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Sun Dec 1 2019 21:50:58

eBay Shifts Part of Sales Tax Burden onto Sellers

By: Reader

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Dear Ina,
I'm writing about the new eBay policy on collecting tax and making it a part of the total transaction. This is a real case example of how it's impacting my business. 

I had a $599.99 sale a few days ago. I charged $13 for shipping and eBay added $39.84 in tax my customer had to pay. That adds up to $652.83 of which eBay took their normal cut of 9.15%, nothing more. 

Here's where the impact is felt: as PayPal took their normal 2.9% + 30C which = $18.08, they actually took $19.23, a difference of $1.15. 

That may not sound like much, but when you add the 1K+ transactions I have per year, and now 30+ states they're collecting tax from increases, it's going to add up fast.

The funny thing is this was eBay's announcement and they're not financially benefiting from it but PayPal is!!!!
Brian

Note from the Editor: Prior to its recent policy change, eBay was paying payment processing costs for the sales tax it collected due to the Marketplace Facilitator laws, so eBay does benefit from the change by shifting the cost onto sellers.

Comments (29) | Leave Comment | Permalink
Readers Comments

Perminate Link for eBay Shifts Part of Sales Tax Burden onto Sellers   eBay Shifts Part of Sales Tax Burden onto Sellers

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

Mon Dec 2 14:00:09 2019

In California, sales taxes are paid quarterly or annually which means what ever venue collects the tax for California, will be collecting interest on a lot of money for three months. That has to be a money maker for card processors and venues that should offset the cost of collecting taxes.  

Perminate Link for eBay Shifts Part of Sales Tax Burden onto Sellers   eBay Shifts Part of Sales Tax Burden onto Sellers

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

Mon Dec 2 14:24:48 2019

@Tiffee Jasso

If the amount of sales tax collected is over a certain amount they must make deposits monthly on what they collect.  In fact if the amount is over I believe $50K it also must be sent electronically so the state does not miss out on the interest they can earn.  I also live in CA and have been dealing with sales tax issues for many years.

Where Ebay is going to make their money on this deal is the $10 million per year they are going to collect from San Jose by channeling all of the local sales tax collected as coming from San Jose so all of the other local districts get nothing, but Ebay gets 30% of all money collected over $5 million per year.  That is much more than the interest they could have made on the tax collected.

Perminate Link for eBay Shifts Part of Sales Tax Burden onto Sellers   eBay Shifts Part of Sales Tax Burden onto Sellers

by: eBaySince2006 This user has validated their user name.

Mon Dec 2 18:42:11 2019

My issue is that adding sales tax to the total cost disproportionately effects sellers who sell higher priced items. The argument is that it is "industry norm" for processors to collect fees on the entire purchase including sales tax. My argument is "industry norm" traditionally refers to large brick and mortar sellers who can afford to absorb the costs.

Us sellers on the internet are mostly small and medium sized sellers who can't afford to absorb the costs. This isn't fair as the higher price items we sell the more we're affected. I don't think it's fair or sustainable and a lawsuit is at hand.

Perminate Link for eBay Shifts Part of Sales Tax Burden onto Sellers   eBay Shifts Part of Sales Tax Burden onto Sellers

This user has validated their user name. by: Marie

Mon Dec 2 21:41:02 2019

@Wellspring

The Facilitator laws for Sales tax rates are NOT driven by the Seller's location at all.  It doesn't matter if the seller is in China or Australia.

The rate is driven by the buyers location.  But you are right about the full zip code.  If buyers would have their full zip code in their ship to address there rate may be a little lower.  When buyer just have their 5 digit code, then each state has directed Ebay what flat rate to charge in sales tax to the buyer.  But if the buyer has their complete zip code, then the rate will be driven by their exact location which may be a little cheaper.  For me it is almost 1.5 percent lower than the overall rate for the state I'm in.  

Perminate Link for eBay Shifts Part of Sales Tax Burden onto Sellers   eBay Shifts Part of Sales Tax Burden onto Sellers

This user has validated their user name. by: Lightning

Tue Dec 3 01:51:21 2019

This small percentage increase on the total sale due to sales tax processing is negligible.  It's a small % of a small %, probably averaging under 25 cents per sale for me.  I'm happy paying it, if it means I don't have to worry about tax reporting to the OTHER 49 states.  

The big deal is the tax itself.  I am finding that buyers have a price in mind that they are willing to pay for an item, including tax and shipping, and that's their limit.

Say they want to pay $50 as an example.  They suspect they will be taxed also, so they are building that into their budget, as well as shipping and the price of the item.  Once again the seller's share is compressed, or your just skipped due to being ''over budget''.

If the tax on that item is 7%, that's $3.50 that we are expected to absorb, so a de facto sales fee of an additional 7%.  That's almost as much as eBay is taking.  Then, to pour salt into the wound, PayPal puts their hand out and says that THEY want 3% of this new ''sales fee'', so that's another dime.  

The dimes are no big deal, but not liking the $3.50 that I am expected to eat.  And it only gets worse as the item value goes up.  We are getting hit from every direction.

Perminate Link for eBay Shifts Part of Sales Tax Burden onto Sellers   eBay Shifts Part of Sales Tax Burden onto Sellers

by: mcposty This user has validated their user name.

Tue Dec 3 12:37:41 2019

steve d..ebay DOES have to do it, thats the thing. they are not doing it to be nice.

a lot of sellers collecter tax properly before the stupid law..and now after..ebay is rigging it and scamming buyers and sellers.

ebay is criminal

Perminate Link for eBay Shifts Part of Sales Tax Burden onto Sellers   eBay Shifts Part of Sales Tax Burden onto Sellers

by: val2525 This user has validated their user name.

Tue Dec 3 22:17:59 2019

Whine much, folks?  PP (and all payment processors) charge their fee based on total payment being processed, doesn't matter if it includes sales tax or not.  That's not new.

Perminate Link for eBay Shifts Part of Sales Tax Burden onto Sellers   eBay Shifts Part of Sales Tax Burden onto Sellers

by: Snapped This user has validated their user name.

Wed Dec 4 12:27:27 2019

"PP (and all payment processors) charge their fee based on total payment being processed, doesn't matter if it includes sales tax or not."

Sellers will not be using their account to collect either their payment or any contrived tax 'due'. It's eBay's account. They're the ones who wanted it that way.

And sellers will now pay for those genius' lack of foresight.

And THAT is what's "not new".

Perminate Link for eBay Shifts Part of Sales Tax Burden onto Sellers   eBay Shifts Part of Sales Tax Burden onto Sellers

by: purpleiris This user has validated their user name.

Wed Dec 4 14:32:25 2019

I don't see how it's legal that they make you responsible for the fees on money you're not collecting...they are.

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