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.

[lacemaker3]

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@sportsntechspot wrote:

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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.

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I don't tknow how you reached that conclusion. It wasn't based on any responses on this thread. All of the regular responders that have tried to help you with your misunderstanding are well aware of this.

Of course exemption certificates are valid. Nobody has said otherwise. 

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@sportsntechspot wrote:

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

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You asked:

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@sportsntechspot wrote:

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

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The answer is no. Whether you accept that or not, it is no.

Sales tax is due, and is charged, based on the taxable status of the item and the shipping address that the buyer is having the item shipped to. It has nothing to do with the seller, the seller's status, the seller's location, or the amount of sales the seller makes.

With one single exception, which does not apply to you, unless you have had sales to Minnesota that were not made on eBay but which exceeded $10,000 in the last 12 months. In that case, you are required to collect and remit sales tax for sales to Minnesota, and eBay won't do it for you automatically. Read the link for more details.

[gracieallen01]

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@sportsntechspot wrote:

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@gracieallen01 wrote:

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

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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

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Personally, I think the 'look, squirrel' moment is yours.  You don't seem to understand, or are ignoring, that the tax is on the buyer (where applicable) and not the seller.  Any threshold obligation/benefit here is on, or for, the platform.

[sportsntechspot · Accepted solution]

@lacemaker3 wrote:

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@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.

This is a good point you're making here the more I think about it and really addresses the crux of the OP.  Is the casual sales exemption only meant to alleviate the seller's burden of collecting and reporting tax?  Or does the exemption carry to the buyer as well eliminating any use tax liability they might have on the purchase?

I lean towards agreeing with you on this one that it's only meant to alleviate the seller's reporting obligations. The customer would still have the use tax liability.  In that regard, I can understand why you wouldn't consider it to be either an exemption or an exclusion.

Funny to think the taxing authority has reach to assess you for not paying tax on that coffee table you bought at your neighbor's garage sale.

I think this answers it for me. Thanks.

[mam98031]

This is a good point you're making here the more I think about it and really addresses the crux of the OP.  Is the casual sales exemption only meant to alleviate the seller's burden of collecting and reporting tax?  Or does the exemption carry to the buyer as well eliminating any use tax liability they might have on the purchase?

Clearly you are missing what a Facilitator Law is that is being applied to marketplaces like Ebay, Amazon, Walmart, Etsy, Sears, etc.  It really isn't complicated at all.

In an effort to have the maximum effect and the widest range of tax collection possible.  Many states passed a Facilitator Law.  Facilitators are Marketplaces like Ebay.  The facilitator laws ENABLE the states to BYPASS the minimum sales thresholds laws already in place in these states.  Instead of trying to get the sellers to try and collect sales tax from buyers in which they ship stuff to inside of these states and get them to remit the tax to the individual states.  They are going after the Marketplaces.

By going after the Marketplaces with the Facilitator law, the individual sellers sales levels into any given state no longer matters.  It isn't considered at all.  Instead the ENTIRE MARKETPLACE's sales into any give state is what is used.  And with a site the size of Ebay, that would mean that they would always exceed any minimum threshold required by any of the states, therefore sales tax is due on all sells from any seller into a state that has a Facilitator Law.

Individual Sellers are NOT required to collect sales tax in any state that has a Facilitator Law.  Ebay will be doing that for them.  Even if that seller only sells $1 into that state.

[7606dennis]

"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.)"

I believe some organization may be exempt from paying sales tax as buyers.  However this would depend upon their their state's laws.  I'm not sure that they would be exempt from collecting sales tax from those buying from them.

With regard to what type of documentation they would need to furnish eBay to claim an exemption as a buyer, I'm not sure.  I suppose it would depend upon the type of organization and the laws of the state involved.

[sportsntechspot]

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@mam98031 wrote:

The facilitator laws ENABLE the states to BYPASS the minimum sales thresholds laws already in place in these states. 

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You're right.  I was never arguing that. You can re-read this thread if you'd like to understand more of my specific question and the pertinent discussion around it.

[mam98031]

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@sportsntechspot wrote:

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@mam98031 wrote:

The facilitator laws ENABLE the states to BYPASS the minimum sales thresholds laws already in place in these states. 

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You're right.  I was never arguing that. You can re-read this thread if you'd like to understand more of my specific question and the pertinent discussion around it.

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Thank you.  I've read the thread.  You still have some misunderstandings but somehow feel you solved your own questions at the top of the thread.  Posters have tried to explain some very valid points to you.  In time I'm sure it will all make sense.

[sportsntechspot]

Credit goes to @lacemaker3 for solving the question I had.

[mam98031]

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@sportsntechspot wrote:

Credit goes to @lacemaker3 for solving the question I had.

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You gave the credit to yourself.  But yes, I agree.  Lace is a very knowledgeable poster.

[sportsntechspot]

By credit, I mean I'm openly acknowledging @lacemaker3 was the one that answered my question. I only figured out just now that eBay has a point system that awards posters credit where in order to award someone else a point you need to accept a post generated by them as the solution. He/she can have the point I inadvertently awarded myself. I don't care

[tidbits4u2]

Yeah well how about the fact that we are now paying paypal fee's on the taxed dollars, is that legal. So your okay with that, how about if all the stores in the world started charging a fee on the tax amount of your purchase.

[tidbits4u2]

NO, I dont want to pay paypal fee's on the taxed dollar amount. I want paypal to stop breaking the law

[mam98031]

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@tidbits4u2 wrote:

NO, I dont want to pay paypal fee's on the taxed dollar amount. I want paypal to stop breaking the law

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They are NOT breaking the law.  You don't like it, I don't like it and I'm sure there are lots of people out there that don't like it, but that does NOT make it illegal.

All money processors charge their fees based on the amount of money processed.

[partalot]

PayPal don't charge any fee for processing the tax amount. You can easily calculate it for any transaction in your history.

[partalot]

As the tax liability is eBay's, PayPal would have no right to charge the seller any fees for the tax amount. They know that and that's why it simply doesn't work like that.