:16 2019

Ummmm ......... can we have that explained in language an average American can read and understand complete with examples, charts, graphs and comparisons between now and how the soon-to-be implemented change will affect our wallets?  

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

This user has validated their user name. by: toolguy

Wed Oct 2 12:27:07 2019

Here's a solution.

Let sellers accept checks and money orders!

There's NO processing fees involved (also no tax collection ~ LOL)

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

by: AngelaTC This user has validated their user name.

Wed Oct 2 12:42:34 2019

I have to collect sales tax for Michigan.  I have to pay processing fees on the cc payments I collect locally as well as Paypal fees on eBay sales.  But Michigan allows me a tax credit for my trouble.

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

by: cardfinds This user has validated their user name.

Wed Oct 2 12:57:42 2019

To me it sounds like ANOTHER money grab. I could be wrong but it looks like they are now going to take their cut from the tax money too. So they can take their % from the sale price, shipping, and now the tax?  

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by: Just Plain Irritated This user has validated their user name.

Wed Oct 2 13:35:10 2019

I am seriously concerned about how I am going to report "sales" amounts collected without sales taxes collected on Iowa Sales Tax Reports and Income Taxes.

Could  eBay please keep these pieces separately??????  Are they not aware that we MUST account for this info to the State and US Governments?

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by: FeelingFroggy This user has validated their user name.

Wed Oct 2 13:43:11 2019

As usual the idiots in the ivory tower directions are as clear as a river of mud. Who knows what is happening. Greedbay has money going in so many directions even they don't know what they are doing.

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

Wed Oct 2 15:14:57 2019

This move is a result of Wenig getting canned as he was to stupid to realize that Ebay was having to pay the processing fees on the Sales Tax.  Since the Interim CEO was the CFO he realized this and so now we get the sudden change.  In reality it is no different that if we were collecting the Sales Tax for our own states as I have always had to pay the processing fees on that amount to Paypal.  However, the Sales Tax was not included in any tax forms I received from the processor as that was actually broken out when the processing was done.

To me this is the Interim CEO trying to show the BOD that he is on the ball and should be installed as the permanent CEO because he just save the company about 3% of the money collected for sales tax, which is so far from reality its not even funny.  I wonder how long its going to take MP to actually get that programming done correctly?  Although it is truthfully the Sellers responsibility the way Ebay is handling things once again makes it look like nothing more than another Ebay Money Grab.

As for dumbing things down, remember Ebay has almost nothing but attorneys on staff who only know how to write in legalese that can be interpreted whatever way they need it to be on a case by case basis.  That is a skill only learned at Ebay and basically makes them useless in the real world now.

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by: cardfinds This user has validated their user name.

Wed Oct 2 15:15:58 2019

I have to file my GA sales tax collected myself each month. I do so by going to main page of seller hub, click on reporting, click on month you need, submit report. A short time later go back and it should downloaded. When in report click expanded view upper right corner and it will show you ALL tax collected. I have to open each transaction with tax charged and find out which state it was for. It's long and tedious but I don't have a choice. I'm a one man operation and don't have an accountant.

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

by: RL15 This user has validated their user name.

Wed Oct 2 15:28:43 2019

fleecebay has to keep sticking their slimy little paws deeper into sellers' pockets

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This user has validated their user name. by: NoMoreEbay

Wed Oct 2 15:59:28 2019

"...order totals sent for processing will reflect the gross order amount inclusive of tax."

The way I read it is beginning Nov 1, ebay is going to consider the price of the item and the tax as the final value and charge a FVF on that total, then submit the tax like before. Before Nov 1 the tax is considered a separate transaction without a FVF.

But that is purely a guess as the verbiage is incomprehensible.

Hey Sweetnam! Great start to your communication effort!

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

by: kjp55 This user has validated their user name.

Wed Oct 2 16:28:53 2019

''...order totals sent for processing will reflect the gross order amount inclusive of tax.''

I was thinking the same thing when I received the email today, then I came here to see if it had hit Ina's news yet....which it has [Good job, Ina].  Seems like nothing more than another $money grab$ by Ebay/Paypal.  Why do sellers get stuck with FV and processing fees on shipping?  Because they can do it and get away with it.  Why do sellers get stuck with FV fees and processing fees on taxes?  Because they can do it and get away with it.

What recourse do we have as sellers?  Leave Ebay, increase prices and pass on to buyers, or absorb it as cost of doing business.  Everyone has his/her own decision to make.  Although....Stomping our feet and flipping Ebay/PayPal the bird might make us all feel better for a few minutes.

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

This user has validated their user name. by: toolguy

Wed Oct 2 17:28:37 2019

@SilverIceKing

"remember Ebay has almost nothing but attorneys on staff "

So of the 14,000 ebay employees how many do you think have a law degree?

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

This user has validated their user name. by: Lightning

Wed Oct 2 17:48:40 2019

I just looked on PayPal at a transaction on which eBay collected $2.38 sales tax.  The sales tax on the PayPal transaction shows as $0.  So PayPal did not charge a fee on the tax, since eBay reported it as zero.  In the future, if ebay reports the gross sale to included the tax, we will be paying the 2.7% on that too.  

Also, eBay will PROBABLY include the tax in the gross sale that they HELPED you make, so there will be an FVF on that, too.  A $300 item with a 7% tax is $21.00 tax.  EBay will charge an FVF of roughly 10% of the $21.00, or $2.10.  PayPal will collect another 57 cents.  Our fees will have just gone up in both areas, and on that sale will amount to $2.67 more, or 0.89% added fees.  Almost a full 1% more instantly.  Yowza!

On top of that, I recently made a $200 sale of a taxable item in my home state, and NEITHER eBay or PayPal collected the tax!!  Happened a couple of days ago, and I am just realizing it now, way too late to do anything about it.  The listing was set up properly, home state tax specified, and ignored.  If they can't get the basic taxation right, how can we depend on them moving forward?  This is a step in full reverse, as at least they used to be able to keep taxes owed on home state purchases working correctly.  Now we got nuthin'.

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by: Snapped This user has validated their user name.

Wed Oct 2 19:53:53 2019

There are some states that 'rebate' (up front) a portion of sales taxes collected and then remitted. In fact, they state that is done to help defray expenses of the bookkeeping required. It could be as much as 20% of that collected - (e.g., collect 5%, remit 4%).

So eBay 'keeps' that? While sellers still need to account for it (even though not 'handled')? AND then they charge the seller a fee for it? To pay for what exactly? The 'cost' of all their machinations (already paid via the rebate)?

Nobody has yet to compose a curse disgusting enough to describe that if so.

Bet ya'll think of one though, when the taxman comes knocking to reconcile the mess this latest unready and ill-timed eBay push job.

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

by: Whatever This user has validated their user name.

Wed Oct 2 20:24:53 2019

"Historically our goal has been not to have any major disruptions in 4th quarter."

Are you kidding me eBay? You've made it a MISSION to screw things up for seller during the holiday shopping season.

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

by: Whatever This user has validated their user name.

Wed Oct 2 20:27:11 2019

time to list more on Amazon - etsy - bonanza poshmark - facebook and my own website - these folks have lost the minds

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

by: GrumpyHam This user has validated their user name.

Wed Oct 2 20:55:04 2019

From Brian.T@eBay
''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. ''

So yes, we will be responsible for paying for the processing fees for sales tax we will never see....  

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

This user has validated their user name. by: Lightning

Wed Oct 2 21:35:34 2019

@GrumpyHam
Your quote from Brian T from eBay looks familiar, but I can't remember where or when it was published.  Can you point to where you saw it?  Also, that is the case at present, I guess(?).  But I suspect that statement was made ahead of the new ''November Plan'' announcement.  No guarantee it won't change.  Vegas odds would be heavily weighted in favor of it changing.

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by: industrystones This user has validated their user name.

Wed Oct 2 21:35:43 2019

SIMPLY TOO MUCH WORK TO SELL ON THIS GOOFY SITE. PERIOD.
About fifty seven cooks in their kitchen.

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