eBay now charging Sales Tax to residents of certain States

[imagine.ink]

I recently had my first eBay sale with the sales tax charged by eBay to a customer in Washington State.  I was surprised, but relieved that eBay is taking care of this obligation.  There is nothing for a seller to do:  the tax is apparently automatically charged to the buyer and eBay collects and pays it to the applicable state.  

From an eBay announcement in September 2018:

As you may know, the Supreme Court ruled in favor of South Dakota in June 2018, which removed the requirement that certain retailers have a physical presence in a state in order for that state to impose sales tax obligations on these retailers.

Some states have extended the tax collection obligation to marketplaces.  We believe this ruling is unfair to small businesses and will continue to call for greater simplicity. In the meantime, we’re working to find the best way to support our sellers.

What this means for eBay sellers: Regardless of where you’re physically located, if you sell to buyers in certain states, those states may require you to collect applicable taxes on your transactions.

I found this chart on another seller's page and believe this is the most up to date list of the states affected:

Beginning January 2019 the House of Representatives of some U.S. states are requiring that eBay charge sales tax.  Following is a list of the states in which this has /will be implemented and the month of the effective date.   (This is a list of all of the states which are known to be putting this into effect at this time; however, other states may also be passing this law in the future.)  The sales tax goes directly to eBay.  eBay is required to collect and report the sales tax to the respective states.   

January 2019:       Minnesota - Washington State

February 2019:     Iowa

April 2019:            Connecticut

May 2019:             New Jersey

July 2019:             Alabama - Oklahoma - Pennsylvania

Just passing this info along ... 

As for how it affects me personally, being a resident of Pennsylvania,  any purchase I make on eBay on or after July 1st will be charged sales tax.  No more tax-free internet purchases!  However, since Pennsylvania doesn't charge sales tax on clothing, I wonder if eBay will apply this same exemption on eBay clothing purchases made by Pennsylvania buyers.  It will be interesting to see how this all works out. 

A word of warning:  I foresee eBay increasing selling fees in the near future to cover all the additional administrative costs they are incurring to collect and remit sales taxes to various states. 

[taylor_memorial]

Administrative costs are paid for by the State collecting the tax, by reduction in the actual rate paid by eBay to the State from the Rate Charged.

In Ohio, for example, my tax burden is reduced by 1/4% so if I collect 7.25% I pay them 7% of the costs.

Not that I expect Feebay to be magnanimous about the realities, but it will amount to a significant sum of money to them even though it matters not at all to me because I sell so little in Ohio.

This will all be done by software: Amazon buys a service that computes taxes by state according to both County and City, so eBay will do the same thing. Checks (in reality electronic transfers) get cut automagically, so the "burden" after first costs (which is a total write off against their profits, meaning taxpayers pay for that burden) is negligible.

Perhaps if enough people see through their excuses they'll be forced to think up another one.

[lludwig]

imagine.ink - Thanks for the info. I'm sending your post to the other half who is in charge of collecting PA tax when we sell to a PA resident, as required by law.  If I am reading it correctly, for us it means that we will no longer have to collect and remit state sales tax for PA and thankfully ebay will take care of the other states. Recently, I had many PA Dutch books and my sales to PA residents have been high with Ohio taking 2nd place in Pennsylvania German books.

As far as tax exemption for clothing bought from a PA seller, I suspect that ebay will have that worked out. However, if you buy clothing from one of the named states and they don't have the clothing exemption, then most likely you will have to pay their sales tax, just like when you travel to another state and buy items. 

I did not know that textbooks were exempt from the PA sales tax. Learn something new everyday.

"Major items exempt from the tax include food (not ready-to-eat); candy and gum; most clothing; textbooks; computer services; pharmaceutical drugs; sales for resale; and residential heating fuels such as oil, electricity, gas, coal and firewood. The Pennsylvania sales tax rate is 6 percent."

[socrates349]

"As far as tax exemption for clothing bought from a PA seller, I suspect that ebay will have that worked out."

Hi, lludwig,  I didn't realize you did stand-up as well as sell books.

Anyway, I sold two items last week to a buyer in Washington state.  The shipping for each was listed as $6.00.  I sent the buyer an invoice with combined shipping of $6.00.   Ebay charged sales tax at the rate of 10%.  Whether that was correct or not, I don't know.  Ebay, however, charged the buyer sales tax  on the original $12.00 shipping cost instead of the amended amount of $6.00.  I assume the buyer didn't object, as I received full payment.  What I object to, however, is future alienated buyers turned off by ebay's incompetence in computing the tax.  It's not like books and collectibles sell on ebay anymore like they did in the past. 

[taylor_memorial]

You wouldn't know if the buyer objected because the tax issue is an eBay issue.
I would hope that eBay will be refunding sales tax when refunds are granted to buyers who have paid tax.

Again, no idea.

I know PayPal breaks out tax collected and does not collect a fee on it.

[lludwig]

Hi socrates349 Hope Springs Eternal! 

As far as tax, I don't think buyers will notice much esp when they are receiving the postage refund.  

[lludwig]

My first sale to Washington. Transaction went smoothly. Ebay collected the sales tax. 

[lacemaker3]

@imagine.ink , here's a link to the eBay policy page about collecting sales tax. This is probably a more reliable source of information than other seller's descriptions. eBay has been, and will be, updating this page as more states pass Marketplace Sales Tax legislation, and as eBay has made plans to comply with them.

https://www.ebay.com/help/selling/fees-credits-invoices/taxes-import-charges?id=4121#section4

Re: tax on shipping charges.

Each individual state determines what is taxable and what is not. For example, Washington state charges sales tax on shipping, because they consider it to be part of the purchase price of the item.  This is perhaps the most common approach, many states do this. However, Minnesota does not charge sales tax on shipping IF the shipping costs are a separate line item on the invoice. So, for sales to MN, if the shipping is calculated separately (not free shipping) then the shipping cost is not subject to sales tax. eBay is supposed to be calculating this correctly for each state. 

Re: tax rates for different states & locations with each state.

Most states have a base sales tax rate, which applies everywhere within the state, but many states also allow local governments (city, county) to charge additional sales tax. For example, the state sales tax rate in Washington is 6.5%, so that is the minimum sales tax rate that will be charged for shipments to WA. However, due to additional local sales tax, some zip codes in WA will be charged a higher rate, up to a maximum of 10.4%. eBay is charging the correct sales tax rate based on the zip code of the shipping address. 

Re: sales tax on different kinds of items.

Some states exempt some kinds of items from sales tax. Some common exemptions may be clothing, food, or prescription drugs. eBay is charging the correct tax rate for the type of item, based on the category the listing was in (or the first category, if the listing had two categories). For example, in Washington, clothing is exempt from sales tax. If a seller lists a sports jersey for sale on eBay, the sales tax for a buyer in Washington would depend on what category was listed (first) on the listing. If the seller listed the jersey in a clothing category (first), there would be no tax. But, if the seller listed the jersey as a collectible, or in both a collectible (first) and a clothing (second) category, then the jersey would be subject to sales tax.

This information is from real examples posted by sellers, and explained and confirmed by eBay employees.

We have noticed that buyers who live in a particular state, are not necessarily very well informed about what their state's requirements actually are. There have been a number of cases where buyers complained that the tax was not calculated correctly, but it turned out that the buyer was mistaken.

[lacemaker3]

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@socrates349 wrote:

"As far as tax exemption for clothing bought from a PA seller, I suspect that ebay will have that worked out."

Hi, lludwig,  I didn't realize you did stand-up as well as sell books.

Anyway, I sold two items last week to a buyer in Washington state.  The shipping for each was listed as $6.00.  I sent the buyer an invoice with combined shipping of $6.00.   Ebay charged sales tax at the rate of 10%.  Whether that was correct or not, I don't know.  Ebay, however, charged the buyer sales tax  on the original $12.00 shipping cost instead of the amended amount of $6.00.  I assume the buyer didn't object, as I received full payment.  What I object to, however, is future alienated buyers turned off by ebay's incompetence in computing the tax.  It's not like books and collectibles sell on ebay anymore like they did in the past. 

---

Hi @socrates349, 

If you sent the buyer an invoice with lowered shipping costs, it has been reported that the seller does not see the recalculated sales tax cost based on the lowered cost of shipping.

However, eBay employees have viewed the invoice that was sent to the buyer, and they confirmed that the sales tax cost was recalculated, and that the buyer was charged the correct sales tax. This was transparent to the seller, because the seller doesn't charge or receive the sales tax.

Currently eBay is not making it easy for the seller to see the amount of the sales tax that is being charged. Sending an invoice is one of the few ways to do it, although it may not show the correct amount when viewed by the seller. The other way the seller can see the sales tax is by downloading a .csv selling report, which many sellers never use.

Hopefully that will be correctly in the near future. They have announced that they will make it more visible to the seller soon. Originally, they seem to have thought that the seller didn't have any need to know about the sales tax that was being charged, but they have now realized that although most sellers don't need to know about it, that isn't always the case.

[taylor_memorial]

And then there is the issue of sales tax exemption.

I don't recall being asked about it as a customer. As a seller, I collected tax last year for Washington, PA, and Ohio. I am tax exempt in Ohio because I collect sales tax for Ohio (and eBay does not). Amazon has collected tax in Ohio for years and I am registered tax exempt there in a couple of categories.

I guess I will refrain from shopping eBay until the issue is addressed.

[taylor_memorial]

Update:

Beware. I just canceled a small order from them because they charged me tax.

Now, I live in Ohio, which charges a use tax. I am tax exempt because I collect a use tax. At this point, eBay has not figured out that not obeying tax laws isn't a good way to run a business, and the best thing to do is not shop here unless you want to cancel a lot of orders to make a point. 

But the thing is this seller has no physical presence in Ohio and Ohio is not one of the taxing authorities that is currently collected by eBay direct.  I know this because I refused to buy the same reading copy from one of their competitors for a penny less because that competitor does not accept PayPal because eBay Payments does not use PayPal. THAT order was not charging me tax.

And I know that this seller pulled out of Ohio 3 years ago because we used to sell all of our culls at the Friends to them.

So this seller is shoe-horning itself a profit by leveraging the eBay decision to collect taxes. Tax fraud.

[taylor_memorial]

1) I cancelled the order within 60 seconds of finalizing it.
2) They shipped the order 2 hours later.
3) They responded to my cancellation request by saying "We have a nexus in Ohio", not with a request for an exemption certificate.
4) They refuse to cancel because they "shipped the item".
5) The item was not picked up to be delivered to the warehouse until 2 hours after the refusal to cancel.
6) Not a single mention of collegiality or even a request to keep my exemption certificate on file. It is quite clear that they have no intention of dealing with the issue.
7) I will have our President contact them in Toledo to attempt to arrange a new pick-up schedule. Anything better than 29 cents a ton is an improvement.
😎 They charge tax at the highest county rate in the State rather than adjusting it for the country in which I reside which is a full point lower. This, for a business which relies on high volume shipping for their entire operating budget.  (I use the average tax for all zip codes in the state which also happens to be a full point lower).

All in all I see no reason to retract any cynicism about their business practices. They don't tell you where they are to warn you that you might be taxed even if you don't live in a State for which eBay collects taxes.

[cleaningoutmyclosets17]

 I must've been living under a rock. I had heard about the sales tax law but I didn't hear Connecticut was added as of April 1st.  I can't say that I am surprised that our state feels the need to tax us to death. 

  I just received my eBay bucks certificate and was going to buy something with it and found the obnoxious sales tax there.  I will spend my free eBay bucks but then, No more eBay purchases for me. 

This is is going to kill sales as more states get added. 

[taylor_memorial]

I doubt it will kill sales. People say that all the time: when fees go up; when postage goes up.

The fact is the more level the playing field, the more likely people will purchase on line. I mean: you live in CT and pay sales tax there for whatever they tax all the time.

It will come down to price, as it always does, for same:same comparison. Only with tax considered.

[lludwig]

2cleaningoutmyclosets17 - Ironically after Washington state was added I had 4 or 5 sales to that state within 2 weeks. It is not a state that was ever on my radar since beforehand I seldom had a sale to Washington