Why do Final Value Fees include Sales Tax?

[smashpenny]

I, like many of you, think that eBay's Final Value Fees are getting too high. 

However, my issue for the moment is the way the fees are calculated. I just sold an item for $1,150. After the buyer paid, the total amount, with shipping and sales tax, came out to $1,273. My Final Value Fee was based on that amount, even though I personally didn't collect the sales tax (eBay did). My total fees for this sale were $160 (which is 12.55% of the sale including shipping AND sales tax, plus a $0.30 eBay fee).

I understand why eBay bases the FVF on the total + shipping (because in the old days, people would sell something cheap and then charge hundreds in shipping fees in order to bring down the FVF). But why the sales tax???

This sale ended up costing me an additional $13. It's not the end of the world, but maybe some who understands the policies better can explain it. Why should my FVF include the sales tax?

Side note: I really miss when all categories had tiered FVFs (where larger amounts got a reduced FVF). Some categories still have this, but it was really nice when it was across the board.

Thoughts on sales tax being included in the FVF calculation?

Thanks!

[johnrj1226]

Money processors collect  a fee on  the total amount the buyers  pay - they only car  how  much not for what it is paid.

PayPal did the  same thing &  has increased their money processing fees after the eBay/PayPal divorce was finalized.  Nothing illegal, unlawful or illicit about it.

Once upon a time American Express was the only  credit  card company that  charge a "merchant fee" for every  card transaction.  Then the other  card companies (Visa, Master Card)  played follow the  leader.around 1992.

Guess lots of sellers never look at the break down of the fees PayPal charged.  The total  fee amount now charged by eBay (not including the optional features like store, enhanced  listing features, etc) is real close to the same amount (%) as  you had with the sum of the prior eBay FVF + PayPal fees).  Now you  pay  your fees as something gets sold/paid for.

The  fee on sales tax is worth it  weight in gold - sellers would not want take on the responsibility   to time and accurately reimburse all those sales taxes to the various taxing authorities (only 5 states have  zero sales tax) - eBay does it for you -.

[ifwpl]

Ebay's rationalization is more than likely that they are recouping the costs of business for managing the collection and remittance of taxes.  Obviously this is largely "automated", using an in-house system or (more likely) using 3rd-party tax software does all of the calculating, assessing, remitting, etc....

I look at it this way: Before the states decided to make marketplaces collect and remit taxes, Ebay had "zero" costs.  "Overnight" they had a whole new cost center - - actual people to manage buyer exemptions, tax professionals to deal with all the paperwork/deal with taxing authority questions, and technology costs (in-house system, 3rd-party system, or hybrid).  This is all very real and costly, so assessing a final value fee on this seems reasonable.

Whether or not 12.9% is excessive is a completely different topic, but you clearly know that and differentiated between the two topics in your question.

[monica-sells]

if you are declaring sales tax as income you are misinformed and donating money that you do not owe...hire a new accountant

[dbfolks166mt]

     This is about the 4th posting like this today which adds to the 1,000's of prior postings asking the same question. It is a common practice of virtually every financial processor to charge a fee on the total sale. All CC companies charge the merchant a xx% fee on the total sale including tax. If you put your tip on your restaurant ticket and pay with a credit card the CC company collects a fee on that as well. 

     There are a couple of gas stations in my area that have a 5% discount if you pay in cash. 

[james-spangler]

For sure eBay should get to charge a processing fee on the sales tax they collect. I don't have a problem with that. What I might have a problem with is the fact that they charge a full 12.9% final value fee for that processing.  Seems like way too much!

[vintagecraze50]

I sell a lot on here and am grateful that ebay takes care of reporting all the sales tax issues to the IRS each year without me trying to figure that out myself with 50 states and different tax rates. So, I gladly pay that little extra so I do not have that hassle.

[albertabrightalberta]

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@smashpenny wrote:

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Thanks for the info on the fees. I guess that's right... eBay has to pay to process the transaction, including the sales tax, but it doesn't seem fair. I don't think I should be charged a fee for something I never see (like the sales tax). 

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@mehemoh wrote:

 It gets added to the total amount of the selling fee. So it costs the seller for eBay to collect sales tax from the buyer and eBay is actually making money from the sales tax. 

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@smashpenny 

@mehemoh 

Would you rather not pay FVF to ebay on the sales tax and instead, have to remit it to each state on every single sale? And you'd have to know which cities within states may have different sales tax rates so you pay the correct amount? 

For my money, I'm glad ebay does the work for me! It's well worth the cost. 

[weedyalan]

Check your math... $7 * 0.129 = $0.90

[docstill299n]

EXACTLY!!!

[moor-963]

Isn't this just a clear example of an unfair business practice?  ebay wants more people to use its service to sell and so instead of listing the real cut it take from people's sales, it defines "sale" to include counter-intuitive things like shipping and taxes.  So the real percentage is significantly higher than 12.9%, but they think they can get away with still telling people that as long as this all is buried in the fine print.  I won't use ebay again. 

[soh.maryl]

What do the "state sales tax issues" have to do with the IRS (Federal)?

[techjoytoday]

Because eBay wants to make an extra 10% on both the shipping cost and the sales tax they help collect.

[techjoytoday]

Yes, the higher sales tax your buyer has to pay, the more money you lose at the rate of 10% of that tax rate on your net earnings.  You also lose 10% of whatever you pay in shipping.

I started listing elsewhere.

[dbfolks166mt]

Zombie thread. OP is over 6 months old and there are hundreds of postings just like this on this forum. 

[adrgonz5482]

Believe me this is a problem that I have as well it really makes no sense as to how they can charge you for something you don’t collect on that practically should be illegal