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why is ebay adding the sales tax to the seller's income from sale. Sellers never receive sales tax
I couldn't believe my eyes, but apparently Ebay is charging the seller to include the sales tax to the amount received, we don't receive any sales tax from customers, and when they get their 12% which already way too high, but this is downright theft by the company. Since this practice has been going on for a while why are they able to do this??
47 comments
2011hemi7*2012
·1 year agoI'm with you, ebay is ripping us off i sold an item for $69 and by the time i paid for fees and some how taxed my net was $51 its not worth! it i am done with ebay!!
Ebay collected a $5 tax from buyer then deducted it from my seller profit **bleep**!!
chapeau-noir
·2 years agoWe need a macro for this.
mam98031
·2 years agoThey are pretty easy to set up. If you have any questions on it, feel free to ask.
rous-eono2c0b
·2 years agoThis is an Ebay rip off. I just complained to them. They add tax, shipping fee and cost of item sold. They total these up and charge their sellers fee from the total?!! Fees should be on the price of the sold item only. Ebay sellers need to get on them about this.
kenneth686321
·2 years agoSo if Ebay charged fees on item price alone would you be happy with an 18-20% FVF fee on item price? My guess would be no. If Ebay did make that change I guarantee they would make sure they take in the same amount of money minimum. 13.25% on price + Shipping + tax = roughly 18-20% on price alone.
Let me give you a few options for sites with "better" fees than ebay. It's your responsibility to understand which site makes you the most money. The site with the lowest fees may not be the best deal
Poshmark 20% on Item Price
Mercari 0% BUT buyer pays 10-12% depending on category
Shopify Store 2.9% + a monthly subscription
FB CL OfferUP + other local sites FREE
Yard Sale FREE
albertabrightalberta
·2 years ago@jgallthatandmore
In answer to your question, "why is ebay adding the sales tax to the seller's income from sale. Sellers never receive sales tax" ebay is NOT adding the sales tax to your income.
Although you are charged FVF on the total payments made by buyers, the sales tax that ebay collects in NOT added to the total of the 1099K you receive or will receive in the future so you do not have to account (on your tax return) for the sales taxes collected.
luckythewinner
·2 years agothis is downright theft by the company. Since this practice has been going on for a while why are they able to do this?
Because they did and there is a no law against it.
mam98031
·2 years ago@jgallthatandmore
Have you been away from selling for awhile? I ask because this isn't something new. Ebay started charging their fees on sales tax when they became our money processors. Before that Paypal charged us a fee on the sales tax. But now it is Ebay. Ebay is very transparent with the details of the fees they charge. Have you ever looked at your MP summary page. I'll give you a link below. Look to the right when you call up the screen.
https://www.ebay.com/sh/fin/summary
Ebay started onboarding sellers into MP in July of 2020. In August of 2020 they changed their fee structure to a Simplified fee, a single fee. This fee is charged on the entire amount paid to a seller by the buyer.
As a Marketplace Ebay is required by Law to collect and remit sales tax to those states that require it.
I'm unsure why you feel this is theft now since you've been paying it for a few years now, unless you did take a break from selling.
g00dies4saleonline
·2 years agoThe simple answer is, Greed!
lonebuck-books
·2 years agoUgh, here is the weekly "did you know eBay charges fees on sales tax" post.
Yes, they charge a fee on tax. Just in case you haven't looked yet, they also charge the fee on shipping.
The fee is charged on the entire transaction amount, not just the sales price. They do this because for a long time sellers cheated the fees by listing an item for a penny with a $100 shipping charge. eBay fixed that loophole 2 decades ago. As for the sales tax, eBay does all of the sales tax filing and remittance to every individual sales tax authority in the country. They also take all of the audit risks. I don't know about you but the pittance we pay for the fee on the sales tax is a bargain for that service. Believe me, back when we all had to do our own sales taxes this has been a Godsend.
zoda99
·2 years ago@lonebuck-bookssaid: The fee is charged on the entire transaction amount, not just the sales price. They do this because for a long time sellers cheated the fees by listing an item for a penny with a $100 shipping charge. eBay fixed that loophole 2 decades ago. As for the sales tax, eBay does all of the sales tax filing and remittance to every individual sales tax authority in the country. They also take all of the audit risks. I don't know about you but the pittance we pay for the fee on the sales tax is a bargain for that service. Believe me, back when we all had to do our own sales taxes this has been a Godsend.
It's not a pittance. It's a large fee. There's a difference......
ajs_coins_and_alchemy
·2 years agoIt's a large fee? Really? You think the amount of fee you pay directly related to sales taxes is a large fee?
If sales taxes are 6-10% and figuring a 13% FVF that's 13% of 6-10%. That's 0.78%-1.3% of the amount being taxed (item or item + S/H depending on local laws)
lonebuck-books
·2 years agoSeriously? A large fee? Wow, your definition of a large fee and mine are vastly different. The amount we pay in fees for the sales tax portion (not the entire sale, just the sales tax) is a pittance compared to the work involved in the filing and remitting of the sales taxes. Like I said in my initial post, I had to do this for several years and it was a massive blessing when the venues had to take it over. The fee I pay to do this is literally a fraction of what it cost me to do it myself before this. I also don't have to be concerned about a sales tax audit anymore, eBay takes all that risk. So yes, it is a pittance.
kenneth686321
·2 years agoWhy does Ebay charge a fee on sales tax? Simple, Ebay determined that a "fair" price to charge for its services is 13.25% of every total $100 that flow through this site. How should Ebay charge the fees?
1. 13.25% on price + shipping + tax? Current Ebay fee model
2. 14-16% on price + shipping?
3. 18-20% on Item price alone? Poshmark fee model (20%).
4. 0% charged to seller BUT 13-15% charged to buyer at checkout? Mercari fee model
5. Charge BOTH sellers and buyers? 5% charged to seller and 9% charged to buyer at checkout. Uber Eats Airbnb model
Ebay still gets roughly the same amount in fees give or take a percent. Which option would attract the most sellers and buyers? As a Seller I prefer option 4 no seller fees BUT as a buyer I prefer options 1-3 no extra service charges besides shipping /tax.
There are other venues for you to sell at. It is your responsibility to understand whether Ebay is the best place to sell or whether you will net more money selling elsewhere.
jerseyboymusic
·2 years ago@jgallthatandmore
I can't believe MY eyes! ANOTHER one of these posts!
I'm glad ebay does all that work! Before they collected and remitted state sales tax (before interstate sales were taxable), I had to register as a business to collect sales tax for the state I lived in... set my ebay listings to COLLECT that state sales tax, keep track of all those transactions, fill out a quarterly tax statement to the state AND pay those taxes quarterly.
Can you imagine having to do that for MULTIPLE STATES??!?!?
No offense ... you have been on here since 2004 with over 20k in sales and you are now just noticing this?
monica-sells
·2 years agoI am a little surprised a veteran seller like yourself is not aware of standard business transactions. That being said, what @@dbfolks166mt very knowledgeably posted, is an outstanding declaration as to the benefit of not having to deal with the Sales Tax dilemna on your own. It shows insight that a lot of sellers have a tendency to overlook.
dbfolks166mt
·2 years agoI am a little surprised a veteran seller like yourself is not aware of standard business transactions. That being said, what @@dbfolks166mt very knowledgeably posted, is an outstanding declaration as to the benefit of not having to deal with the Sales Tax dilemna on your own. It shows insight that a lot of sellers have a tendency to overlook.
As a side note for any item purchased on a CC eBay is paying the CC merchant fees on the sales tax portion of the transaction as well. Granted it's 2-3% and not 13.25% but they are paying it.
jgallthatandmore
OP2 years agoBut why do they take any sales tax profit. I see it added to my total of the fees, and yes I have just noticed this.
ajs_coins_and_alchemy
·2 years ago20,000 items sold and you just noticed this .... WOW
Remitting sales tax (sending it to the taxing authorities) is the responsibility of the merchant (you). However, eBay takes care of this as a service to you. You are paying for this service. You are welcome.
If you were required to do this yourself, you would beg for eBay to take over it for you, and would HAPPILY pay those fees.
ETA: Also, sales tax is a portion of the buyers payment, and buyers' payments need to be processed. EBay pays another company to process payments (a payment processor). So part of the fee you pay, eBay pays to the payment processor to handle that part of the buyer payment. The remainder of the fee is kept by eBay for the service they are providing you to remit that to the states/counties/municipalities etc.
dbfolks166mt
·2 years ago20,000 items sold and you just noticed this .... WOW
Remitting sales tax (sending it to the taxing authorities) is the responsibility of the merchant (you). However, eBay takes care of this as a service to you. You are paying for this service. You are welcome.
If you were required to do this yourself, you would beg for eBay to take over it for you, and would HAPPILY pay those fees.
ETA: Also, sales tax is a portion of the buyers payment, and buyers' payments need to be processed. EBay pays another company to process payments (a payment processor). So part of the fee you pay, eBay pays to the payment processor to handle that part of the buyer payment. The remainder of the fee is kept by eBay for the service they are providing you to remit that to the states/counties/municipalities etc.
EBay does not do this by choice but by law as a result of the US Supreme Court's decision in Wayfair vs. South Dakota and all the individual state laws each state has put in place with regards to interstate ecommerce.
They also have to monitor the sales tax with regards to shipping since a lot of states don't apply sales tax to shipping if it can be separately identified. So they have to look at individual sales to see if the seller used free shipping or calculated, what state the buyer was located in and whether they charge sales tax on shipping.
I am quite sure this is one job that eBay would gladly give up. It was one of those trains that came down the track after eBay moved to managed payments.
dbfolks166mt
·2 years agoBut why do they take any sales tax profit. I see it added to my total of the fees, and yes I have just noticed this.
It's not all profit and nobody other than eBay knows if there is any profit. First eBay is paying the CC merchant fees on the sales tax that is charged to the buyers CC account, generally 2-3% so that leaves the remaining 10% of the fees to cover the collection and remittance of the collected sales tax to each of the individual states, the accountants, programmers, lawyers...... that monitor the 10,000+ state, county, city, parish.......... tax laws for updates and changes. They also monitor and adjust for the various tax rates applied to various products. No way I want any part of that job let alone all of it.
caldreamer
·2 years agoYes, EBAY charges fees on entire amount (purchase price + shipping + sales tax) plus 30 cent handling charge. Personally, I don't mind because EBAY is doing all the work of collecting and remitting sales tax to 50 states. Otherwise, Sellers would be forced to file 50 different "sales tax" returns every year.
ten_o_nine
·2 years agoyes it is too high
gloryglorygifts
·2 years agoNo, we don't see it in the funds we receive but it is still part of the purchase transaction so it needs to be collected and reported by ebay, by law. Yes we are also charged a fee by ebay to collect and remit that sales tax to the states that require it. That is a blessing.
It should all be deducted from your 1099 as expenses come tax time though.
albertabrightalberta
·2 years agoSales tax collected and remitted by ebay isn't included on our 1099s so there's no expense to deduct (for that tax).
kensgiftshop
·2 years agoIt's their site and they say so.
There's nothing wrong with it, most places base their fee's on the total amount the buyer pays.
mam98031
·2 years agoActually not true. Etsy and Amazon do not charge any fees on sales tax. That doesn't mean Ebay is doing something wrong, it is just neither site does what Ebay does on this subject.
It is also important to remember that before Ebay became our money processor we paid PayPal 2.9% on the sales tax, most categories pay Ebay 13.25% on the sales tax. That is a big difference.
The argument that Ebay needs the extra fees to pay for collecting and remitting sales tax. If that were true, certainly Amazon and Etsy would do it too. But even excluding that, Ebay [and other marketplaces] are paid by the states for collecting and remitting sales tax. Most likely through a percentage discount on taxes due as long as they pay on time.
And remember from January 2019 until after August of 2020 as sellers entered into MP, Ebay did not collect any fees on the sales tax they collected and remitted to the various states.
squinkercat59
·2 years agoI completely agree with dbfolks166mt; remitting sales tax is such a hassle I consider it a very small fee indeed, to take care of all that for me. Imagine selling 100 items in a month, all to different tax jurisdictions. The record keeping and filing would be a nightmare. I only sell in places that do this for me.
mam98031
·2 years agoActually it is highly unlikely that sellers, small sellers, would ever of needed to do this. There were minimum thresholds that had to be shipped into any give state before the seller was required to collect and remit sales taxes. Those 100 items sold would be very unlikely to be headed for the same state.
While states certainly wanted this new found income, they were smart enough to know to chase million and millions of small businesses to collect and remit taxes would be an impossible task for them as well as the businesses. Then someone dreamt up making it the responsibility of the marketplaces so MFLs [Marketplace Facilitator Laws] were born.
So if there weren't MFLs, it is highly unlikely that small sellers would have ever been made to collect and remit taxes. It would be way too burdensome on them and the states too.
dbfolks166mt
·2 years agoActually it is highly unlikely that sellers, small sellers, would ever of needed to do this. There were minimum thresholds that had to be shipped into any give state before the seller was required to collect and remit sales taxes. Those 100 items sold would be very unlikely to be headed for the same state.
While states certainly wanted this new found income, they were smart enough to know to chase million and millions of small businesses to collect and remit taxes would be an impossible task for them as well as the businesses. Then someone dreamt up making it the responsibility of the marketplaces so MFLs [Marketplace Facilitator Laws] were born.
So if there weren't MFLs, it is highly unlikely that small sellers would have ever been made to collect and remit taxes. It would be way too burdensome on them and the states too.
While the limits are there for each state those can easily be changed and probably would have been by multiple states given the way ecommerce has exploded. Just like several states changed the 1099-K reporting threshold well before the Federal government did. Even with the limits small sellers would have to kept track of each state during the year in case they exceeded the threshold. That would also have included keeping track of all the other nuances associated with each states sales tax laws.
Without MFL's it is highly likely that a lot of sellers would simply have ignored the sales tax collection/reporting just as many did for the 1099-K and with no checks in place the state would have no way to know how many sellers would simply ignoring the laws.
mam98031
·2 years agoYou missed part of my point. What I said still stands to be true.
What I was addressing had nothing to do with the 1099K.
dbfolks166mt
·2 years agoYou missed part of my point. What I said still stands to be true. You missed part of mine. Yes it stands true at the moment but that means small sellers would have to track sales to every state that has sales tax laws throughout the year just in case they exceeded the threshold or just in case the state changed the threshold sometime during the year. It would be virtually impossible for small sellers to track and even more so for the states to enforce which is simply why the laws are written the way they are.
What I was addressing had nothing to do with the 1099K. The 1099-K was an example. Both the Federal government and the states wanted the extra tax revenue so they lowered the threshold. Several states actually did so before the Federal government attempted to do so. Same for the sales tax, yes the limits are currently high and most small sellers would not hit them but states can always lower the limit just like they did with the 1099-K.
mam98031
·2 years agoI didn't miss anything you said.
dbfolks166mt
·2 years agoI didn't miss anything you said.
Nor did I miss anything in your post. I fully understand what the laws currently are but those can, and probably will change.
lonebuck-books
·2 years agoHow quickly we forget about the posts from sellers who got letters from various states (California was a big one) stating that they owed sales taxes and penalties for not filing for sales in their state. They would estimate some ridiculous amount of gross sales in their state and calculate the amount of taxes owed off of that estimate. It didn't matter if the seller sold $1 or $1 million in that state, they would come after them and it was up to the seller to prove that the state was wrong. Minimum thresholds didn't matter at all with those states, they just saw it as a money grab.
So, it did happen back before the marketplace facilitator laws went into effect. Many sellers lived in fear of getting a letter from another state's sales tax division that they would then have to spend time/money fighting.
mam98031
·2 years agoYour right, I don't remember that at all. Not sure how California or any other state would have known how much any given seller had shipped into their state. From what you describe, it is unlikely that would have held up legally if challenged by the seller.
I do know that California got some info from Amazon regarding FBA inside of California, wanting taxes paid on that inventory. As I remember it, it didn't go anywhere as California couldn't accurately prove what the so call offending sellers actually owed. I don't actually remember how it all turned out but the states MFL was not long after this.
The SCOTUS ruling was in June of 2018, the first MFL showed up in January of 2019 and in succeeding months over the next 2 years all the other states that have sales tax passed their own MFL. California passed theirs in April of 2019 and effective October of 2019.
dbfolks166mt
·2 years agoThis question has been asked and answered thousands of times. The situation has not changed nor have the answers. Following is my canned response every time I see one of these postings.
You can blame the 2018 US Supreme court decision in Wayfair vs South Dakota for this one. The ruling basically stipulates that states may charge tax on purchases made from out-of-state sellers even if the seller does not have a physical presence in the taxing state. After the Courts decision individual states began to pass individual state laws regarding sales tax on interstate ecommerce sales. Missouri was the last to do so effective January 2023.
That being said I have always considered the eBay FVF's on sales tax to be the best accounting bargain around. If you sell a $100 item to a buyer in a state with 8% sales tax the FVF on the $8.00 in sales tax amounts to 13.25% * $8.00 or $1.08 if you are promoting at 2% that adds another $.16 so the total FVF on the sales tax is $1.24.
For that $1.24 eBay keeps track of the 10,000 various state, county, city, parish, municipality..... sales tax rates, and laws, and applies and collects the proper sales tax from the buyer. The sales tax percentage may also vary depending on the type of items you are selling since some states, counties, cities…. Tax different items differently. Food and clothing for example. EBay then remits those collected funds to the 45 states with sales tax laws on whatever periodic basis is required. There is NO WAY I want to take on that burden as a seller for $1.24 +/- out of a $100 sale. "
mam98031
·2 years agoThe first state Ebay has to collect and remit sales tax for was the state of Washington and that started in January of 2019. During the next two years, all the other states passed their laws which make Marketplaces responsible to collect and remit sales taxes.
Ebay however did NOT charge the FVF on sales tax until August of 2020 and only for those that were onboarded to Managed Payments. Over the next year and a half Ebay was onboarding sellers to MP, but for those seller that weren't in MP, they were not paying any fees on sales tax. It only started when Ebay became the Money Processor for sellers.
dbfolks166mt
·2 years agoThe first state Ebay has to collect and remit sales tax for was the state of Washington and that started in January of 2019. During the next two years, all the other states passed their laws which make Marketplaces responsible to collect and remit sales taxes.
Ebay however did NOT charge the FVF on sales tax until August of 2020 and only for those that were onboarded to Managed Payments. Over the next year and a half Ebay was onboarding sellers to MP, but for those seller that weren't in MP, they were not paying any fees on sales tax. It only started when Ebay became the Money Processor for sellers.
Technically yes but sellers were paying fees on sales tax through PayPal if they were not yet in MP and PayPal was still serving as the financial processor. Had eBay not transitioned to MP PayPal would still be the one handling the sales tax and charging the fees along with being the one that issued the 1099-K.
mam98031
·2 years agoNot "technically", what I said was and is correct. With PayPal we paid 2.9% fees on the entire amount of money paid by the buyer. With Ebay as our money processor, in most categories, we pay 13.25%. Before Ebay became our money processor we NEVER paid selling fees on taxes.
I never claimed or even stated anything about If Ebay had not brought MP site wide, would PP still be our Money Processor, IDK if they would be or wouldn't be. My crystal ball is silent on the subject. LOL
But still if PP was still our money processor, we would be paying 2.9%. It is highly likely that after all this time they would have raised their fees from 2.9%. With that said, what I said earlier would still be correct. We would pay PP the fee on the sales tax, but we would NOT be paying selling fees on Ebay sales.
robbie31415
·2 years agoTo answer your question.
"why are they able to do this?"
Because it's legal, agreed to by you, and standardized by financial payment processors that have been charging fees on the entire transaction amount since forever.
lilyswan2
·2 years agoyou can tolerate something but not agree with it. lots of things people put up with but are not in agreement with. sometimes if enough people complain things change. not always. but venting is helpful in its own way.
tobaccocardyahoo
·2 years agoEbay fees are not a secret. No one requires you to sell on Ebay.
If they are too high, explore other ways of selling.
We all have to decide whether we can meet our profit goals selling here. Many can, some cannot.
With 20k items sold, you should not be surprised by the fees.
As for reporting income, this is Ebay's attempt to meet IRS requirements. Since you will have an offsetting expense, there is no harm done,
2011hemi7*2012
·1 year agoDude, ebay is double dipping in my case they charged the buyer tax, then deducted that same tax from me the seller, so both of us were charged a tax...i have never heard of the seller being responsible for paying the sales tax. Its bull!
kh-adrian
·1 year agoHi everyone,
Due to the age of this thread, it has been closed to further replies. Please feel free to start a new thread if you wish to continue to discuss this topic.
Thank you for understanding.