State Sales Tax and where it's leading ...

[mr_lincoln]

The state sales tax issue is only the beginning of taxes to come.  Why? Because there's still money on the table.  Just be glad our President is going after taxes from foreign shippers or it could be worse from a competitive standpoint.  While it took states a while to get their sales tax collection laws in place it may not take as long for them to get their income tax laws in place.

The immediate windfall for each participating state for Sales Tax is suddenly realizing sales tax on ALL internet transactions, meaning all those Sellers who dodged reporting internet sales or didn't have a Tax ID for wholesale purchasing and reporting will now have sales tax levied on their transactions.  Now, as long as they don't get a PayPal or future eBay Managed Payments 1099K the government will be hard pressed to collect tax on their income from online sales ... THIS is where the future tax push is heading, and don't think anyone in state government hasn't thought this far ahead.

At some point the venues will be tasked by the state and or federal government to generate 1099Ks for ALL members of the venue and there will be a minimum dollar threshold and my guess is it will be well below the current $ 20,000 on PayPal.  And why do I think this?  Its because the states will do the math after a couple venue sales tax reporting cycles and compare that with their registered Tax ID citizens and see what I am guessing to be a rather large difference.  All they have to do is some simple math to see that they are getting far and away more sales tax on what their Tax ID holders are reporting in actual sales ... this will gave them a general idea of the dollar amount many people are NOT reporting anything for either Sales Tax or Income tax purposes.  In our state it means another 3.07% on the table for Income tax not to mention the Federal Government's cut on that increased income tax.

[lacemaker3]

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@mr_lincoln wrote:

Now, based on the explanation posted above (yours) ... there are 5 states that do not have a state sales tax ... if I purchase form a Seller in one of those states I am not charged sales tax because they don't have any right? ... but am I suddenly charged a "Use" tax based on MY state's sales tax rate?  I just don't think that's how it works based on my conversations with my state rep.

Assuming that you live in Pennsylvania, where your items are located: no, that is not correct.

If you purchase an item on eBay (or any Marketplace Facilitator website), you will be charged PA sales tax on that purchase. No matter where the seller is located, even if it is in one of the 5 states that have no sales tax. You would not owe any Use Tax on that purchase because Use Tax is only owed on transactions th at were not charged sales tax at the time of purchase (or in some states, on items that were charged less sales tax than you owe in Use Tax).

However, if you are able to purchase something without paying sales tax, and that item is taxable in PA, then you owe Use Tax on it.

....  In the case of the collected Sales tax and in conversation with my States Tax department last week I was informed that I will no longer have to record the IN state sales tax shipments since the internet venue was collecting and remitting it.  ...

Assuming you mean in-state sales tax (rather than INDIANA sales tax), this is correct. You will no longer have to record the in-state sales tax for shipments that are being delivered to your own state of Pennsylvania,because eBay is collecting and remitting it.

....  I further understood that the venue would also be collecting and remitting sales tax on my out of state sales shipments (which is in line with the last two paragraphs of the above reply only it would apply to my state not CA) and the tax rate would be based on my state not the addressee's state.  In other words, the tax "rate" is determined by the state where the item originates not where it will ship to.  If the State Rep got that wrong then you are right, I am not clear on that point. 

This is not quite correct. The internet venue (eBay) will also be collecting and remitting sales on your out-of-state sales shipments, but the tax is charged at the sales tax rate for the shipping address, and it is remitted to the state where the item is being delivered. Pennsylvania does not get any sales tax for items that are being delivered to another state.

This only applies for items being delivered to states with a Marketplace Facilitator law, where eBay is required to collect and remit the sales tax. So it does not apply to:

• The five states that don't have a sales tax. Residents of these states don't have to pay any sales tax.
• The 8 states that eBay is not currently collecting sales tax for. Residents of these states will owe Use Tax  on their taxable purchases. (Some of these states collect a default amount of use tax from all residents who file a state income tax form, so they have a much higher rate of compliance that states which relied on voluntary compliance.)

[gracieallen01]

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@mr_lincoln wrote:

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@gracieallen01 wrote:

With all due respect, you may have an incorrect perception, though I may be mistaken.

Yes, ebay is collecting a tax, however, it isn't a sales tax - even though it is a tax created from a sale.  ebay  is collecting a USE tax from the buyer that purchases the item, no matter where they live - according to the amounts and criteria of the buyer's home state.  This is to close the loophole for the buyer that avoids paying tax locally by purchasing online and doesn't report it on their state's income tax forms as a "USE TAX".

From cdfta.ca.gov - "Generally, if sales tax would apply when you buy physical merchandise in California, use tax applies when you make a similar purchase without tax from a business located outside the state."

This does not preclude the seller being responsible for collecting sales tax for the state in which they live and have their business.

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Thanks and I understand Use tax, a number of years ago it was voluntary to report and I did once.  In the case of the collected Sales tax and in conversation with my States Tax department last week I was informed that I will no longer have to record the IN state sales tax shipments since the internet venue was collecting and remitting it.  I further understood that the venue would also be collecting and remitting sales tax on my out of state sales shipments (which is in line with the last two paragraphs of the above reply only it would apply to my state not CA) and the tax rate would be based on my state not the addressee's state.  In other words, the tax "rate" is determined by the state where the item originates not where it will ship to.  If the State Rep got that wrong then you are right, I am not clear on that point. 

Now, based on the explanation posted above (yours) ... there are 5 states that do not have a state sales tax ... if I purchase form a Seller in one of those states I am not charged sales tax because they don't have any right? ... but am I suddenly charged a "Use" tax based on MY state's sales tax rate?  I just don't think that's how it works based on my conversations with my state rep.

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If you go to a state that doesn't have a sales tax, no you don't pay sales tax on items that you would pay tax on, if you purchased them locally.  However, you may still be liable for Use Tax when you bring them home - I believe it depends on the state.

The Marketplace Facilitator tax is to charge YOU the USE TAX on out-of-state purchases, if YOU live in a state with sales tax for local purchases.  A seller in a state with no sales tax has nothing to do with it, one way or another - they don't charge sales tax on what they sell and they don't pay their state a collected tax for their sales.

[gracieallen01]

Your interpretation may well be correct.  After all, I was quoting the State of California and their terminology may not be suited for all states.  Thank you for the post.

[lacemaker3]

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@gracieallen01 wrote:

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If you go to a state that doesn't have a sales tax, no you don't pay sales tax on items that you would pay tax on, if you purchased them locally.  However, you may still be liable for Use Tax when you bring them home - I believe it depends on the state.

The Marketplace Facilitator tax is to charge YOU the USE TAX on out-of-state purchases, if YOU live in a state with sales tax for local purchases.  A seller in a state with no sales tax has nothing to do with it, one way or another - they don't charge sales tax on what they sell and they don't pay their state a collected tax for their sales.

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What eBay is charging is not a Use Tax, because Use Tax is owed on taxable purchases whenever Sales Tax was not collected at the time of sale. (Or in some states, a Use Tax is also owed if the Sales Tax that was collected was less than it would have been in the buyer's resident state, in which case the buyer owes the difference as Use Tax.)

eBay is collecting the Sales Tax at the time of the sale, which is the definition of a Sales Tax, so they are correctly calling it a Sales Tax.

Yes, it is "in place of" the Use Tax, because each transaction that Sales Tax is collected for, is one transaction that Use Tax is not owed on.

I have read several of the legislations that were passed by various states to enact their Marketplace Facilitator Sales Tax, and as far as I can recall, they all called it Sales Tax.

[csbbct]

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@mr_lincoln wrote:

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@gracieallen01 wrote:

With all due respect, you may have an incorrect perception, though I may be mistaken.

Yes, ebay is collecting a tax, however, it isn't a sales tax - even though it is a tax created from a sale.  ebay  is collecting a USE tax from the buyer that purchases the item, no matter where they live - according to the amounts and criteria of the buyer's home state.  This is to close the loophole for the buyer that avoids paying tax locally by purchasing online and doesn't report it on their state's income tax forms as a "USE TAX".

From cdfta.ca.gov - "Generally, if sales tax would apply when you buy physical merchandise in California, use tax applies when you make a similar purchase without tax from a business located outside the state."

This does not preclude the seller being responsible for collecting sales tax for the state in which they live and have their business.

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In the case of the collected Sales tax and in conversation with my States Tax department last week I was informed that I will no longer have to record the IN state sales tax shipments since the internet venue was collecting and remitting it. 

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@mr_lincoln   You might want to double-check on the reporting requirements for your state.  In CT, even though ALL my sales are on eBay, I must still file my sales tax return on-time where I will list my "Gross Receipts from Sales of Goods" MINUS "Sales for resale or sales through a registered marketplace facilitator - sales of goods" to come up with the total sales where I must remit the tax directly to the state.  eBay didn't start collecting for CT until 4/1/19, so this year I'll have the first three months of the year to report sales tax I collected for CT residents, but moving forward I will have no sales tax to remit, but I still MUST report as long as I continue to retain my Sales Tax ID.  My state is not requiring me to differentiate between Marketplace Facilitator sales in CT vs not in CT (they only want to know that the Marketplace Facilitator handled tax collection for all those sales), but every state could be different.  

[gracieallen01]

With all due respect, I'm not always completely sure just what ebay is charging, considering the meaning of the Marketplace Facilitator Act and the nuances that seem to surface in some of the threads.  And, I certainly don't see why it is so convoluted in some of the explanations.

[dtexley3]

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@mr_lincoln wrote:

@lacemaker3   So are you saying that if I am a Buyer and have a shipping address in one of the 5 states that has NO sales tax that I will NEVER have to pay State Sales tax on an internet purchase? 

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This is correct. I NEVER have to pay sales tax on ANYTHING I purchase.  hehehe.

[mr_lincoln]

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@csbbct wrote:

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@mr_lincoln wrote:

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@gracieallen01 wrote:

With all due respect, you may have an incorrect perception, though I may be mistaken.

Yes, ebay is collecting a tax, however, it isn't a sales tax - even though it is a tax created from a sale.  ebay  is collecting a USE tax from the buyer that purchases the item, no matter where they live - according to the amounts and criteria of the buyer's home state.  This is to close the loophole for the buyer that avoids paying tax locally by purchasing online and doesn't report it on their state's income tax forms as a "USE TAX".

From cdfta.ca.gov - "Generally, if sales tax would apply when you buy physical merchandise in California, use tax applies when you make a similar purchase without tax from a business located outside the state."

This does not preclude the seller being responsible for collecting sales tax for the state in which they live and have their business.

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In the case of the collected Sales tax and in conversation with my States Tax department last week I was informed that I will no longer have to record the IN state sales tax shipments since the internet venue was collecting and remitting it. 

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@mr_lincoln   You might want to double-check on the reporting requirements for your state.  In CT, even though ALL my sales are on eBay, I must still file my sales tax return on-time where I will list my "Gross Receipts from Sales of Goods" MINUS "Sales for resale or sales through a registered marketplace facilitator - sales of goods" to come up with the total sales where I must remit the tax directly to the state.  eBay didn't start collecting for CT until 4/1/19, so this year I'll have the first three months of the year to report sales tax I collected for CT residents, but moving forward I will have no sales tax to remit, but I still MUST report as long as I continue to retain my Sales Tax ID.  My state is not requiring me to differentiate between Marketplace Facilitator sales in CT vs not in CT (they only want to know that the Marketplace Facilitator handled tax collection for all those sales), but every state could be different.  

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Yes, I actually called the state and asked  ... Tax ID holders have to report and remit online.  Sellers without the Tax ID can do it as part of their personal tax return.  Sales volume dictates reporting and remitting frequency.  I originally thought (from reading) that we would still collect, report and remit the "IN" state shipment portion and the venue would take care of ALL out of state shipments.  I don't think that was made clear early on.  So when I spoke to the state they said Tax ID holders still have to report like normal EXCEPT we put NO online sales amounts on the form for "IN" state sales and they further state the venue collects and pays that.  So we would only be reporting and remitting tax payments on sales NOT completed online BUT still shipped within the state (or were sold a an event or b&m store).

[lacemaker3]

@lacemaker3 wrote:

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@gracieallen01 wrote:

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If you go to a state that doesn't have a sales tax, no you don't pay sales tax on items that you would pay tax on, if you purchased them locally.  However, you may still be liable for Use Tax when you bring them home - I believe it depends on the state.

The Marketplace Facilitator tax is to charge YOU the USE TAX on out-of-state purchases, if YOU live in a state with sales tax for local purchases.  A seller in a state with no sales tax has nothing to do with it, one way or another - they don't charge sales tax on what they sell and they don't pay their state a collected tax for their sales.

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What eBay is charging is not a Use Tax, because Use Tax is owed on taxable purchases whenever Sales Tax was not collected at the time of sale. (Or in some states, a Use Tax is also owed if the Sales Tax that was collected was less than it would have been in the buyer's resident state, in which case the buyer owes the difference as Use Tax.)

eBay is collecting the Sales Tax at the time of the sale, which is the definition of a Sales Tax, so they are correctly calling it a Sales Tax.

Yes, it is "in place of" the Use Tax, because each transaction that Sales Tax is collected for, is one transaction that Use Tax is not owed on.

I have read several of the legislations that were passed by various states to enact their Marketplace Facilitator Sales Tax, and as far as I can recall, they all called it Sales Tax.

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@gracieallen01 wrote:

With all due respect, I'm not always completely sure just what ebay is charging, considering the meaning of the Marketplace Facilitator Act and the nuances that seem to surface in some of the threads.  And, I certainly don't see why it is so convoluted in some of the explanations.

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With all due respect, the definitions are perfectly clear.

Sales Tax: is a tax that is collected on taxable purchases at the point of sale.

Use Tax: is a tax that is owed on taxable purchases if sales tax was not collected at the point of sale.

[membersinceaug2001]

I was thinking this may be why ebay is going to MP, so sellers are no longer hiding out via Paypal.  Maybe the gov't even put them up to this?

[the*dog*ate*my*tablecloth]

Yeah they’re not that clear. Avalara and the law refer to taxes collected across state lines as “seller use tax”. 

https://www.avalara.com/us/en/blog/2019/04/what-businesses-need-to-know-about-sales-tax-consumer-use...

There are also some State sites that refer to cross border sales as use taxes.

[the*dog*ate*my*tablecloth]

Both MP and Paypal will be using the same 1099 so I’m unclear on what you mean by hiding out or why the government would encourage eBay to change their money processor? I don’t think that would even be legal, it would be restraint of trade.

[mr_lincoln]

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@dtexley3 wrote:

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@mr_lincoln wrote:

@lacemaker3   So are you saying that if I am a Buyer and have a shipping address in one of the 5 states that has NO sales tax that I will NEVER have to pay State Sales tax on an internet purchase? 

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This is correct. I NEVER have to pay sales tax on ANYTHING I purchase.  hehehe.

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Good for YOU!  And all those like you! 

[gracieallen01]

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@lacemaker3 wrote:

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@gracieallen01 wrote:

With all due respect, I'm not always completely sure just what ebay is charging, considering the meaning of the Marketplace Facilitator Act and the nuances that seem to surface in some of the threads.  And, I certainly don't see why it is so convoluted in some of the explanations.

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With all due respect, the definitions are perfectly clear.

Sales Tax: is a tax that is collected on taxable purchases at the point of sale.

Use Tax: is a tax that is owed on taxable purchases if sales tax was not collected at the point of sale.

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And, what is ebay selling?

[mr_lincoln]

Update: with regard to the discussions on this thread that shifted to the Sales tax collection topic it seems like today it was confirmed on the Weekly Chat that the Buyer's state dictates the amount of Sales tax that will be charged on a purchase not the Sellers ... if you happen to read that on the chat just filter through the disclaimers made by eBay on advice on taxes, etc. ... the comments were not necessary since the questions )being on eBay's Weekly Chat) we about what eBay charges and processes for Sales tax purposes ...