Sales Tax on eBay – Can it be Avoided Particularly by Sellers Who Don’t Sell Much?

[sportsntechspot]

Now that eBay among other e-commerce websites are deemed by taxing authorities as "marketplace facilitators" who must collect and report sales tax on behalf of their third-party sellers, many sellers on eBay are seeing their customers charged sales tax regardless of if they want their customers charged sales tax.

So how can sellers avoid eBay from slapping sales tax on their customers' invoices?

eBay accepts exemption certificates which is one way you can get eBay to turn off the tax. But that only works if your customer has a valid exemption reason such as resale AND is registered with the state in question that imposes the sales tax. If you're dealing with an unregistered customer, good luck completing an exemption certificate. It's not possible. They must have a registration number issued by the state which is required to complete the exemption certificate.

If you're running a business on eBay and you don't have exemption certificates from your customers you're pretty much going to be stuck with eBay charging the tax on your customers' invoices.

But what about the regular, average day users like me who aren't running businesses on eBay and just occasionally sell something here and there? Is there anything that can be done to avoid the tax being charged to your customers who live in states that impose a sales tax?

Most states allow sellers an exemption known as a casual or isolated sales exemption. Essentially it exempts a seller who is not regularly engaged in the business of making sales at retail.

District of Columbia: "Casual and isolated sales by a vendor who is not regularly engaged in the business of making sales at retail are not subject to tax."

Hawaii: "'Casual sale' means an occasional, isolated, irregular, infrequent, or incidental sale or transaction involving tangible personal property that is not ordinarily sold in the usual course of trade or business."

Idaho: "To qualify as an occasional sale, the seller must not make more than two sales of tangible personal property in a 12-month period, or hold himself out as engaged in the business of selling tangible personal property."

Missouri: "An isolated or occasional sale is a sale of tangible personal property, services, substances, or things by a person not engaged in such business. Such sales do not constitute engaging in business unless the total amount of the gross receipts from such sales exceeds $3,000 per calendar year."

Nevada: "If a seller has not made more than two sales during any 12 month period, these sales are considered tax exempt occasional sales and the seller has no obligation to collect sales tax from the buyer."

This is why most states don't tax garage sales. People who have occasional garage sales are largely ignored by state taxing authorities because states recognize garage sales generally don't occur very often and are immaterial in terms of sales.

With that said, how are casual sales by users on eBay viewed in this new "marketplace facility" taxing era? Is the exemption still valid for a user on eBay who only sells 2 items per year? Is it even relevant to the taxing authority that the eBay user only makes casual sales, or does it throw that exemption out the door when it comes to marketplace facilitators? I guess it would come down to an argument of who is truly making the sale, the eBay user or eBay itself? I would view the eBay user to be the true seller of the transaction and therefore entitled to the casual or isolated sales exemption. eBay as the marketplace facilitator is just that. A facilitator. It is merely aiding in the sale but not representing either the seller or the buyer.

Has anyone had any luck getting eBay to turn off the tax on their seller account based on the casual or isolated sales exemption? The only option I've found so far available to the public is to submit an exemption certificate. If no one knows, can eBay step in and assist on this one? I would like the sales tax on my seller account completely turned off for my token 1-2 customers per year based on the casual or isolated sales exemption.

[myboardid]

"I do believe if you somehow qualify to be a tax-exempt seller, you can upload that documentation to eBay for their consideration. (This might be, for example, a charitable organization or religious organization that has qualified for tax-exempt sales, depending on the specific circumstances and laws in each state.)"

This applies to INCOME Tax, not to the collection of sales tax.  Apple & oranges. 

[myboardid]

Actually, on second thought, I think there may be some states that allow certain non-profits to sell without collecting sales tax.  It doesn't happen in my state, so I forgot about that.  

[myboardid]

clbent04 - the facilitator Marketplace laws do not allow for the marketplace to exempt anyone from collection of sales tax.  They are based on a $$ threshold of sales made through the marketplace itself and not based on the sales made by individual sellers using said marketplace.   I have not read all of the new laws from every states, but I have read several of them and there is no mention of exemptions at all. 

[mam98031]

---

@vintagecraze50 wrote:

I remember reading that there is an income threshold for these taxes. If you do not make x amount in sales then I believe you are exempt. Not totally sure, but I believe that it’s correct.

---

@vintagecraze50 

That is incorrect.  It is why they placed the onus on Marketplaces like Ebay, Etsy, Amazon, Walmart, etc.  It is based off what the site as a WHOLE does in sales into each state.  The Facilitator Laws make the Marketplace responsible to collect and remit taxes on ALL sellers no matter their size or location.  If they ship into a state with a Facilitator Law, Ebay is legally BOUND to collect and remit taxes to the appropriate state.

[sportsntechspot]

---

@lacemaker3 wrote:The so-called casual seller scenario (in those states that allow this) is completely different from a sales tax exemption. It only means that the "casual seller" is not required to collect the tax, it doesn't mean the buyer doesn't have to pay it. Any time a buyer doesn't pay tax on a taxable purchase, for any reason, they are responsible to pay the use tax if they didn't pay the sales tax.

I didn't know "scenarios" gave taxpayers the right to avoid paying tax.  In sales tax law the terms used to avoid paying tax are either exemptions or exclusions.  Now if you're saying that the casual and isolated sales exemption is actually an exclusion and not an exemption, and that the purview of the exclusion does not extend to the scenario of a marketplace facilitator platform, I can reason with that. But I'd still have to ask, is that right answer?

---

@lacemaker3 wrote:

---

---

This can't be done. There is no "casual or isolated sales [tax] exemption" on eBay. And you, as a seller, should not be trying to facilitate tax evasion.

---

Again, there's a difference between tax avoidance and tax evasion. You can read up on the difference on Google. I'm only trying to help my customers commit the former (something everyone should do unless you like giving your money away to the government without having any obligation to do so).

[mam98031]

---

@sportsntechspot wrote:

---

@lacemaker3 wrote:The so-called casual seller scenario (in those states that allow this) is completely different from a sales tax exemption. It only means that the "casual seller" is not required to collect the tax, it doesn't mean the buyer doesn't have to pay it. Any time a buyer doesn't pay tax on a taxable purchase, for any reason, they are responsible to pay the use tax if they didn't pay the sales tax.

I didn't know "scenarios" gave taxpayers the right to avoid paying tax.  In sales tax law the terms used to avoid paying tax are either exemptions or exclusions.  Now if you're saying that the casual and isolated sales exemption is actually an exclusion and not an exemption, and that the purview of the exclusion does not extend to the scenario of a marketplace facilitator platform, I can reason with that. But I'd still have to ask, is that right answer?

---

@lacemaker3 wrote:

---

---

This can't be done. There is no "casual or isolated sales [tax] exemption" on eBay. And you, as a seller, should not be trying to facilitate tax evasion.

---

Again, there's a difference between tax avoidance and tax evasion. You can read up on the difference on Google. I'm only trying to help my customers commit the former (something everyone should do unless you like giving your money away to the government without having any obligation to do so).

---

According to the Supreme Court we are obligated to pay sales tax on internet sales to the appropriate states in which the product is shipping into.  Which has spawn the Facilitator Tax laws we now have to deal with on various marketplaces.

[gracieallen01]

---

@sportsntechspot wrote:

---

@richard1rst wrote:

Is there anything that can be done to avoid the tax being charged to your customers who live in states that impose a sales tax?

Simple answer - NO. Although it is unlikely they would come after any one small independent seller, failure to pay legitimate taxes is a felony.

---

Avoidance of tax is legal and prudent. Evasion of tax is a crime. Yes, there's a difference. That's how the many legitimate tax firms and consultants out there make money and help save us taxpayers from unnecessary taxation.

---

Unfortunately, I do believe that failure to pay state mandated use tax, when charged by, and due state the state, is tax evasion, not tax avoidance.

[sportsntechspot]

---

@gracieallen01 wrote:

---

---

Unfortunately, I do believe that failure to pay state mandated use tax, when charged by, and due state the state, is tax evasion, not tax avoidance.

---

State mandated use tax? When did that enter the discussion? 

[gracieallen01]

---

@sportsntechspot wrote:

---

@gracieallen01 wrote:

---

---

Unfortunately, I do believe that failure to pay state mandated use tax, when charged by, and due state the state, is tax evasion, not tax avoidance.

---

State mandated use tax? When did that enter the discussion? 

---

Do you not know 'why' the Marketplace Facilitator tax was implemented?

[mam98031]

---

@sportsntechspot wrote:

---

@gracieallen01 wrote:

---

---

Unfortunately, I do believe that failure to pay state mandated use tax, when charged by, and due state the state, is tax evasion, not tax avoidance.

---

State mandated use tax? When did that enter the discussion? 

---

It is the lack of people paying the use tax on internet sales that causes the states to seek a remedy.  In states that have sales tax, we as consumers were always suppose to claim items we had shipped into the state but didn't pay state sales tax on and pay use tax for these items.  But very few people ever did that.  States were losing lots and lots of money because of this.  

So they fought hard to get the Wayfair bill overturned by the Supreme court which resulted in these Facilitator laws we see now.  So big or small, if you purchase something from a internet Marketplace, you will be paying sales tax.  The Marketplace will collect the sales tax and remit it to your state for you.  

[lacemaker3]

---

If the buyer says the item is not as described, then they are entitled to a refund. If you don't agree to accept the return, then eBay may refund them and charge you for it, without requiring them to return the item. That's in the  eBay Money Back Guarantee. http://pages.ebay.com/help/policies/money-back-guarantee.html#description @sportsntechspot wrote:

---

@lacemaker3 wrote:The so-called casual seller scenario (in those states that allow this) is completely different from a sales tax exemption. It only means that the "casual seller" is not required to collect the tax, it doesn't mean the buyer doesn't have to pay it. Any time a buyer doesn't pay tax on a taxable purchase, for any reason, they are responsible to pay the use tax if they didn't pay the sales tax.

I didn't know "scenarios" gave taxpayers the right to avoid paying tax.  In sales tax law the terms used to avoid paying tax are either exemptions or exclusions.  Now if you're saying that the casual and isolated sales exemption is actually an exclusion and not an exemption, and that the purview of the exclusion does not extend to the scenario of a marketplace facilitator platform, I can reason with that. But I'd still have to ask, is that right answer?

---

You have missed the point. I highlighted it in red. 

There is no such thing as a "casual and isolated sales [tax] exemption".  Nor is there an "exclusion".  The tax is due and is required to be paid, whether the seller is a considered a "casual seller" in their own state or not. 

If you're asking whether the states were "right" to require Marketplace Facilitators to collect sales tax, I'm not going there. They have done it. Live with it. If you want to change it, then contact your state legislators, they're the only ones who can change it. But don't get your hopes up, because the states have to have income to pay for the services and infrastructure they provide for their residents, and for most states, the majority of their income comes from sales tax.

---

@sportsntechspot wrote:

---

---

@lacemaker3 wrote:

---

---

This can't be done. There is no "casual or isolated sales [tax] exemption" on eBay. And you, as a seller, should not be trying to facilitate tax evasion.

---

Again, there's a difference between tax avoidance and tax evasion. You can read up on the difference on Google. I'm only trying to help my customers commit the former (something everyone should do unless you like giving your money away to the government without having any obligation to do so).

---

This is not a voluntary tax, that buyers can either pay or "avoid" legally. This is a tax that buyers are (and have always been) responsible to pay. If they don't pay it, then they are tax evaders. 

I'm sorry if you don't agree, but I'm not going to argue about this. Your understanding is wrong, whether you agree with that or not.

[sportsntechspot]

The most quality answers I've received so far on this have been from @eleanor*rigby and @lacemaker3 so thank you guys and everyone else for your input. Interesting to see what a small sample of eBay users know about sales tax.

The OP poses a technical question that requires some background knowledge in tax to follow.  For one, there is a difference between economic nexus thresholds, marketplace facilitators, thresholds within exemptions, and exclusions.  Not everyone knows the differences, and that's okay, but they're important to understand to follow the discussion as to why eBay may or may not be legally allowed to turn the tax off for casual or isolated sales (something I'm actually still debating).

A common misconception I'm seeing on this thread is that since we now have new tax legislation on marketplace facilitators, exemption certificates are no longer allowed on marketplace facilitator platforms.  That's incorrect.  Exemption certificates are still very much valid in and out of marketplace facilitator platforms.

Many exemptions in sales tax have thresholds separate from the economic nexus thresholds recently enacted by many states.  One has nothing to do with the other.  For example, a typical threshold states use with service providers is that if taxable tangible personal property (TPP) is provided in conjunction with an exempt service, as long as the TPP represents 10 percent or less of the overall invoice, then the entire invoice including TPP is exempt from tax.  This is commonly known as the true object test. 

If a seller on eBay sells both services and TPP bundled together, and they make a sale into a state where the transaction qualifies exempt from tax under the true object test, they do not have to collect tax on that sale. 

As to what the correct answer is to the OP, it is still unanswered for me.

[mam98031]

---

@sportsntechspot wrote:

The most quality answers I've received so far on this have been from @eleanor*rigby and @lacemaker3 so thank you guys and everyone else for your input. Interesting to see what a small sample of eBay users know about sales tax.

The OP poses a technical question that requires some background knowledge in tax to follow.  For one, there is a difference between economic nexus thresholds, marketplace facilitators, thresholds within exemptions, and exclusions.  Not everyone knows the differences, and that's okay, but they're important to understand to follow the discussion as to why eBay may or may not be legally allowed to turn the tax off for casual or isolated sales (something I'm actually still debating).

A common misconception I'm seeing on this thread is that since we now have new tax legislation on marketplace facilitators, exemption certificates are no longer allowed on marketplace facilitator platforms.  That's incorrect.  Exemption certificates are still very much valid in and out of marketplace facilitator platforms.

Many exemptions in sales tax have thresholds separate from the economic nexus thresholds recently enacted by many states.  One has nothing to do with the other.  For example, a typical threshold states use with service providers is that if taxable tangible personal property (TPP) is provided in conjunction with an exempt service, as long as the TPP represents 10 percent or less of the overall invoice, then the entire invoice including TPP is exempt from tax.  This is commonly known as the true object test. 

If a seller on eBay sells both services and TPP bundled together, and they make a sale into a state where the transaction qualifies exempt from tax under the true object test, they do not have to collect tax on that sale. 

As to what the correct answer is to the OP, it is still unanswered for me.

---

Don't confuse an sales tax exemption certificate with being exempt from all sales tax for your state.  Exemption certificates can be filed on Ebay.  They have a procedure for these.  I have one filed.  I do not have to pay sales tax on stuff I purchase for resale or as part of what I sell, as well as shipping supplies.  But everything else I have to or I'm legally responsible to pay sales tax on.

If you have issues that some of the things Ebay is charging sales tax on are not in fact taxable in your state, then you need to take that up with your state.  Ebay does as directed by the laws in place.  

Something that all buyers can do to help is to make sure they have their full zip code set up in their account for their delivery addresses.  That enables the software used to charge the sales tax that is appropriate not only for your state, but your exact location.  For example if I don't have my full zip code on my delivery address I get charged 10% in taxes, but when I put my full zip code, I get charged 8.7% because that is the correct rate for exactly where I live within the state.

[sportsntechspot]

---

@gracieallen01 wrote:

---

---

Do you not know 'why' the Marketplace Facilitator tax was implemented?

---

Yes, but no one here is arguing about the legal obligation to pay use tax, nor was it something I brought up in the OP. That's fine if you want to talk about it, just seemed kind of like "look, squirrel!" moment to me

[mam98031]

---

@sportsntechspot wrote:

---

@gracieallen01 wrote:

---

---

Do you not know 'why' the Marketplace Facilitator tax was implemented?

---

Yes, but no one here is arguing about the legal obligation to pay use tax, nor was it something I brought up in the OP. That's fine if you want to talk about it, just seemed kind of like "look, squirrel!" moment to me

---

I think there is a lot you have misunderstood on this thread.