Dreaded tax audit

[comam47]

Ok so eBay started to collect sales tax and remitting them to states.  Now I have a dreaded tax audit in Arkansas and have found out that they still charge a tax that is not collected by eBay.  Is there anyway to check to see where the tax is sent to?  Better yet how can you tell if it’s making it to

the states?  There should be a way to check this because I was informed that there has not been the proper tax remitted to the state of Arkansas 

[slippinjimmy · Accepted solution]

they still charge a tax that is not collected by eBay

What is this tax not collected by eBay?

[caldreamer]

EBAY has been collecting sales tax on your behalf since July 2019.  Every year when you file your State Tax form (you would show EBAY as facilitator).   Sales Tax liability would be zero (because EBAY already paid).   

Never heard of State demanding to know where EBAY sent was money (your State made contract with EBAY so they should know where money is going).    Why would you be liable for additional taxes?   Did you put correct social security# on your EBAY account?

[kds99]

Are they referring to sales tax on items that you sold outside of eBay, or buyer paid cash on pickup?

[dbfolks166mt]

     The collection of what is often referred to as the "Amazon Tax" is based on the individual ecommerce tax laws passed by each individual state and unfortunately those can vary greatly in their complexity with Illinois having about the most complex I have seen. 

     For most of the state laws eBay is on the hook to collect and remit the collected sales tax to the individual states based upon the individual law the state passed. Since the seller is unaware of what is taking place inside eBay with regards to this process they would be the only ones who could validate/verify the payments to the state. The Arkansas IRS may have to pull eBay into your audit process and in fact they should already know how to contact them since they are, or are supposed to be, the ones making the payments. 

     You do have the ability to pull a report from the transaction page that shows the amount of tax eBay collected on any sales to Arkansas residents. Other than that information you are kind of dependent on eBay to handle the rest of the process. 

[toysaver]

If you did not declare your income from eBay sales on your 1040 that may be the tax share that Arkansas wants to settle.  Or did they specfically say sales tax?

[7606dennis]

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@toysaver wrote:

If you did not declare your income from eBay sales on your 1040 that may be the tax share that Arkansas wants to settle.  Or did they specfically say sales tax?

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That could be a possibility if Arkansas has a state income tax.  Of course, the IRS may decide to audit the OP if that is what is going on.

[toysaver]

It seems any state that is getting sales tax remitted by eBay from seller x's sales would be more than interested if there wasn't a correlated income declared from seller x for the sales.   But tax laws are a quagmire so could be something else related to sales tax as well.

[downunder-61]

Could this be more of a personal tax issue you may have, unrelated to eBay, as you are in Arkansas and the tax is collected by eBay for the 'buyer's location' not the sellers.

[abb6-31]

@downunder-61  sounds to me like you're getting nailed for income tax, which is up to you to report to the feds and your state.

[soh.maryl]

State sales tax on internet purchases is collected by eBay and remitted to the appropriate state.

It's calculated based on the buyer's delivery location, not the seller's.

When you mention a "tax that is not collected by eBay", are you referring to state income tax?

These are two separate and completely different taxes.

[eleanor*rigby]

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@dbfolks166mt wrote:

     The collection of what is often referred to as the "Amazon Tax" . . .

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The "Amazon Tax" refers to whether Amazon should have collected sales tax in states where it had a physical presence. That entire issue was rendered moot by the SCOTUS decision in South Dakota v. Wayfair, Inc. in 2018, and states began passing their own online retailer sales tax laws.

If anything, it should be referred to as the "Wayfair Tax."

[dbfolks166mt]

It's the byproduct of the Wayfair decision that has caused the individual states to implement their own ecommerce sales tax laws that have taken on the nickname Amazon Law. 

https://www.cbpp.org/research/new-yorks-amazon-law-an-important-tool-for-collecting-taxes-owed-on-in... 

[dbfolks166mt]

     It is possible that there are additional sales taxes that eBay is not catching based on the location of the buyer. Illinois probably has one of the most complex and ugliest ecommerce sales tax laws out there. The following has either become effective or will become effective shortly. I would imagine the eBay IT department as well as the accountants are having a hay day with this one. 

     Online sellers will be required to collect the correct amount of sales tax depending on the address of the buyer. That means, for example, that a Chicago resident would pay the same 10.25 percent sales tax for an online purchase that would be charged if he/she bought the item in a store down the street. For Chicago, the rate includes the 6.25 percent statewide rate, a 1.75 percent tax from Cook County, a 1.25 percent tax from the City of Chicago and a 1.0 percent tax to fund regional transit. The exact tax collected will depend on what taxes are in effect at the buyer’s location. The state will distribute the money based on where the purchases happened.

[dbfolks166mt]

My apologies it's not Amazon tax but Amazon law that is being applied to the various ecommerce sales tax laws that were put into place after the Wayfair decision.