Yet another Sales Tax bug - eBay Overcharging and Applying Marketplace Tax Where They Shouldn't

[salebolt]

eBay should not be applying marketplace tax to sales made by sellers in Illinois and shipped to Illinois.   This is normal sales tax at normal sales tax rates and not subject to marketplace facilitator rules.

Persons making sales to Illinois purchasers that are subject to Illinois Retailers' Occupation Tax (sales tax) are not considered to be "marketplace sellers" and are not subject to the provisions of 86 Ill. Adm. Code 150.804.

https://www2.illinois.gov/rev/research/legalinformation/EmergencyRules/MarketplaceFacilitator/Pages/...

The Illinois Use Tax Rate is 6.25%, eBay is charging 10%. 

https://www2.illinois.gov/rev/questionsandanswers/Pages/135.aspx

[trainsets]

Triton -

Your tax team does NOT have it correct for Illinois based sellers and the collection of Marketplace Facilitators Tax.  If you have a document from the State of Illinois, which confirms that eBay is properly handling the collection and remittance of tax, it needs to be shared ASAP as it is counter to all other guidance from the state.  There is no tax professional who I've spoken with so far that agrees that eBay (and Amazon for that matter) is handling it properly for this state.  I have previously shared Illinois DOR guidance and clarification on the matter.  It is being ignored by eBay. 

Here are some links on the very subject and how IL differs from other states' implementation of MFT's.

https://blog.taxjar.com/file-sales-tax-illinois-tricky-marketplace-facilitator-law/

https://www2.illinois.gov/rev/research/publications/compliancealerts/Documents/CA%202020-3.pdf

Illinois DOR has indicated that Amazon and eBay are working on a solution to this problem, but neither has come up with one.

[salebolt]

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@Anonymous wrote:

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Hi @trainsets, our tax teams are also in direct communication with the various states to ensure we are complying with our tax responsibilities and we've confirmed that we are appropriately collecting sales tax for IL. If there is a concern with a specific transaction/item, you are welcome to contact Customer Service to have this reviewed for potential corrections.

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You are absolutely not in compliance.   Further, you have forced us out of compliance.  As I've posted before, they have issued special guidance to us telling us we are liable for your errors. 

If your tax people are unable to correct the programming on this, you need to provide us a way to block in-state sales or add a surcharge to our orders to cover the tax so we can remit it.  

We are also losing 7% on orders since Jan (because we own the state this amount on each sale), and our buyers are being charged incorrect tax rates as well.

[etrusca]

I have a suggestion that may be  helpful- as I am already registered in a number of states and had contacted them to see  how they handle this as few have updated their informational pages to address the topic.

Many states are in agreement that they will then receive the tax from Ebay on your behalf for marketplace sales

and this gets credited to your account and you dont have to do anything as it will be done for you instead of you counting it as a sale and sending in the money.

Each state is handling  the quarterly, monthly returns differently. In my home state of Pa,

though the marketplace facilitator collects & remits the tax to the state, I was told a seller has to count the sale

into their reported sales under gross ( not back it off under non taxable since it was paid) and then show a shortage in the amount paid. Problem is the calculator doesnt like that and there is no line item on the form to identify & isolate these sales and account for tax already paid, unless an error from a previous filing.

So I think all states have to get aligned to the marketplace faciliator remittance system and somehow have a separate accounting per registered dealer on their " business acct" or deal with these sales separately. Where this become complicated with taxes is if your registered sales tax state taxable sales filings dont match or calculate into your actual reported annual sales it is hard to reconcile and is misleading.

Thats the best I can do here as these are the facts as I have learned w/ other 5 states that I do business in physically. theother option is if this is your main source of reported sales then I would write a letter to the head of your sales tax division explaining the situation as they, the state, have to be in compliance also with these new laws.  Good luck - 

[trainsets]

Unfortunately, your comments/suggestions are not applicable to the particular issue we are facing with IL. Other states in which eBay collects/remits taxes on our behalf are not an issue for us. The issue is specific to IL and only for sellers based in IL.

[thenourishshop]

I noticed this today. I just realized that Ebay is collecting incorrect taxes on Illinois purchases. For a sale of $73.47 they collected $.59- That is 0.8%. Which Illinois tax is 0.8%? even use tax is 6.25%. Since I have a registered Illinois business in Chicago my tax would be 10.25% and as mentioned by the EBAY representative that taxes are based on the buyers location-even then its doesn't match. What they are collecting is so little and much less than what the should. After going through the new rule I realized that I am still responsible for collecting and remitting because a marketplace facilitator tax rule is for out of state. Now the problem is Ebay is collecting this ridiculous taxes on IL purchases and doesn't allow me to collect actual taxes which is way higher than collected by EBAY which mean I will be paying sales taxes from my own pocket now.

[salebolt]

Since they are taking email submission to customer support now, I laid it all out for them in a support case.  As expected, they didn't handle the question properly and responded with some generic boilerplate about seller income and VAT and 1099-K forms.

I also sent in a tax exemption request so that purchases are not taxed.  So the items we buy for R&D, resale, and packing materials are not taxed since they are not taxable in IL.  Other items we pay use tax ourselves.

I piggy backed on that case with the use/sales tax issue to see if they had a way to register as a retailer so they would use the tax tables instead of facilitator tax.  They replied insisting they are doing it correctly.   Then they suggested I file for tax exemption, which I already had earlier in the ticket.  So they can't even follow thread context.

I pushed back again and some anonymous responder said they'd check with the sales tax team and then they went dark.  That was Mar 25.

Pretty much exactly what I expected and why I wasn't willing to spend several hours on the phone with them.

[shipscript]

@salebolt 

Preface these types of detailed or complex tax communications to Customer support with:

"This question/issue is for the sales tax team, and can not be answered by customer service directly. Please pass this to the sales tax team."

The tax team is a separate internal entity that I suspect works with an outside contractor (like avalara) for tax development, programming, and processing. The tax team is the one where programming issues and refund issues should be raised, but the team can only be accessed by us through customer service.