Final Value Fees on State Income Tax when NOT Charged to Buyer

[lost-but-now-found]

I understand that eBay charges a final value fee on all funds collected from a buyer (product sale, shipping/handling, taxes) plus a $0.30 charge. What I can't understand is why/how they are charging a FVF on taxes that are NOT charged to a buyer. For instance I sold an item for $25 w/free shipping and NO Taxes. The payout/fees look like this:

Item Price: $25.00

Sales Tax: $2.13

Fees Based On: $27.13

Final Value Fee: (12.55%): -$3.40

Again, sales tax was not charged to the buyer so why is it that I'm being charged a fee on funds that were never collected?  Also the "sales tax" imposed to this transaction is 8.52% (2.13/25) not the 10.25% for my city nor the 4.5% for the city/state of the buyer. This raises the FVF to 13.6% (3.4/25). I do realize it is a marginal increase for me at approximately 1% (though it does seem to vary from 0.8-1.5% for each transaction). But 1% on potentially hundreds or thousands of dollars adds up. Am I missing something? Or does this seem really unethical?

[releasethekraken_1]

How did you determine that sales tax was not charged?

What city/state was the package sent to?

[lost-but-now-found]

I did not charge sales tax in the listing and thus I did not collect sales tax from the buyer. The overall payment from the buyer was $25. The package was sent to Tulsa Oklahoma which sales tax is 8.52%. So I now see that is where the imposed sales tax figure comes from. 

My question still remains however as to why I'm being charged a FVF on a sales tax that wasn't collected from the buyer? Why would eBay get a percentage of sales tax that isn't even charged? Wouldn't that be similar to them applying a percentage fee on free shipping?

[kensgiftshop]

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@lost-but-now-found wrote:

I did not charge sales tax in the listing and thus I did not collect sales tax from the buyer. The overall payment from the buyer was $25. The package was sent to Tulsa Oklahoma which sales tax is 8.52%. So I now see that is where the imposed sales tax figure comes from. 

My question still remains however as to why I'm being charged a FVF on a sales tax that wasn't collected from the buyer? Why would eBay get a percentage of sales tax that isn't even charged? Wouldn't that be similar to them applying a percentage fee on free shipping?

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In your numbers above, the buyer paid $2.13 in sales tax.

[lost-but-now-found]

And by percentage fee on free shipping I mean them determining what shipping should or could be and then assessing a percentage fee based on this value.

[lost-but-now-found]

In this case, yes, the fee is being charged to the $2.13. I, however did not collect this $2.13 from the buyer. So, I am responsible for paying eBay a fee on a sales tax that I didn't collect from another state? Again, I could very well be missing something here and is why I came to the boards searching for an answer.

[lacemaker3]

@lost-but-now-found ,

eBay collected the sales tax from the buyer, as they were required to do by the buyer's state. In many states, there is not only the state sales tax rate, but individual cities and municipalities are allowed to impose sales tax as well. eBay is required by law to collect the sales tax from the buyer for all items, based on the shipping address where they are sent. Many states (more than half of them) also include the cost of shipping when they calculate the sales tax (which levels the playing field somewhat, for local B&M sellers competing with distance orders).

eBay fees are calculated based on the total amount of the payment that the buyer had to make. This is standard procedure for payment processors, and now that eBay has only a single, simplified payment that includes the payment processing, that is how they do it.

[lost-but-now-found]

So I am being charged a FVF on sales tax that I didn't collect. I'm paying a fee (as the FVF percentage-12.55%) on sales tax ($2.13) the buyer directly paid eBay (or essentially state/city). So eBay is profiting off sellers through state and city taxes? I seems is essence that they are taxing me (FVF) on the the tax charged to the buyer?

Again all I received from the buyer was $25 but eBay FVF also applied it to the tax they directly collected from the buyer.  Apologies if I'm being thick, I just don't understand it. I now understand how it works thanks to your explanation (which I very much appreciate) but it doesn't answer the why. 

[lacemaker3]

@lost-but-now-found ,

Yes, I think you've got it now.

Don't think of it as a tax, it is definitely NOT a tax. It's a processing fee, and B&M sellers who accept credit and debit card payments directly, have been experiencing this forever. eBay sellers who were required to collect sales tax were experiencing this with PayPal as well.

Yes, the eBay fee is higher than PayPal's fee or a merchant gateway's fee. However, eBay did set their fees so that they are a little bit lower than the sum of the fees that were charged before (eBay plus PayPal). That helped to even things out. The last time I checked, there was a breakeven point at about 6% sales tax. If the sales tax charged was less than 6%, the seller was paying slightly less than before, and above 6%, the fees were slightly higher. I believe that 6% is about the average sales tax rate, overall. (That was at the older fee rates, before both eBay and PayPal increased their fees slightly.)

[releasethekraken_1]

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@lost-but-now-found wrote:

So I am being charged a FVF on sales tax that I didn't collect. I'm paying a fee (as the FVF percentage-12.55%) on sales tax ($2.13) the buyer directly paid eBay (or essentially state/city). So eBay is profiting off sellers through state and city taxes? I seems is essence that they are taxing me (FVF) on the the tax charged to the buyer?

Again all I received from the buyer was $25 but eBay FVF also applied it to the tax they directly collected from the buyer.  Apologies if I'm being thick, I just don't understand it. I now understand how it works thanks to your explanation (which I very much appreciate) but it doesn't answer the why. 

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eBay collected and will remit the tax to Oklahoma for you. eBay also charges FVF on what the buyer pays for shipping, even though you don't get to keep most (all?) of that; they also charge FVF on what you paid to acquire the item, even though you already paid that money out.

They charge FVF on what the buyer pays, regardless of how much of that payment ends up in your pocket; the fees are approximately the same as they were when PayPal was handling payments.

[lost-but-now-found]

So the FVF incorporates an "interchange processing fee" because eBay is now the prime financial intermediary between the seller and buyer since they cut out PayPal?

And this interchange fee is also applied to sales tax? And doing so is an industry standard (VISA, Mastercard, etc.)? -whether that is ethical is another discussion and not my primary concern

Interchange fees are typically around 1-3% though right? Whereas eBay is assessing all of it's 12.55% FVF on sales tax?

Apologies for so many questions but your responses have been immensely helpful in my understanding of this. 

[kensgiftshop]

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@lost-but-now-found wrote:

In this case, yes, the fee is being charged to the $2.13. I, however did not collect this $2.13 from the buyer. So, I am responsible for paying eBay a fee on a sales tax that I didn't collect from another state? Again, I could very well be missing something here and is why I came to the boards searching for an answer.

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Yes, Ebay collects the sales tax for the states, but we have to pay a fee on it.

[kensgiftshop]

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@lost-but-now-found wrote:

So I am being charged a FVF on sales tax that I didn't collect. I'm paying a fee (as the FVF percentage-12.55%) on sales tax ($2.13) the buyer directly paid eBay (or essentially state/city). So eBay is profiting off sellers through state and city taxes? I seems is essence that they are taxing me (FVF) on the the tax charged to the buyer?

Again all I received from the buyer was $25 but eBay FVF also applied it to the tax they directly collected from the buyer.  Apologies if I'm being thick, I just don't understand it. I now understand how it works thanks to your explanation (which I very much appreciate) but it doesn't answer the why. 

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Just like Pay Pal, credit cards and other payment processors, their fee's are based on the total amount the buyer pays.

[lacemaker3]

@lost-but-now-found ,

Yes, I believe that all of those statements/questions are factually correct.

I don't have an opinion on whether this is ethical. It's business. This is how it is. An eBay seller needs to understand what fees are being charged, so you can set your prices at a level that will give you a good profit margin. That's all that is really necessary. The fees we have to pay are not under our control, they are not in our sphere of influence. We can't change them, so it's not worth getting upset over them. We can just understand them, and deal with them. 

As I understand it, virtually all of the main selling websites (i.e. the ones that have decent buyer traffic, and generate a reasonable number of sales for their sellers) have similar payment systems. Except that Amazon's might be considered "worse" because I think they only send payments every two weeks or something like that.

[lost-but-now-found]

I have since come to the understanding that eBay collected (from the buyer) and paid on my behalf (seller) the sales tax that was owed to the buyers state/city/municipality/town hall/girl scout group. They do not make this very clear. At least not on the "Payments>Transactions>Transaction Details" page. And (at least in part) is why I couldn't figure out why a fee was being applied to funds that (I thought) weren't being charge to the buyer and certainly not funds collected by the seller. I do appreciate your response though.

Do you know why sellers have the option to charge sales tax in their listings if eBay already automatically collects it from the buyer and pays it on behalf of the seller?