Does overcharging sales tax by eBay required a call for the audit?
When I buy the merchandise from any retailers online, the sales tax is 6.5% (Illinois), however eBay charges almost double. I understand that the company may dictate their cost of completion the transaction, however the sales tax is regulated charge, thus everything over the establish tax rate should be called "fees". Also the sales tax on the shipping cost, when the charge is posted in a separate line is fishy in the most states.
24 comments
mudshark61369
·3 years ago@avalon5054,
I am surprised that no one else has yet mentioned this, but since you live in a Home Rule State: Which means, that local governments in home rule states have the power to impose their own sales tax on top of the state sales tax.
If you do not have a plus 4 zip code on your registered eBay address, your sales tax would automatically be charged the highest Local Govt. sales tax rate in Illinois, plus the State mandated tax rate. Since your state also taxes the shipping cost you pay, that too would be charged the State tax + the highest local sales tax rate.
eBay fees are not paid by buyers. Sellers pay those out of what they receive.
bonjourami
·3 years agoBut if you want to audit Ebay, by all means go for it.
myangelandmyprincess
·3 years agoI will add that Illinois imposed a level the playing field act in January 2021 which requires marketplace facilitators that meet the required thresholds to collect and remit the local districts Retailers' Occupation Tax. So this act is what made marketplace facilitators such as eBay be required to collected the local ROT where as they used to only collect the state use tax.
myangelandmyprincess
·3 years agoSo based just on the five digits it's 10% and based on the price plus shipping that does sound like what you were charged.
avalon5054
OP3 years agoPlease explain why:
the tax is 10% and the cost base increased by the added shipping cost vs. 6.5% on the cost of merchandise only.
Predicting your explanation that eBay charges the additional sales tax for the local subjurisdictions, I would like to know how and where the sales tax reported and paid by eBay (state, county, city, etc).
I doubt that the large retails doing a business online and collecting the sales tax in my area equal to 6.25%, on the cost of the good only are in violation of law.
Thank you.
myangelandmyprincess
·3 years agoBecause that is the tax law in your state. "For online sales that require shipping to be paid in order for the customer to receive the item, there is no choice for the customer; therefore, the shipping is taxable". This is the law in your state.
It is also the law that they have to charge the local tax of where the item is delivered. So it is going to add the local tax rates not just the state.
monica-sells
·3 years ago"...Please explain why:
the tax is 10% and the cost base increased by the added shipping cost vs. 6.5% on the cost of merchandise only...."
This question make no sense to me. The sales tax where you live and buy is 10%....if you buy a TV down at Joe Appliance store IN Arlington Hts., you will be charged 10% Sales Tax on the purchase when you pay.
Buy the same item IN Bolingbrook, IL at that Joe's store and pay only 8.5% Sales Tax
BUT, if Joe's in Bolingbrook ships to your house, you will be charged 10% Sales Tax on the purchase.
monroe67
·3 years agoThese seem to be very heavy questions for the Fourth of July holiday.
"Please explain why:
the tax is 10% and the cost base increased by the added shipping cost vs. 6.5% on the cost of merchandise only."
While I am sure "myangelandprincess" is an intelligent and educated person, well versed in his/her own areas of expertise and knowledgeable about many things on eBay -- I think he/she might not be able to explain completely WHY the tax is 10% and all the rest of your question, unless he/she also happens to be knowledgeable about taxation on products, goods, and services in the State of Illinois. I admit this is a possibility, but probably is not the case.
"Predicting your explanation that eBay charges the additional sales tax for the local subjurisdictions, I would like to know how and where the sales tax reported and paid by eBay (state, county, city, etc)."
Wow. Well. You say you "would like to know . . . ." Doesn't sound like a need, though.
There might be a way to find this out, but I am thinking it could take you a lot of time and effort and maybe even money.
Perhaps you could contact the treasury department of your state, county, and city governments, and ask them, "Say, can you guys tell me how much you guys received in sales taxes from eBay last year? Then, can you break that down for just zip code 60004? Please?" You might want to be prepared to wait a while for responses. Months, maybe, if ever.
"I doubt that the large retails doing a business online and collecting the sales tax in my area equal to 6.25%, on the cost of the good only are in violation of law."
Well, you might be able to call your local Walmart or Home Depot or Macy's, ask to speak to the shipping department, and ask this question. OR you could test this for yourself. Instead of driving to a local branch of one of those large retailers, walking inside and making a purchase in person, order something from one of those stores online and have it mailed/ shipped to you. Of course, you would pay the mailing/shipping/postage cost. Then you can see whether you are charged sales taxes on that delivery cost.
valueaddedresource
·3 years ago@avalon5054 it would be helpful if you could give examples including what the items are that you are purchasing, what the price is, what you have been charged for tax and what your zip code is.
Tax rates can vary depending where in Illinois you are located as there is the state rate and then there may be various county or city/local taxes as well.
https://www.avalara.com/taxrates/en/state-rates/illinois.html
The Illinois (IL) state sales tax rate is currently 6.25%. Depending on local municipalities, the total tax rate can be as high as 11%.
And just because other retailers may only be charging you the state rate, that doesn't necessarily mean they are doing it correctly.
avalon5054
OP3 years agoThank you for your response.
My ZIP code is 60004.
The cost of the item I bought is $43.80.
Discount: $2.19
Shipping: $11.99
Tax: $5.36
I would appreciate your explanation of the sales tax charge.
myangelandmyprincess
·3 years ago60004 TAX JURISDICTION BREAKDOWN FOR 2023
Illinois 6.25%
Cook 1.75%
Arlington Heights 1%
Regional Transport. Authority (rta) 1%
Minimum combined sales tax rate value 10%
monica-sells
·3 years ago@myangelandmyprincess is exactly right.....
If you live in Arlington Hts. the Effective Sales Tax Rate is 10%
Exactly 5.36 (10% of 53.60)
technically...in some jurisdictions, the sales tax is determined PRIOR to the discount applied.....
(which would make it even higher)
as well as some jurisdictions do NOT charge sales tax on shipping....
(which would effectively lower it)
https://www.avalara.com/taxrates/en/state-rates/illinois.html
monroe67
·3 years ago"My ZIP code is 60004.
The cost of the item I bought is $43.80.
Discount: $2.19
Shipping: $11.99
Tax: $5.36
I would appreciate your explanation of the sales tax charge."
OK. We will add your numbers together. $43.80 - 2.19 + 11.99 = $53.60
The State of Illinois does require that buyers who buy Things online and have them delivered to addresses within the State of Illinois also pay sales tax on the cost of shipping. In your case, you paid $11.99 to ship your purchase to you.
Using the tax info researched and posted by "myangelandprincess", the total sales tax percentage for online purchases that are delivered to zip code 60004 is 10%.
$53.60 x 0.10 = $5.360. Drop that final zero -- it is nothing, after all.
That is the explanation of your $5.36 sales tax charge.
BTW, here's a math lesson for this holiday: A very simple way to calculate 10% of any dollar amount is to move the decimal point one space to the left.
If your total purchase price, including shipping, had come to $55.49, your sales tax, 10%, of that would have come to $5.549. In this case, because that last digit is nine, you would have had to pay $5.55 in sales taxes.
buyselljack2016
·3 years agoeBay does not "charge" sales tax. They collect/remit sales tax based upon the Zip code provided in the delivery address. A 5-digit zip code may be charged differently than a 5 digit + 4-digit zip.
dryophelia
·3 years ago@avalon5054
Are you referring to sales tax on a purchase you made or your buyer purchased an item from you and the sales tax they paid was double?
Buyers pay sales tax (transaction tax) based on where the item is delivered, not by where the seller is located.
eBay/Adyen base their fees on the total amount paid by the buyer.
I’m not sure which avenue your question is meant to take.
avalon5054
OP3 years agoI am the buyer and I was charged the sales tax. The sales tax should be calculated by my location. It's always adding cost from the Nordstrom, Mary's, TJmax, etc. equal to 6.5% on the cost of the merchandise ONLY.
Are these national retailers are dummies and violate the law?
I doubt!
myangelandmyprincess
·3 years agoI don't know what the laws are for cooperations who have a nexus in the state and thus required to collect tax under those laws.
I do know marketplace facilitator laws for Illinois require eBay to collect and remit the local ROT.
bonjourami
·3 years agoI also live in Cook County.I am also charged for the shipping cost too.
valueaddedresource
·3 years ago@avalon5054 out of curiosity, are the locations for those major retailers you visit 100% in your same zip code?
Just as a quick example - the county where I live in Florida the total state/local tax rate combined is 6.5%. If I go to the Walmart that is a mile from my house, that's the tax rate on applicable items.
However, the closest mall in this area is about 9 miles way and technically in a different county, where the total state/local tax rate would be 7%. If I shop at Macy's at that mall, it's 7% on taxable items and if I decided to stop at the Walmart that is across the street from the mall (because it was convenient since I was in the area), I would pay 7% at that Walmart instead of the 6.5% tax at the Walmart closer to my house.
Beyond that, even if they are in the same zip code, as others pointed out there may be different rules for retail stores with physical nexus (admittedly I am not an expert on Illinois tax law).
monica-sells
·3 years agoI have a novel idea.....
show a screenshot of ANY receipt from an online seller you have mentioned, SENT TO YOUR ADDRESS showing ONLY 6.5% Tax in the total....
otherwise, this is all hypothetical and useless.......
myangelandmyprincess
·3 years agoIt does look like cooperations or sellers who do their own sales tax collection may fall under different laws and if they owe the local ROT or just the use tax. But it is more complex than marketplace facilitator And I'm not going to get into trying to decipher all that.
What matters is the marketplace Facilitator laws that under the expansion with the level playing field are required to collect and remit the both local tax and use tax.
avalon5054
OP3 years agoHere you go;
Item Total$105.94
pping & Handling
FREL
Discounts ($0.00
Subtotal$105.94
Estimated Tax $6.62
total
$112.56
myangelandmyprincess
·3 years agoIs this an eBay purchase? What kind of item is it?
Like I say eBay purchases follow marketplace facilitator laws and have to charge the local ROT and not just the state use as that was the main if not whole point in the level the playing field act.
myangelandmyprincess
·3 years agoShipping in Illinois is taxable
"For online sales that require shipping to be paid in order for the customer to receive the item, there is no choice for the customer; therefore, the shipping is taxable"
Do you have your full zip code being used including the last 4. Illinois state is 6.25% but local tax can add up as much as 4.75% so if you aren't using the full code if may charge you the highest state and local based on the first five of the code.