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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) | 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: lessthanthreerecords This user has validated their user name.

Sun Dec 1 22:46:28 2019

I had to raise all my prices slightly due to this change.  Worst of all is that there was no communication from eBay prior to the change.  eBay claims they sent a message to sellers about a month prior, which technically they did, but it was general to the point that it was hardly saying anything besides that there was going to be a change with how sales tax would be handled.  There was absolutely no statement that the PayPal fee on sales tax would be paid by the seller.  To make matters worse, this change was implemented during the item specifics disaster, so until that was fixed, I was unable to do a bulk pricing edit.  eBay as usual, why am I surprised?

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

Mon Dec 2 00:43:42 2019

As  unfortunate as that change is for Sellers, I was surprised that the CFO (now CEO) Schenkel had not made this change immediately upon Ebay began collecting sales tax as a marketplace facilitator since sellers who had been collecting Sales Tax on their in state sales had always paid the Paypal discount fee on the Sales Tax.  Brick and Mortar stores also have had this cost in their items since they went into business.  

The surprising matter in this entire situation is that Ebay CFO Schenkel ever allowed Ebay to have paid this fee on the Sales Tax for any Sellers they collected Sales Tax for.  This just shows the ineptitude of upper management at Ebay and their lack of ability to run such a large company.  How the BOD of Ebay has allowed him to keep his original job as CFO, let  alone promote him to temporary CEO is nothing more than another sign that nobody at Ebay has any idea of what they are doing, including the BOD.

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by: getalife This user has validated their user name.

Mon Dec 2 00:56:06 2019

I don't blame Ebay, I blame Congress. Every time they impose yet another new tax for something it impacts everybody. Stop electing these tax and spend politicians who think they know how best to spend your money.

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by: rover This user has validated their user name.

Mon Dec 2 01:24:01 2019

It seems that greedy and corrupt politicos are constantly dreaming up new ways to fleece ordinary citizens while they themselves wallow in luxury and enjoy endless perks and allowances.

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by: Paul W This user has validated their user name.

Mon Dec 2 02:07:56 2019

So the PayPal fee goes up about a nickel for a $20 sale where sales tax is collected.  A nuisance, yes; a business buster, no.

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This user has validated their user name. by: Working It

Mon Dec 2 02:34:43 2019

It's my view that the collected sales tax is eBay's obligation, as the marketplace facilitator -- which is why they are collecting it. eBay should pay the processing fees for its own obligations, in the same way that they pay any other business-related expenses.

I've always accepted the obligation to collect for my own state, and pay the sales tax processing fees. OTOH, my state gives a rebate for the accounting & processing of those sales taxes, that more than offset the payment processing fee on the sales tax.

Is eBay also getting those offsets? If so, they should definitely be paying the fees for payment processing of the sales tax.

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by: Chicago48 This user has validated their user name.

Mon Dec 2 05:08:19 2019

Rockstar Flipper did a whole video on how PP and Ebay are charging tax on the TOTAL of the sales and not on the price of the item.  You should look it up.  You really have to look at your PP invoice carefully to see each line item.  EB and PP are taking more in taxes than they should.  One day, a big seller will wake up and file a class action lawsuit.

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by: wellspring This user has validated their user name.

Mon Dec 2 07:54:41 2019

Many States require sales tax be collected on shipping and handling. Ebay is charging the highest sales tax per state instead of where a seller resides. If we could add the 4-digit numbers to our zip codes in our listings, it could be more accurate but that doesn’t work and always kicks back out. Our ship from address (return address) with the zip+four has no affect on adjusting the sales tax to our actual local. Poshmark and Mercari have not raised their fees for processing sales tax for sellers and neither should ebay/PayPal. Ebay should be absorbing the PayPal cost. The sales tax is being collected on the cost of goods plus shipping.  

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by: GotToGetOut This user has validated their user name.

Mon Dec 2 08:11:29 2019

It's like the penny years ago some bank scam was charing $.01 a customer knowing no one person was going to bother with $.01 but added up it was millions.

Ebay is really hurting for money.  I just found out they're charging 5% because my returns for china category are 1.68% and more than the average seller in that category!!  So, if I sell a $10 plate with my average shipping of $10 for one 2-3 lb. plate, I already have fees of $1.90 + for the plate and now add another $1 (not even counting PayPal or store fees averaged out per sale) are $3 or 30%.  I stopped listing any further china items and I also am removing 1500 listings over my 1000 included items in my premier store.  These guys are going to lose that $150 I was paying them each month in store fees just to make another $300 or so in sales.  Now Ebay loses those few extra sales I might have made in stale items and that $150 in extra items.   Their plans to increase their coffers at the seller's expense is going to be a net negative for them and it gave me the impetus to get off my duff and end a lot of old listings.    

Just when you think there is not much more they can charge for, they find a way!    who knows how they calculate the ''average'' category seller?  I wouldn't trust their metrics plus why should they be dinging me a second time if I am already a top rated seller??

No wonder so many people are down on Ebay.  

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by: maxoptical This user has validated their user name.

Mon Dec 2 08:25:07 2019

There is another problem with pay pal accepting our sales tax. When we get our year end 1099K it will show all the sales tax as revenue. At this point eBay does not have a tax document to show us the sales tax paid on our behalf. This is not the case with eBay managed payments.

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This user has validated their user name. by: RKTOYS

Mon Dec 2 09:12:45 2019

"Rockstar Flipper did a whole video on how PP and Ebay are charging tax on the TOTAL of the sales and not on the price of the item."

Unfortunately, shipping (not postage) is taxable in PA.  They rationalize it as shipping being a service whereas postage is a product.  It still really burns.

What I want to know is what fee structure we're being charged under now.  The couple of times I've bought from eBay since this tax garbage started, my credit card showed two separate transactions (one for the real bill, one for the tax).  If we're getting charged the flat 29c on both charges, that's ridiculous.

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by: sapience This user has validated their user name.

Mon Dec 2 09:40:10 2019

''There is another problem with pay pal accepting our sales tax. When we get our year end 1099K it will show all the sales tax as revenue. At this point eBay does not have a tax document to show us the sales tax paid on our behalf. This is not the case with eBay managed payments.''
EXACTLY!! The same thing is happening on Etsy, not just Ebay. All financial documents provided by both platforms do NOT have a column indicating the tax they collected on our behalf. So yes, our 1099's will be hyper inflated showing a gross revenue collected of which the tax THEY collected and we NEVER received is added into that total. UNLESS you've been painstakingly adding the tax info on a daily basis into your spreadsheet AND saving every sale notification, you will be SOL in April. Yeah, I've heard from some saying 'they' always save everything, yada yada. The problem IS that many don't realize the tax amounts collected will NOT be included in the financial csv's provided by the platforms. I am pretty meticulous but didn't notice the discrepancy until late last month. Often it's smaller dollar amounts for many of us which is easily overlooked when receiving our 'net' from a sale after sales.
This is a HUGE issue. I contacted Etsy and they blew me off, refusing to address the missing data in our financial transactions data.
I posted about this and quite frankly am shocked their hasn't been a huge outcry of outrage! For many the amount of revenue never received but reported to the IRS that they DID receive it will likely add up to thousands of dollars. I'm a small seller, but the amount for me is already in the hundreds... it's a real legal mess...  

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by: Steve D This user has validated their user name.

Mon Dec 2 11:07:10 2019

I have no problem with this. We, as seller,business owners, are responsible for our own taxes. Since eBay is kind enough to do it for us (NO they do not have too) I am willing to take a small hit to continue to use the platform. People all forget when this was first instituted by the Government, we were all running scared wondering how we were going to figure out how much to charge each state and each region of each state! eBay stepped in and said they would do that for us, as did Amazon. So now we are getting charged for them to do it, I say, thanks for doing it for me! There is one state ( I think it is New York) that has EIGHT different tax regions... Think about how much you would pay an accountant to figure THAT one out!

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This user has validated their user name. by: iheartjacksparrow

Mon Dec 2 11:17:04 2019

RKTOYS writes: "[M]y credit card showed two separate transactions (one for the real bill, one for the tax)."

I discovered that as well. I bought an item from the U.K., paid through PayPal, and thought everything was fine. About a week later I was going through my credit card statement when I found another charge, from the day after the sale, in pounds sterling with the name of the seller attached. I thought he had somehow hacked into my PayPal account and ran through another charge (it amounted to abound $8). I contacted the seller, and he indicated it was the "use" tax for California. The thing that disturbed me was that neither eBay nor PayPal sent me any kind of message that an additional amount was being paid through my PayPal account. And the really strange thing is it was listed on my credit card statement as "Bill/Utilities," which makes me wonder if eBay is pocketing all the tax money they are collecting.

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This user has validated their user name. by: toolguy

Mon Dec 2 11:37:40 2019

@wellspring

"Ebay is charging the highest sales tax per state instead of where a seller resides."

WRONG! Not even close!

When I buy something on eBay I am charged 7.75% and the highest tax in California is 10.25% in LA County

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by: GreenMen This user has validated their user name.

Mon Dec 2 12:37:32 2019

But this situation is no different than if you had a bricks and mortar store. Visa/MC/Amex et al all collect their fees on sales tax too.

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by: Geetar This user has validated their user name.

Mon Dec 2 12:53:52 2019

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by: Jairib This user has validated their user name.

Mon Dec 2 13:09:55 2019

The whole sales tax grab is wrong.  Most states are not charging the seller tax unless they sell thousands of dollars to that state.  We as small sellers would never even meet the minimum of sales to all those states requiring us to pay the tax in the first place.  For example, South Dakota requires the seller to pay tax IF they sell $100,000.00 OR 200 transactions, neither of which I have done.  Have any of you?

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by: Geetar This user has validated their user name.

Mon Dec 2 13:28:08 2019

@ Jairib

They are looking at like this:

If ebay as whole sold 100k, or 200 transactions customers are charged sales tax. So they are well over that amount.

If you had your own website you would not go over the threshold. But ebay as a whole goes way over that, in 1 day probably.

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by: Geetar This user has validated their user name.

Mon Dec 2 13:37:41 2019

Well everyone wanted to fight this tooth and nail. Of course this kind of stuff was going to happen. Did everyone really think that internet sales were going to go up and the states were not going to find a way to get their sales tax? They were loosing a lot of tax revenue with a big chunk of the sales moving online. It should have been done years ago when there were not enough resources to tax each individual juristiction. The tax may have ended up like a VAT tax (one rate), more streamlined and less of a headache. This is an accounting nightmare.

These marketplaces, and payment processors were looking at it as an opportunity to make more money (of course). I guess in Business there really is no morality.
Notice how that ebay monthly sales $ limit stays the same even though they are adding in the tax. Thats just great for them, thats that many more sellers they could charge for a store every month.

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