What we Need as Members to Enhance the Sales Tax Collection process by Ebay.

[mam98031]

In an effort to assist Ebay in seeing and knowing the issues we see with Ebay collecting sales tax for certain states I thought we could have a discussion about it so that Ebay knows our thoughts and concerns.

This is something Ebay has to do, so that isn’t the issue.  We may not like it, but they still have to adhere to the new laws.  Sellers and some buyers have specific needs that aren’t being met.  These needs have to be addressed as they are important factors.

Ebay is very much aware that there is room for improvement and I believe they are actively working on improving the process.  But just in case they haven’t thought of some issues, this discussion may help.

Here are some of the things I see in no specific order.

1. We need a way to submit our Resale Certificates so that Ebay has them on file.
2. We need a way to flag a purchase on Ebay to be for Resale so that we are not charged Sales Tax.
3. We need a report that shows by state what taxes were collected on our behalf. Some states require us to report this information.  Some of us have to report the full sale amount as a retail sale and then we can take a deduction for that sale because Ebay has taken the sales tax from the customer and remitted it to the appropriate state.  This report needs to give us the ability to get it by date range.  Some of us report to our states monthly, some quarterly and some yearly.  So we need flexibility in the report.

What do you see as an improvement or enhancement specific to Ebay collecting sales tax in various states?

[slippinjimmy]

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@blackranda2 wrote:

So maybe what I should have asked is if someone from the US buys a product while physically in Canada and then takes the product back to their home state, are they charged state sales tax then? Or are they only charged customs and import fees if the value is over their limit. If they aren't charged state sales tax in that case then why are they charged when buying online and the item is shipped to them. See what I m getting at here?

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In this case the "buyer" is supposed to declare the purchase on their State Tax Return and pay the Use (Sales) Tax at that time. because there is no easy way to track these purchases it has been a voluntary disclosure system. Compliance is almost non-existent and that is why the States have had to come up with ways to collect these taxes which have ALWAYS been payable.

[slippinjimmy]

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@mam98031 wrote:

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@blackranda2 wrote:

Really? Then why did the tax rate table using her address say it it should have been 5.37 in CAD which is 8.6% not 6.24 in CAD which is 10%.  CAD means Canadian dollars. Same as USD means United States dollars.  I list on ebay.ca so my listings are in Canadians dollars and then PayPal converts the payment to the correct currency when the buyer pays. My buyer also says her sales tax rate is 8.6%.  I think you may be wrong about King County being 10.1%?

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Like many states, the SS varies across the state.  Parts of King Count are as your customer stated and parts are not.  In the higher population, the higher the sales tax is in that county.

https://dor.wa.gov/sites/default/files/legacy/Docs/forms/ExcsTx/LocSalUseTx/LocalSlsUseFlyer_19_Q2_a...

I don't know if there is some agreement with the various states that Ebay collects money for to charge one rate for the entire state, but I suspect that may be the case.  However I do not have anything that verifies that.  It would make sense if there were so that it was not an undue burden on the company collecting the sales tax for all these purchases.

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For Washington State eBay uses the lookup table provided by WA to calculate the specific local tax rates based on the shipping location. I don't know for a fact but I assume that all the States with a MF system will require the same type of calculation (ie: not a flat rate for the entire State).

[mam98031]

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@blackranda2 wrote:

Isn't it actually an internet state sales tax? You didn't answer as to if the sales tax is charged or not if the buyer brings the item across the border themselves physically. I am going to search online and see if I can find an answer to this myself. That in a nutshell is where the dilemma is.

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I have answered your questions.  You may not like or agree with my answers, but they have been answered.  There isn't much else I can help you with.

BTW, it is State Sales Tax, it is NOT an internet sales tax.  The US has not passed any laws for internet sales taxes.  If you know of such a law, please provide a link.

[slippinjimmy]

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@blackranda2 wrote:

Hmm. I see. I guess I am having a hard time wrapping my head around the whole idea of my sales from Canada having US state sales tax  applied. Lets take a look at this from another angle using a make believe scenario.

If a buyer from the United States travels to lets say British Columbia, Canada and purchases something from a store while there, they are charged the 7% Provincial sales tax which is then remitted by the store to the applicable place in Canada not to the US government, right? So when buyer from the US goes to a Canadian listing in British Columbia on the internet are they not "virtually" travelling to British Columbia? If so then shouldn't the same 7% provincial sales tax be the sales tax charged? And shouldn't it be remitted to the Canadian government not the US government? And vice versa if a Canadian buyer goes to a US state either in reality or virtually shouldn't the same applicable sales tax rules apply? If I am missing something here please explain what it is.

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If you (In Canada) purchase an item from the USA and have it shipped to Canada you are subject to GST/HST/PST if the declared value exceeds CA$20 (yes I know that collections are often not done even if the value exceeds the $20 free limit). These taxes are collected by Canada Customs.

In the USA the Federal Government (US Customs) does not and can not collect State Taxes because unlike Canada there is no National Sales Tax system.

Another tax thing you may not be aware of, eBay is now collecting GST for shipments sent to Australia (basically it's a MF rule that applies to all of Australia) and eBay are collecting it on all sales made to Australia regardless of which eBay site the transaction occurred (.com, .ca etc.)

[blackranda2]

Yes I was aware that eBay is now collecting GST for buyers from Australia.  Recently I have been charged duty, both GST/PST and a 9.95 handling fee from Canada Post very often on my purchases from the US if they are over the 20.00 limit.  It really hurts and puts the cost of the item(s) much too high to to be feasible when you consider the exchange rate from USD to CAD and the shipping cost which is in reality part of what the item is worth. So to prevent this I just make sure I don't purchase anything over 20.00 value in Canadian dollars. We all do what we have to do.

[blackranda2]

My mistake.  When I type internet sales tax in my browser and search the results come up as the state sales tax.  Here is a link as an example. The headline says: Internet sales tax collection laws now gradually taking effect.  So I guess I misinterpreted this. 

https://www.usatoday.com/story/money/business/2018/12/23/sales-tax-online-retailers-begin-collect-in...

Thank you for all your answers and your patience with me.  I do somewhat see things a bit differently but unfortunately  I still don't completely understand the reasoning behind it especially taxing on the shipping cost. Perhaps I never will. Such is life.

[blackranda2]

Again my mistake regarding thinking it wa an internet sales tax. As I mentioned in my reply to another member when you do a search for internet sales tax the state sales taxes come up in the search so I guess I misunderstood. Here is another site which calls it that.

https://www.google.com/search?rlz=1C1GCEA_enCA777CA777&q=list+of+states+with+internet+sales+tax+2019...

Yes shipping is included in the total. On the tax rate table for Department of Revenue for Washington it said the rate for my buyer's address should be 8.6%.  So I used the total of the order including the shipping cost and calculated the tax.  But the actual tax she was charged was 10%. It doesn't  make any difference if it is done in Canadian dollars or US dollars a percentage is a percentage. 

I thank you as well for taking the time to respond to me. I sincerely hope some of the misconceptions about this get cleared up in the future.  In the meantime I have a decision to make which I am definitely not looking forward to.

[blackranda2]

I have read your reply carefully several times and am wondering if part of the reason I wasn't understanding is because perhaps I am confusing state sales tax  with the dollar value of items which US citizens can import into the United States without paying tax. Not sure if I have this right now or not but it sounds like when a US citizen purchases something outside of their state and/or country they are supposed to report it and pay the (use) state sales tax? And they haven't been doing that? Or am I totally off base on this as well? Wow how confusing!

[the*dog*ate*my*tablecloth]

Buyers were supposed to be paying use tax on their State tax returns on everything they bought from outside the State if their State has a sales tax. Not all do.

This has nothing to do with import duty which has always had a very high exemption in the US, unlike other countries like Canada.

[lacemaker3]

@blackranda2, maybe this will help you understand this. I'm know you are already familiar with some of this, but perhaps not with all of it, so I will start by reviewing the basics.

I know you are very familiar with what a sales tax is: it is a tax on items (or services) that is imposed as a percentage of the sub-total, by the government, either local (ie state or province) or federal government. But there are some differences between the USA and Canada.

In the USA, sales tax is imposed by the local governments. Most (not all) states have a sales tax, and local governments (county, city, etc.) can also impose an additional sales tax. If there are additional local taxes, they are all added together and shown as a single percentage line item on the receipt.  So far, this is very similar to the HST/GST/PST/QST that is charged in Canada, except that Canada has a federal sales tax that is also included. 

In the USA, states also charge a use tax. The is equivalent to a sales tax (and the same percentage rate) but is charged on any purchases that would have been taxable, but for some reason (any reason) the tax wasn't paid. It may not have been charged because the purchase was ordered from another state, or because the seller wasn't registered to collect sales tax, or because the person bought the item while they were outside their own state. If they paid tax on the purchase, but the rate was lower than the rate in their state, then they are supposed to report and pay the difference as use tax to their own state. 

The use tax has been in the laws for many years, but compliance with it has always been poor. In some states, residents are supposed to file and pay the use tax  voluntarily, sometimes with their state income tax, but this rarely happened. As far as I know (can remember), Canada doesn't have a use tax.

With the vast increase in online commerce, the amount of use tax that was not being paid was increasing astronomically, and the states wanted to do something to collect this tax that was owed but not being paid. So, recently, they have been passing laws that require Remote Sellers and Marketplace Facilitators to collect sales tax. They can require marketplaces like eBay, Amazon, Wayfair, and so on to collect the sales tax, even though they couldn't require their own citizens to pay the use tax. 

So, that's why the sales tax is collected based on the shipping address that the product is being sent to.

Having been involved in some of the trouble-shooting when this was first implemented, I know that eBay is charging the sales tax rate that applies to the zip code of the shipping address. There were a number of cases where buyers complained the tax rate was wrong, but it turned out that they were not aware of the actual tax rate that applied to their address. Perhaps they were used to shopping over the country  line, with a lower rate. In some cases, different locations within the same zip code had different tax rates, which is virtually impossible for a layman to figure out, but eBay worked with state officials to get it right.

Also, eBay is charging for taxable items based on the category  they are listed in, or the first category if they are in two. For example, Washington doesn't tax clothing, but if a sports jersey is listed as a collectible it is taxable. If the same jersey is listed in clothing, or in clothing first and in collectibles second, then it is not taxable.

As far as I know, Canada doesn't have a use tax on tangible purchases, so they don't have the same issue of not being able to collect taxes that are owed, but not enforceable. However, Canada does have a tax (similar to use tax, but called a sales tax) which Canadians are supposed to pay on digital services they receive. According to this article, the compliance rate with this is very low (like use tax).

https://www.cpacanada.ca/en/news/canada/2018-09-13-tax-on-digital-services

Also, it appears that Quebec has passed a law that requires remote sellers (using the USA definition) to register and collect QST if they have sales over CAD$30,000 that are delivered to Quebec. This applies from Jan 1, 2019 (for sellers outside Canada) and from Sep 1, 2019 (for sellers inside Canada but not in Quebec). If you're interested, here's more info:

https://www.ey.com/Publication/vwLUAssets/Alert:_Canada_-_Quebec_announces_QST_and_e-commerce_measur...

[blackranda2]

Thank for sending the links. I did check them out. Most of the information I was familiar with but I wasn't in the loop at all about the US use tax.  I had no idea there was such a thing.  It is a bit clearer to me now.

I also want to clarify that I do understand that by law as a marketplace facilitator eBay has to abide by it and they are trying to make the best of it. This has to be overwhelming for them. Like a bad dream which could spiral into a full-fledged nightmare trying to keep all the different state taxes and sub taxes straight.  I also think I understand that since they are the ones collecting the tax the threshold limits for having to charge the tax  have to be thrown right out window since they (eBay) will be over the threshold limits.  I know this has been said numerous times before but I think it is going to crush the small sellers on eBay.   They make up the backbone of what eBay is or at least was.  Millions of little things add up to big dollar amounts.  Many of the small sellers are not  making a lot of money from selling on eBay.   Some are there mostly because they enjoy it. And in my opinion they are actually helping their own local economy in some ways. They have to buy shipping supplies such packing materials, ink to print their shipping labels or purchase shipping at their local Post Office pens, pencils paper etc to do their bookwork or even sometimes to pay a local accountant. Another biggie is the cost of gas to take the packages to the Post Office.  And these are all taxed at the local level.  I can go on and on about the things I have to buy  to sell online but you get my gist.  I for one do not usually purchase these things online. I buy them locally as I need them.  And also don't forget I pay income tax and Canada Pension on my sales as well. So the question is: Am I hurting the local economy by selling online? To me the answer is no. I am helping it.  Time will tell I guess as to what effect this will have on small sellers. It is not so much the use tax on the item which bothers me as much as the use tax on shipping costs. I just can't figure that out. Am I overreacting? Probably but the decision for me is... Do I continue doing something which I don't agree with completely or do I not do it?  Something I need to figure out myself for the future.  Thank you again for everyone's replies. They were very much appreciated and will help with my decision. 

[the*dog*ate*my*tablecloth]

If your concern is hurting local sales that’s exactly why this interstate tax was created. Small local shops had to charge sales tax so they lost a lot of local sales to the internet where things WERE tax free.

Now it’s a level playing field. People will pay sales tax whether they buy locally or online. Much more fair for local businesses 

[blackranda2]

Sort of a level playing field except for the tax on shipping. If someone buys something locally most of the time unless it is a large item they just take the purchase home with them so there is no sales tax for shipping.  I am not concerned about small online sellers hurting the local economy especially if they are selling a vintage item that isn't often available in a local store. I just wanted to point out that small online sellers can help the local economy with the supplies they need to purchase to sell online.  If these small online sellers aren't selling online there would be no need for them to purchase these things and I am betting without the extra dollars they make selling online they would also be purchasing less of the what I will call non essential food products such as snacks, pizza and even going out to restaurant or for a beer because there would be no extra money to do this with.  I could be wrong but I personally don't think the amount of tax collected from small online sellers is going to be much more if any more than the extra they spend locally because they have money from their online sales to spend . An average income person  can only spend what they have.

[the*dog*ate*my*tablecloth]

Many people have been spending thousands a year on the internet. If they now choose to buy locally (or online and now actually pay the use tax they used to skip) that's a lot of sales tax that will be captured by the States.

Don't get me wrong, I'm an online seller, but you have to look at things from both sides. I chose to sell easily shippable vintage collectibles. I'm not so worried about losing my market.

[blackranda2]

I usually try to see things from both sides.  I can see how perhaps buying online without paying taxes could have been cheaper even with the shipping costs in the USA because your domestic shipping costs are much less expensive than in Canada. With the added taxes and shipping cost it likely won't be now. Yes people may decide to shop locally instead if they can buy what they want locally.  And if the local shops don't jack up their prices now that they have an edge. If people do switch to buying more locally the postal service is going to take a big hit though.  So it will help in some ways and hurt in others. The idea may have been to balance the scales for local business as you said before but I think it was more to get the taxes.  Until it was explained to me yesterday I wasn't aware of your use tax so that has made some difference in my outlook on the situation. The use tax actually amazes me but it is a law and since it wasn't being paid voluntarily it is now time to pay the piper.  I really don't think the tax is going to make much difference to me as a buyer only as seller or to most Canadian buyers.  I don't buy much online unless it is something I can't get locally because even if the price was cheaper without tax the cost of shipping took care of that in big hurry.  Our low import value and higher domestic shipping costs already minimize our online shopping activity. This low import value used to irritate me but now I can see why our government set it up that way.  Smart move on their part. What will be will be. All we can do is wait and see how this plays out. That will be interesting watch if nothing else