Why Can't eBay Just Separate the Taxes from the Sale?

[bubbles1234567]

Correct me if I am wrong, but as things stand, sellers pay the PayPal fees on the total amount of the sale (including eBay's collected tax) when it should just be the total sale MINUS taxes that eBay should siphon off to its own tax fund account or something. Meaning, sellers are paying additional PayPal fees on "taxes" that are never theirs to collect in the first place.

I had a buyer message me that they were confused why I collected an additional $11 in tax from them when the item was worth $139 with free shipping. As if I am causing the deception. While I explained the confusion away, it's kind of annoying to (a) know that I am paying PayPal fees on the total amount that I should not and (b) eBay is not just siphoning off the taxes to its own systems instead of throwing it on PayPal and then deducting it from there.

[luckythewinner]

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@bubbles1234567 wrote:

Correct me if I am wrong, but as things stand, sellers pay the PayPal fees on the total amount of the sale (including eBay's collected tax) when it should just be the total sale MINUS taxes that eBay should siphon off to its own tax fund account or something.

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The buyer pays PayPal.

PayPal charges a fee on the total collected.

PayPal sends the sales tax amount back to eBay. 

If you want the sales tax portion to have zero fees, you need to talk to PayPal, not eBay.

[vntg*salad]

Lets hope that Ebay managed payments will take that head scratching of paypal and the tax thing away...a little at least

[bubbles1234567]

My point is, here's how your order should work:
The buyer pays PayPal.
PayPal sends the sales tax amount back to eBay.
PayPal charges a fee on the gross total collected.

This is the gross total that I sold my item for and it makes logical sense for me to pay PayPal fees on the sold price. Now if eBay wants to stop automatically collecting taxes and put that burden on the sellers, then that's a different story.

[kensgiftshop]

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@bubbles1234567 wrote:
Now if eBay wants to stop automatically collecting taxes and put that burden on the sellers, then that's a different story.

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Myself, I would rather pay a little fee and let them deal with the taxes.

[buyselljack2016]

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@vntg*salad wrote:
Lets hope that Ebay managed payments will take that head scratching of paypal and the tax thing away...a little at least

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In July MP will be charging a "simplified fee" on the entire amount paid by the buyer, including "sales tax".

You might be scratching your head a bit more.

[fab_finds4u]

The PayPal transaction fee isn't based on what you collect, it's based on what PayPal collects from the buyer.  It's based on what PayPal has to disperse. 

If you sell an item shipped through GSP the seller's fee is based on the buyer's total payment that was collected by PayPal. You don't get the money they send to GSP for shipping. It's part of the total transaction PayPal handled.   Same difference. You're paying PayPal to dispurse the buyer's payment. 

[gwzcomps]

They used to but buyers got confused and complained about their being 2 different transactions.

[mam98031]

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@bubbles1234567 wrote:

Correct me if I am wrong, but as things stand, sellers pay the PayPal fees on the total amount of the sale (including eBay's collected tax) when it should just be the total sale MINUS taxes that eBay should siphon off to its own tax fund account or something. Meaning, sellers are paying additional PayPal fees on "taxes" that are never theirs to collect in the first place.

I had a buyer message me that they were confused why I collected an additional $11 in tax from them when the item was worth $139 with free shipping. As if I am causing the deception. While I explained the confusion away, it's kind of annoying to (a) know that I am paying PayPal fees on the total amount that I should not and (b) eBay is not just siphoning off the taxes to its own systems instead of throwing it on PayPal and then deducting it from there.

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That is how Ebay use to do it.  In November of last year that changed to what we see today.  They changed how tax was handled because it was confusing the heck out of buyers to get two separate charges for one transaction.  What was going to the seller and then the sales tax going to Ebay.

Not only were the buyers complaining, the banks and credit cards were complaining about all the extra transactions.  Millions and millions and millions of them.  

So it became what we see today.

"I had a buyer message me that they were confused why I collected an additional $11 in tax from them when the item was worth $139 with free shipping. As if I am causing the deception."  There is no "deception" here.  Maybe a lack of understanding by both the buyer and you on this.  But it isn't deceptive.  Clearly the buyer is in a state that has a sales tax, so they have to pay their state.  

You have always paid PP for processing fees on sales tax.  They have always charged their fees on the total amount received without regard to the break down of the payment.  Back when we sellers had to collect sales tax for buyers that had something shipped within the state we are in, we charged and collected sales tax to later be remitted to our state.  PP charged their fee on that sales tax portion too.  This is just something that has always been done by any money processor, not just PP.

[mam98031]

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@vntg*salad wrote:
Lets hope that Ebay managed payments will take that head scratching of paypal and the tax thing away...a little at least

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Nope.  It is handled in the same way, or will be after July 18th.

[mam98031]

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@bubbles1234567 wrote:
My point is, here's how your order should work:
The buyer pays PayPal.
PayPal sends the sales tax amount back to eBay.
PayPal charges a fee on the gross total collected.

This is the gross total that I sold my item for and it makes logical sense for me to pay PayPal fees on the sold price. Now if eBay wants to stop automatically collecting taxes and put that burden on the sellers, then that's a different story.

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Ebay can't do that.  If they did they would be in breach of the laws for every state that has an MFL [marketplace facilitator law].  Ebay is required by law in 39 states to collect and remit sales tax.  Ebay does not have the legal authority to do as you state above.

[bubbles1234567]

This makes a lot of sense. Thank you guys!

[myangelandmyprincess]

That's the way it worked to begin with but buyers were complaining about the having two separate payments showing for the one transaction.  

[go-bad-chicken]

"Why Can't eBay Just Separate the Taxes from the Sale?"

Well they could separate out the sales tax but then that would reduce their profit. eBay is playing the long game, and eventually they will profit heavily on the sales tax that they collect due to state's imposed Marketplace Facilitator Tax Laws.

eBay's new terms of service for their Managed Payments program; which starts for many sellers in 30 days on July 20 changed how seller's fees will now be calculated. The newer method of fee calculation is called the "Simplified Fee". Nice huh? This new Simplified Fee is an all inclusive category based FVF that will apply to:

   1 - The sale price of the item.

   2 - The cost of shipping.

**3 - Sales Tax collected.

While some of the categories will temporarily see some small savings overall, others will see a fee increase right away due to the fact that sales tax will now be calculated at rates as high as 21% for certain sellers under certain circumstances.

But even those sellers who will initially see a very small savings overall in fees will eventually see those savings disappear in the future the moment that eBay decides to tap the throttle just a little bit and raises those new Simplified category based FVF by say 0.5%. 0.5% does not sound like much does it? It's only half a point. But it will be. Because now that new category based Simplified FVF applies to sales tax.

At this point I am just speculating but I would guess that eBay will raise these new Simplified Fess for sellers sometime in late 2021 when the overwhelming majority of sellers are already enrolled in Managed Payments. No need to do that now as that would rock the boat and probably hurt their current Managed Payment seller on boarding campaign.

Almost half of my business that I conduct here on eBay falls into the media category. So I and my fellow media sellers will now get the privilege of paying 14.35% on all sales tax that eBay collects; starting July 20. And that rate of 14.35% applies irregardless of whether or not a media seller is a store subscriber or not.

So circling back around to your original question in your OP, "Why Can't eBay Just Separate the Taxes from the Sale?"

Because eBay has designed their new Managed Payments program in such away that in the long term it will make state mandated sales tax collection a new profitable revenue source for eBay.

[prettywoman-2012]

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@luckythewinner wrote:

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@bubbles1234567 wrote:

Correct me if I am wrong, but as things stand, sellers pay the PayPal fees on the total amount of the sale (including eBay's collected tax) when it should just be the total sale MINUS taxes that eBay should siphon off to its own tax fund account or something.

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The buyer pays PayPal.

PayPal charges a fee on the total collected.

PayPal sends the sales tax amount back to eBay. 

If you want the sales tax portion to have zero fees, you need to talk to PayPal, not eBay.

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Well... this is only partially correct. Come July 20, 2020 it is going to be eBay, and not PayPal, who collects and processes the tax-related fees, as follows:

(a) Final Value Fees on the taxes now on PayPal are non-existent - but eBay will charge 12-15% of FVF on the sales tax portion of a buyer's payment, to sellers.

(b) eBay with Managed Payment - which is mandatory for those who wish to continue to sell on eBay - will also process the entire payment made by buyer, which is going to be part of above-mentioned new FVF that is going to apply to the total amount the buyer paid: item price + shipping + tax. So, compared with PayPal only charging a low (2.69 or close) percentage of payment processing fee for the tax portion as it is now, eBay will apply the entire 12-15% FVF as a one-time fee on the total amount processed.

(c) In addition to the above, eBay will continue to earn the 2% discount from the total amount of taxes it collects, meaning, before they pay the actual U.S. State who is entitled to receive that tax, to compensate eBay for its administrative expenses regarding the collection of taxes.

PW😄🐿