Do sellers pay tax for buyers who live in a state that has no sales tax?

[thewildones]

Hi, sorry if my question is a bit confusing and I have so little knowledge about this topic, so I'd like to get some clarifications, please.

So, for example, if a seller lives in CA (has sales tax) and a buyer lives in OR (no sales tax), sales tax will not be collected from the buyer, so what do sellers report to the IRS for this sale? Is this considered a non-taxable sale for the seller, are the seller required to pay the tax themselves, are they responsible for it, or how does it work?

Thank you.

[katzrul15]

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@thewildones wrote:

Hi, sorry if my question is a bit confusing and I have so little knowledge about this topic, so I'd like to get some clarifications, please.

So, for example, if a seller lives in CA (has sales tax) and a buyer lives in OR (no sales tax), sales tax will not be collected from the buyer, so what do sellers report to the IRS for this sale? Is this considered a non-taxable sale for the seller, are the seller required to pay the tax themselves, are they responsible for it, or how does it work?

Thank you.

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@thewildones 

Sales tax is collected (if applicable) based on "where" the order is being shipped to.  If it is being shipped to a State that does not currently collect sales tax, no sales tax is applicable.  It is not paid by the Seller, as no sales tax applies to that order.

States that do not currently collect sales tax are:

Alaska, Montana, Oregon, New Hampshire and Delaware.  Florida used to be on that list and changed in 2021.

E-Bay remits the sales tax for a Seller, so while it is collected from the buyer from an order when applicable, it is not sent to the Seller to handle with the individual States, etc.  E-Bay handles all of that for us as Sellers.

[coolections]

You need to do nothing. The buyer pays the state tax and Ebay gives that money to the state. One reason why so many are confused about why Ebay charges fees on the total amount paid to the seller. Ebay takes care of all that for you. The only thing you need to report is what is on your 1099 at the end of the year.

[buyselljack2016]

You need to separate "sales tax", and "income tax" thoughts.  They have nothing to do with each other.

The IRS is about income tax that you as a seller pay on your  profits, and has nothing to do with "state" sales tax.

[partfinds]

@thewildones 

Sellers pay income tax. Buyers pay sales tax (applicable to their state). In January Ebay gives sellers 1099k form that will list total money that was processed for you. This total amount you will report to IRS along with the expenses for your store such as fees you paid ebay, store subscription, shipping labels , etc. Sellers don’t report sales tax Ebay collected on seller behalf.

the reason why you as seller see state tax in transaction details is because Ebay charges sellers fees from the amount of tax that is charged to buyer. This fee (expense) is reported to IRS when you file your taxes.

[caldreamer]

IRS requires that you report all income earned on your Federal Income Taxes (doesn't matter what state Buyer or Seller is in).   1099 will be sent to both you and the IRS (you must report this "gross sales" amount on your income taxes).   If you file as a "business" you can deduct expenses (EBAY fees, cost of goods, mileage, amount paid for shipping, packing supplies).

EBAY collects "sales tax" and remits to all the states on your behalf.  

[thewildones]

Thank you, everyone, for the clarification!

I do have one more question, I would really appreciate it if any of you can help clear this up.

And I understand that ebay or similar platforms will automatically take care of any tax-related charges, but I'd like to ask for future reference in case I have to deal with buying/selling on other platforms. (I've done google searches but I can't find a straight answer.)

If a buyer is from Oregon (no sales tax) and a seller is in a state like Virginia (which has an "origin-based sales tax policy," where sellers will charge the origin's tax rate, so in this case, Virginia's state tax rate.)

So my question is, does the no sales tax still apply for Oregon buyers? Or will they be required to pay Virginia sale's tax.  Thank you again, I don't have much experience so I hope any one of you can help. @caldreamer  @partfinds @buyselljack2016 @coolections @katzrul15 

[nobody*s_perfect]

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@thewildones wrote: ... If a buyer is from Oregon (no sales tax) and a seller is in a state like Virginia (which has an "origin-based sales tax policy," where sellers will charge the origin's tax rate, so in this case, Virginia's state tax rate.)

So my question is, does the no sales tax still apply for Oregon buyers? ...

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Yes.

For the purposes of SALES tax, the seller's state is irrelevant.  

[varebelrose]

The sales tax is based on the BUYER'S location, not the seller's. In your case of a seller in Va., that has no bearing on anything.

[luckythewinner]

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@thewildones wrote:

Hi, sorry if my question is a bit confusing and I have so little knowledge about this topic, so I'd like to get some clarifications, please.

So, for example, if a seller lives in CA (has sales tax) and a buyer lives in OR (no sales tax), sales tax will not be collected from the buyer, so what do sellers report to the IRS for this sale? Is this considered a non-taxable sale for the seller, are the seller required to pay the tax themselves, are they responsible for it, or how does it work?

Thank you.

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States governments levy sales and use taxes on a BUYER for transactions that fall within their jurisdiction. Sales tax is paid by the BUYER to the state where the BUYER lives if that state has a sales tax. In this case the buyer is in OR, so there is no sales tax. Period. 

 The federal government levies income taxes on income received by sellers. The IRS has nothing to do collecting and remitting sales tax, and you do not "report" sales tax to the IRS for any eBay transactions.

What the eBay seller reports to the IRS for this eBay sale is exactly what the eBay seller would report to the IRS for any other eBay sale - the gross income from the sale. But again, that reporting to the IRS is for income tax purposes, not sales tax purposes. 

[soh.maryl]

The state sales tax that a buyer pays is calculated based on the BUYER'S LOCATION.  It has nothing at all to do with the seller's location.  There is no situation where the BUYER would pay state sales tax based on the SELLER'S location.  

[lacemaker3]

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@thewildones wrote:

Thank you, everyone, for the clarification!

I do have one more question, I would really appreciate it if any of you can help clear this up.

And I understand that ebay or similar platforms will automatically take care of any tax-related charges, but I'd like to ask for future reference in case I have to deal with buying/selling on other platforms. (I've done google searches but I can't find a straight answer.)

If a buyer is from Oregon (no sales tax) and a seller is in a state like Virginia (which has an "origin-based sales tax policy," where sellers will charge the origin's tax rate, so in this case, Virginia's state tax rate.)

So my question is, does the no sales tax still apply for Oregon buyers? Or will they be required to pay Virginia sale's tax.  Thank you again, I don't have much experience so I hope any one of you can help. @caldreamer  @partfinds @buyselljack2016 @coolections @katzrul15 

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Yes, Oregon buyers do not have to pay sales tax, no matter where the seller is located. As long as the shipping address is in Oregon, there is no sales tax due on the transaction.

You are based in Oregon, which has no sales tax. You don't need to worry about the difference between origin-based or destination-based sales tax. As far as I know, all the states that have origin-based sales tax, those rules only apply for domestic sales, meaning when both the buyer and seller are in the same state, and when the seller is selling directly to the buyers. All the states that have marketplace facilitator tax laws, the marketplace facilitator sales tax is destination-based. Even when the in-state sales tax is origin-based, the sales tax for transactions on a marketplace is not.

eBay sellers don't need to worry about this at all, because the effects of origin-based sales tax laws only affect transactions where all of these are true:

1. Both the buyer AND the seller are located/have a nexus in the same state, which has origin-based sales tax.
2. The seller is selling directly to buyers, not through a Marketplace (like eBay).
3. The seller meets the requirements of their state to be required to register to collect sales tax.

Only sellers who meet ALL of those conditions need to collect the origin-based sales tax. (This is also true for states which have destination-based sales tax).

The purpose of the Marketplace Facilitator sales tax laws, is to make it easier (and feasible) for states to be able to collect sales tax for transactions made by the residents of that state. When a marketplace is collecting sales tax on the transaction, the seller does not need to (and is not allowed) to collect sales tax on that transaction.

Here's a good explanation of origin-based sales tax, which states have it, and what sellers based in those states have to do to comply with it for sales within their state. This does not apply to any transactions which happen on eBay, or any other marketplace, no matter where the eBay (or marketplace) sellers are based.

https://www.avalara.com/us/en/learn/whitepapers/origin-vs-destination-sales-tax.html

[gosimus]

@thewildones 

< sales tax will not be collected from the buyer, so what do sellers report to the IRS for this sale >    

Sales tax is charged by the terms imposed by the state in which the purchase was made, and the revenue is subsequently submitted to that state.  The IRS is a federal agency does something different.