EcommerceBytes Letters to the Editor Letters to the Editor
Your emails to EcommerceBytes
For consideration, send your email to ina@auctionbytes.com with "Letters to the Editor Blog" in the subject line! Remember to include your name as you would like it to appear in the blog.
Sun Feb 5 2017 11:44:17

Are Government Laws on Marketplace Sales Misguided?

By: Reader

Sponsored Link

Dear Ina,
Here is yet another example of government misdirection to create laws for improving state sales tax collections - link to article in TimesUnion.com.
 
Among the proposals he has introduced to create a 2017 New York State budget, Governor Andrew Cuomo has included provisions to require Amazon and other online "marketplaces" (eBay and Etsy were specifically mentioned in the linked article) to collect and remit state sales tax on payments made by purchasers who buy from sellers using the venues. 

New York is looking at this as one way to collect sales tax they believe online sellers living in New York state are not remitting. Instead of targeting the individual sellers, they are attempting to target the venues that host member-sellers' accounts.
 
What is most upsetting is that this is one of numerous "hidden" proposals slipped into huge catch-all bills the Governor will send to the Legislature for approval. Citizens may not realize such a misguided provision is in there! If you do not live in New York, you may want to check out what is happening in your own state. With California and New York seemingly the leaders, new laws often are Monkey See, Monkey Do.
 
Unfortunately, if I read the news story correctly, there is little or no understanding of how online "marketplaces" actually work. Amazon is indeed a target on which to focus, because someone who buys from Amazon sends payment directly to Amazon. Amazon even has their own type of payment, and, further, operates "fulfillment centers" where many items are kept. Other items come directly from individual sellers who provide them. But the payment goes to Amazon, which sends funds for the payment to the account of the seller with whom they have contracted to provide the items (at least I think this is how it works - I do not sell on Amazon). 
 
On the other hand, eBay and most other online "marketplaces" - Etsy, Bonanza, Ruby Lane, TIAS, etc. etc. - operate completely differently. They are only the "venue" that provides a platform for individual sellers to use. This is like the local fire house that hosts a community tag sale - shoppers do not pay the fire house for items they purchase, they pay the individual vendors at their respective tables. The fire house is not responsible for collecting and remitting sales tax - the vendors are!
 
On one hand, I am salivating at the idea of eBay hitting heads with New York over "who" is supposed to collect and remit sales tax on online purchases, except our citizens' tax dollars will be squandered on these fruitless efforts! 

On the other hand, I am horrified at the idea of eBay taking over and remitting sales taxes for me - I do not trust eBay with anything! and much prefer to submit my own tax filings myself!
 
The people who drafted this proposed legislation do not seem to understand that eBay and others do not collect payments. Payments are collected by the individual sellers who use the online venue to market their items. eBay forces sellers to use PayPal, which in essence is a banking service that transfers payments sent in from a buyer's account, to a seller's account. 

As further proof it is the payment recipient/processor, PayPal must generate and send an IRS Form1099 to sellers whose income/payments exceed a certain amount. eBay has NOTHING TO DO WITH PAYMENTS. Nor do other similar operating venues.
 
I will be contacting my state representatives to let them know that this is one of the most misguided ideas I have ever heard of. Before writing proposed laws that will impact thousands of citizens, they should at least understand how the venues they want to govern operate. 
 
I just wanted to send this along to make readers aware. 
OP




Comments (14) | Permalink

Readers Comments

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

by: FeelingFroggy This user has validated their user name.

Sun Feb 5 16:23:55 2017

To much overheated hype where there isn't anything to worry about. If you live in a state that has sales taxes then you should already be collecting them.

If your not....then I would think that maybe you should worry.

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

This user has validated their user name. by: iheartjacksparrow

Sun Feb 5 20:13:50 2017

As the OP stated, the individual sellers collect the payments, not eBay or other marketplaces. I don't know what New York has in mind for collecting all the payment records, issuing subpoenas to each of the four million (or whatever the number is) sellers on eBay? It seems whatever their plan is will only cost them more money than the amount they could possibly hope to collect from the sellers. I read an article years ago about how these states imagine they will collect millions of dollars from small online sellers, when the reality is nothing close to that.

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

This user has validated their user name. by: cfrphoto

Mon Feb 6 00:37:43 2017

It is the responsibility of the buyer to pay any sales or use taxes due on items purchased out of state. Since eBay is not handle shipping, it is not clear that any nexus exists for collecting sales tax. Worst case, eBay would close any offices they have in New York state.

Looking ahead, if states are successful in requiring sellers to collect sales taxes nationwide, multiple jurisdictions and destination based sales taxes will become a huge burden on sellers. In that case, eBay should handle sales tax collections and track buyers with resale certificates. Otherwise small sellers will be hard pressed to compete with sellers able to afford multi-state sales tax reporting software.

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

This user has validated their user name. by: Marie

Mon Feb 6 02:52:09 2017

New York has tried this before.  I remember a friend of mine sharing with me she was having trouble with one of her suppliers from New York a few years back.  They were trying to charge her sales tax on items she was buying wholesale and shipped to a different state [other than NY].  It was a hot mess until she got things worked out the her supplier.

This type of taxation would be a nightmare.

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

by: ewegolf This user has validated their user name.

Mon Feb 6 07:59:29 2017

Utah and Amazon signed a sales tax collection agreement that went into effect 1/1/17.  Amazon, which has no physical presence in Utah, will keep the standard 1.31% of taxes collected.  Utah has been trying to lure online retailers to collect taxes by offering up to a 18 percent retainer for the merchant.  Utah said Amazon would only keep the 1.31% but would not release the specifics of the deal by claiming it would give Amazon's competitors an advantage.  So what is Amazon getting if they have "volunteered" to only keep the standard 1.31%?  No transparency in this deal.

It should be noted that the sales tax collection only applies to items that are sold directly by Amazon, not third-party sellers. This point was quickly lost by the local media.  

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

by: Moonwishes This user has validated their user name.
Web Site

Mon Feb 6 09:24:44 2017

The greedy politicians with their hands out are missing one hugely important fact. On line selling keeps many sellers off the dole. By earning their money they can bypass food stamps, food pantries, welfare checks, etc. I"m sure that some of the 'uncollected' sales taxes are far less that the money the states would have to shell out to cover for those that aren't bringing in enough income. If somehow, someday one of these "you have to collect sales tax from everybody" laws pass, many smaller on line sellers will be out of business since it would cost more in bookkeeping than we could ever afford.

I collect and turn in sales tax on the taxable items that I sell to those in my state. On eCRATER I can charge the sales tax by category for my inventory, but on Amazon, it would be too difficult to divide out the categories that are taxable, out the sales tax that would be owed to my state. Even cashiers at thrift stores where I find some of my goods can't keep it straight in their heads as to what is taxable and what isn't.

However I know many sellers must be cheating on collecting their sales taxes as they are either collecting when and where they shouldn't or they aren't collecting at all or they are and are pockeing the money since they aren't officially signed up to collect and remit taxes. Why would I think many may be cheating? Simply how many times on seller forums at this times of year, for the last 15 years, sellers asking if they have to declare the income they made selling on line. Saw one this year that said they had cleared a $7K profit, did they need to report it on their taxes. If sellers can't get the concept of yes, you have to declare their whole income to the IRS, state and local folks, how are they going to think that they have to collect sales taxes.

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

This user has validated their user name. by: VV

Mon Feb 6 10:07:28 2017

Nope.

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

by: Barbbie This user has validated their user name.

Mon Feb 6 10:15:19 2017

It would cost me more to file with those services than I pay in taxes and considering they do not actually file for you (unless you subscribe to yet another part of the service for another fee) all they are doing is compiling info for you.
Ebay doesn't collect tax even when I have it marked to do so.  I do not know if a lot of people collect taxes and do not pay but I am pretty sure I collect less than I actually pay.
But I can see the issue being pretty widespread if the venues were made to charge the tax to the buyer and casual vendors made to figure out how to pay it to the states or pay some service 20.00 to pay 1.00 of taxes.
On the other hand, I can see ebay increasing store fees and offering this mess for "free" if they are made to pay to do it for us.

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

This user has validated their user name. by: Ric

Mon Feb 6 13:18:56 2017

The reality is that states (right or wrong) believe they are entitled to sales tax revenues on purchases coming into their states, and with governments becoming more and more desperate for new revenue streams, they will eventually get bills through to enable collection.

Sellers already know that there are a myriad of taxable items that vary from state to state, and these requirements are difficult if not impossible to keep up with on their own.

Sellers also know that collecting, tracking and remitting sales tax to individual jurisdictions would be a massive time consuming process that would cost individuals more time and effort to be in compliance.

States also realize that it is next to impossible to verify compliance by individual sellers but that holding marketplaces responsible for collection would be a more efficient way to enforce sales tax compliance. Holding venues responsible would not only insure compliance, but would reduce costs associated with sales tax collection.  

In the event audits become necessary to confirm compliance, it would be easier for states to audit a handful of venues as opposed to the millions of individual sellers across those venues.

IMO, IF sales tax collections are to become a reality, sellers should welcome the prospect of states holding venues responsible for the collection of taxes and remittance of payments on their behalf since by doing so, they would be relieving sellers of a next to impossible task.

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

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

Mon Feb 6 14:25:42 2017

In California, you have to have a permit, and you have to pay sales taxes for sales, online or in house. Not to do so can put you in court. Fines and penalties are hefty and you could even do jail time. right down to the penny. Anyone selling online is a fool if they don't pay attention to their State's taxation laws.  

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

by: Moonwishes This user has validated their user name.
Web Site

Mon Feb 6 20:19:40 2017

>Anyone selling online is a fool if they don't pay attention to their State's taxation laws.<

So true. In my states regular clothing is not taxable (such as the stuff you have to wear to keep from getting arrested for indecent exposure, however non-necessary clothing, swimsuits, wedding gowns, Halloween costumes and others ARE taxable. The very sane taxation is in place for sewing patterns. If the garment is taxable, the pattern for making it is as well. If it isn't neither is the pattern. It is a boondoggle. I know that the big fabric store in the city doesn't charge tax on any pattern so they must handle it via invoices somwhow. But thrift stores, selling them can never get it right and I have given up trying to tell them. I can't even imagine a venue being able to get picky enough to know that someone buying from my state if they buy a top and pants pattern for a child as well as their costume, is going to collect the tax properly, assuming sellers when lisitng have designated each pattern correctly. Then you have all the sellers from one state, some charging, others not for the same item. It will end up being a convoluted mess.

I buy quite a bit on Amazon and am charged sales tax every time. However when I sell things on amazon, I'm never credited with the sales tax that might have been owed, EVER! Which means to keep myself out of jail I have to calculate the tax and pay it out of pocket and I have no clue what Amazon has done with any tax they collect on an item I sell. Is the state getting a double payment or what?

I doubt that this will ever be solved in any sensible manner, since most politicians don't have much common sense on things like this since most of them have been politicians for most of their lives and don't know how to work like the rest of us - and I'm talking about the guys on both sides of the isle.  

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

by: Toledo Maude This user has validated their user name.

Tue Feb 7 12:27:31 2017

I do not think that any state is ''too rich'' not to need more funding for roads, schools, police, healthcare and other services.

Yes, it does ''ruffle my feathers'' when QVC charges me sales tax on purchases.

And when twice a year, I go online to pay my share of state sales tax, and I cannot remember from six months prior how to sign in and find the damn sales tax form page.  Many ugly words come out of my home office.

From what I have read on proposed legislation, my little business is a few hundred thousand short of being required to report and pay sales tax to every state.  And with eBay being that special trading partner, I do not expect to make up the gap in my lifetime.  

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

by: Snapped This user has validated their user name.

Tue Feb 7 19:04:43 2017

''Sellers also know that collecting, tracking and remitting sales tax to individual jurisdictions would be a massive time consuming process that would cost individuals more time and effort to be in compliance''

That's the real problem in the end.  Notwithstanding loss of 'desirability' of 'no tax collected on online sales' when states do eventually eliminate that current 'advantage'.  But that's a seperate argument.

However, there IS a simple solution.

When I visit another state and buy something from a store there, I pay sales tax at THAT state's rate, not my own.

Conversely, if I buy a one-off item at say, a yard sale, or via answering some 'for sale' ad, no matter where I do this, that seller doesn't (meet requirements to) collect tax.  Even on a used car, that collection is done by the state at registration.  

So....make online sellers collect tax on all sales, at their own tax rate (not the buyer's).  Use current laws in place (until otherwise changed), to define thresholds where such collection and remittance becomes mandatory.  

The real bonus of this simple solution is that it removes eBay (or any site) from the equation - and the inevitable 'glitches' forthcoming - unless that site actually owns, or WANTS to actually 'own' the inventory.  Thus THEY become the seller from which remittance is due.  

Collect at the sale location rate, not the buyer location rate.  Just like IRL.

What could be simpler?

Are Government Laws on Marketplace Sales Misguided   Are Government Laws on Marketplace Sales Misguided

by: epuise This user has validated their user name.

Wed Feb 8 19:26:03 2017

IF the venue collected ALL TAX from a NY -buyer- when shopping w/ a NY -seller- (or any other state, and, forwarded THAT to the Tax Authorities, sending me PROOF it was COLLECTED & REMITTED, it would be a BIG RELIEF top me. No more begging by 'buyers' about WHY I 'charge' sales tax. Then, the ONLY tax I need to collect & remit is from 'live' sales.



Login is required to post comments.
To sign in to leave a comment using your AB Verify User Name, fill in the form below. If you have not yet signed up for AB Verify, or if you'd like more information, go to the Registration Page
.

Login for AB Verify
Be sure and use your email address and password to log in.

 
Email:
Password:
 
 Forgot Your Password?
 Even though you are signed in with the AuctionBytes Blog, you will have to sign in to the EcommerceBytes blog. But you can sign in with your existing AB Verify info.