Do we deduct “tax collected by eBay” from our profits?

[soviet_surplus]

Do we? Need help with getting my taxes ready

[luckythewinner]

Your use of the term "profit" is too vague. You only deduct the sales tax as an expense if you also report it as income. 

Let's take this example:  

A buyer pays $90 for an item and $10 in shipping

eBay charges them an additional $9 in sales tax for a total of $109

You originally bought the item for $30 with the intention of reselling it for a profit. 

If you are under Managed Payments, the buyer pays a total of $109. eBay immediately deducts their fee of $13.98, and then takes the $9 in sales tax back. This leaves you with a net deposit of $86.02 in Managed Payments. And for the sake of argument, let's say you later bought a shipping label for $8 from Bay to ship it and paid for it with your available Managed Payment funds. Eventually, eBay would deposit a net of $78.02 into your bank account. 

For tax purposes, you would probably report: 

+ $109 in income

- $9 in sales tax taken back to eBay

- $13.98 in fees taken by PayPal

- $8 in postage costs

- $30 in cost of good sold 

--------------------------

= $48.02 in "profit"

For your taxes, you would probably use a schedule C and report the $109 as income, and deduct each of the expenses by putting them on the appropriate expense line item.  

This is obviously just a example; they are many different ways to account for things on your taxes. 

[soviet_surplus]

I worded my post weird but yeah we’re on the same page. Ok cool Thank you 

[caldreamer]

Once EBAY starts collecting Sales Tax on your behalf....you do not deduct that Sales Tax money because it is not included in your income.   That money went directly to EBAY and is NOT included in your income.

[soviet_surplus]

What about with PayPal? It shows the money there. I don’t have to deduct it?

[fshtsp]

With PayPal your 1099-K includes sales tax and you would need to calculate that and have it deducted.  With the eBay 1099-K from managed payments it appears that sales tax is not included in that number and no deduction would need to be made.  Someone correct me if I’m wrong.  

[gkn29]

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@luckythewinner wrote:

Your use of the term "profit" is too vague. You only deduct the sales tax as an expense if you also report it as income. 

Let's take this example:  

A buyer pays $90 for an item and $10 in shipping

eBay charges them an additional $9 in sales tax for a total of $109

You originally bought the item for $30 with the intention of reselling it for a profit. 

If you are under Managed Payments, the buyer pays a total of $109. eBay immediately deducts their fee of $13.98, and then takes the $9 in sales tax back. This leaves you with a net deposit of $86.02 in Managed Payments. And for the sake of argument, let's say you later bought a shipping label for $8 from Bay to ship it and paid for it with your available Managed Payment funds. Eventually, eBay would deposit a net of $78.02 into your bank account. 

For tax purposes, you would probably report: 

+ $109 in income

- $9 in sales tax taken back to eBay

- $13.98 in fees taken by PayPal

- $8 in postage costs

- $30 in cost of good sold 

--------------------------

= $48.02 in "profit"

For your taxes, you would probably use a schedule C and report the $109 as income, and deduct each of the expenses by putting them on the appropriate expense line item.  

This is obviously just a example; they are many different ways to account for things on your taxes. 

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I think I've found my 2021 Tax Person 😁😁

[dbfolks166mt]

I can validate/verify that the 1099-K includes sales tax and that would be a deduction. I did not get a 1099 from eBay in 2020 so defer to somebody else on that one. 

[dbfolks166mt]

While this is correct for a Paypal 1099 not so much for the eBay one. Also remember that there are a bunch of other deductions that you don't spread across individual items but that also reduce your bottom line. 

[darsdandydeals]

Ebay includes it in your income. So they can charge you more final value fees. Then paypal deducts it and sends it back to ebay, When filing taxes do just that. Report it as income, then claim it as an expense, Evens it out.