Whine about a South Dakota v Wayfair charge collected by eBay

[Brian Van Horn]

Recently bought a fantasy hockey card set on eBay from someone in Canada. I was still charged by eBay the 6% PA sales tax. Interesting. South Dakota v Wayfair never said anything about international sales tax enforcement. Told by the eBay rep that it would be referred over to the eBay tax office for follow up and I should hear back in a couple weeks. Hmmmm.

[ALBB]

I don't know whats going on in South Dakota !..but I don't like it !!

[bnorth]

Originally Posted by ALBB

I don't know whats going on in South Dakota !..but I don't like it !!

Way too much rain and we don't like it either.

[Brian Van Horn]

I don't think because the seller used eBay it gives nexus in order to collect the tax.

[Bigshot69]

Not sure if you were buying for your own PC or for resale but based on this link it looks like Ebay might be able to exempt your account from sales tax if you provide them with a resellers certificate or vendors license.

https://www.ebay.com/help/buying/pay...=4771#section2

*Disclaimer-I’m not an accountant but sharing so anyone with questions can run by theirs👍

[Brian Van Horn]

Originally Posted by Bigshot69

Not sure if you were buying for your own PC or for resale but based on this link it looks like Ebay might be able to exempt your account from sales tax if you provide them with a resellers certificate or vendors license.

https://www.ebay.com/help/buying/pay...=4771#section2

*Disclaimer-I’m not an accountant but sharing so anyone with questions can run by theirs👍

Adam,

Thank you, but my focus is on nexus regardless of personal collecting or resale.

[canjond]

I have gotten charged sales tax on every international purchase Ive made since the new tax rules went into effect. It's probably 25+ transactions at this point. UK, China, France, Italy, Canada, etc. Doesn't matter.

[birdman42]

Brian, my understanding is that after the Wayfair decision the idea of nexus is pretty much gone. States call it a "use tax" rather than a "sales tax." Their position is that one should pay a tax on all items of personal property you use in your state of residence, no matter where you purchased it. (With some exceptions, of course, such as food.)

Now I live in Maryland. If I want to drive a couple hours to Delaware, where there is no sales tax, then fine. But if I sit at my screen and buy from a Delaware vendor, then I'm supposed to pay MD tax. Many states have a "use tax" question on their income tax form. I've never seen anybody say "Yes, I do owe use tax," but really they are supposed to.

So the fact that the seller isn't even in the US is irrelevant. You are in the US, in your state, and that's what matters. Wayfair didn't change any laws. What it did do was shift enforcement from voluntary disclosure by the buyer to mandatory collection by the seller.

While I hate to bring them into yet another thread, P--- located their Vault in Oregon because the state has no sales tax.

Bill

[Jim F]

I am in Canada. Sometimes when I sell something the tax will automatically come up on the buyers invoice. It is happening more often recently. I change the invoice to zero tax. I don't know if I'm supposed to but I do not have any license to collect American tax. It would seem that if someone actually paid the invoice before I changed it, it would go into my Paypal account.

[Brian Van Horn]

Well, my problem is that, in my opinion, that if you have a US Supreme Court ruling which never mentions the word international in its opinion, how can you have an argument for Nexus? The US Supreme Court, in my gullible opinion, can't issue a ruling that covers international trade in this area because it isn't in its jurisdiction and the international part simply wasn't part of South Dakota v Wayfair. This, again in my opinion, is an over reach. Just because your seller is eBay doesn't do it for me if the actual seller and product is outside the US. Yes, I am aware I am opening up a whole new can of worms/cottage industry with this argument.

[MW1]

Can an experienced accountant comment on this?

[bnorth]

Originally Posted by Jim F

I am in Canada. Sometimes when I sell something the tax will automatically come up on the buyers invoice. It is happening more often recently. I change the invoice to zero tax. I don't know if I'm supposed to but I do not have any license to collect American tax. It would seem that if someone actually paid the invoice before I changed it, it would go into my Paypal account.

I would highly recommend you quit doing that. YOU ARE NOT collecting American tax and you will never see that money. eBay IS THE ONE collecting the tax that the buyer does owe.

Originally Posted by MW1

Can an experienced accountant comment on this?

It has been explained several times on this forum. Post #8 pretty much covers it. Some people seem to have a huge problem paying a tax they really owe and probably have not been paying for years.

[frankbmd]

Originally Posted by MW1

Can an experienced accountant comment on this?

If not, an inexperienced accountant?

Or perhaps someone who is just “okay” with numbers?

[MikeKam]

As a Canadian seller, I'm supposed to only charge Canadian customers tax and do not charge or collect any American taxes. However, as has been mentioned, "use" tax on most purchases for some states has come into effect where no matter what you buy, you will/should be paying taxes on it.

It does make sense when you consider buying/selling pre-internet was typically done physically within a region close to you and taxes could be collected rather easily. Now, with so much interstate/international commerce, a lot of governments have been losing out on sales tax proceeds. Can't say I enjoy it though

[BobC]

Originally Posted by MW1

Can an experienced accountant comment on this?

Been an accountant for 40+ years, and as Ben said, this has been written about in other threads already. I'll try to give you a condensed recap.

Sales tax is a state level tax, not federal. Along with sales tax, every state has what is also called "use tax" and the laws in each state are referred to as sales and use tax laws, which work on the same basis. Sales/use tax is charged on sales based on the point of sale, where it takes place. When you drive to the store and buy something there, that location you bought it at is the point of sale, regardless of where you live and end up taking the item back to use. The sales tax rate being charged at the store location you bought the item at is what they charge you. When you don't drive to a store to purchase an item yourself, and buy it online and have it shipped to you instead, the point of sale generally becomes the location the item is shipped/delivered to, such as your home. In that case the sales tax to be charged is for the location of your home where there item was sent to, not where it was shipped from. Sales/use tax is not based on where the item was shipped from, whether it was a domestic or foreign seller, it is based on where the item is considered sold/delivered to, and ultimately put to use.

Before there was an internet and people bought so many things online, there used to be catalog sales companies that would ship items to sellers. Older folk will remember things like the Sears, Montgomery Ward and JC Penney catalogs, or companies like Speigels that sold strictly through catalog sales alone with no brick and mortar stores at all (some of which are still operating today). Back in those earlier times, the rule was that a retail seller was not required to collect and remit sales tax to any state they made such catalog or remote sales to customers in unless they also had a physical presence in that state. And by physical presence they meant that the seller had to have employees, inventory, stores, assets, sales and so on in that same state. So if a catalog company had none of those physical items in a certain state, they were not required by law to collect and remit sales tax to that state for sales to residents of that same state. So that the states didn't get screwed on sales taxes by everyone just starting to buy things from out of state sellers, they pretty much all had enacted "use" tax laws in conjunction with sales tax laws. The "use" tax laws basically said that if any resident or business in that state purchased something that should have been subject to sales tax, but the seller was not required to charge and collect the sales tax from them because they did not meet the physical presence nexus test, under the "use" tax laws the resident/business customer is supposed to voluntarily report and remit the sales tax they would have otherwise been charged and paid to the seller. As another poster pointed out, most individuals (and many businesses) do not report and pay this "use" tax to their states. The Supreme Court had previously confirmed this "physical presence" nexus requirement and test in the case of North Dakota Vs. Quill back in 1992.

Fast forward to the jump in online sales and marketing, and the way commerce has dramatically changed the past few decades. Retailers now are more than ever likely to sell things online and not have a physical presence in a lot of state they make sales to customers in. Those states were losing out on more and more sales tax and started to fight back regarding the "physical presence" test being the determinant as to whether a retailer has nexus in a particular state to collect sales tax. So instead, the states started to argue that as opposed to a "physical presence" nexus test, there should be a new "economic presence" test to determine nexus for sales tax purposes. And that new test was confirmed last year in June, 2018 when the Supreme Court updated their thinking in the South Dakota Vs. Wayfair case when they changed the definition of necessary presence a company must have in a particular state for them to be considered to have sales tax nexus and therefore be required to start charging and collecting/remitting sales tax. Under the South Dakota sales and use tax laws, the Supreme Court recognized and confirmed that any person/company, foreign or domestic, that makes such online or other indirect sales to customers in South Dakota that end up totaling $100,000 or more in any calendar year, OR have 200 or more such sales transactions to South Dakota customers in a calendar year (regardless of the sales volume) shall be deemed to have sales tax nexus in South Dakota and is required to start collecting and remitting sales tax on all sales thereafter made to South Dakota customers, whether the seller has an actual physical presence in South Dakota or not.

And now that the Supreme Court has ruled and set the bar for what constitutes economic nexus for sales tax purposes by confirming the South Dakota laws, most other states that have sales and use tax laws are changing and adjusting their own laws to coincide with South Dakota so they can also begin to enforce sales tax collections on out of state sellers. Here is a link to an article that outlines the current economic nexus rules for remote/online sellers in all the states. You'll notice that pretty much every effective date for these comes after the Supreme Court's June, 2018 decision in the South Dakota Vs. Wayfair case. It also includes a map showing the states that do and do not have a specific economic nexus law currently on the books for sales tax, which also includes the five state that do not currently have any sales/use taxes at all; Alaska, Delaware, Montana, New Hampshire and Oregon.

For sales tax purposes it does not matter if the seller is shipping you an item from outside the U.S. or not.

As for Ebay collecting sales tax, they technically are not the actual sellers, but I believe they tried to get in front of this sales tax issue and decided to start taking responsibility for the collection and remittance of sales taxes in certain states on behalf of their sellers. This way the sellers, especially the smaller ones, wouldn't suddenly be faced with the additional burden of having to now register in all these states and start keeping track of records and filing sales tax returns and everything else that is involved. Actually, it is probably a smart move on Ebay's part as they can tout it as a service preformed on behalf of their customers and save them the time and hassle of having to do all this sales tax work. I imagine over time Ebay will start mandatory collections and remittance of sales tax for more and more states.

And as one poster already pointed out to another, as a seller I would not be overriding invoices and removing sales tax charges that Ebay is automatically adding to the customer bills. Those sales taxes are supposedly being collected and remitted by Ebay, to save the sellers the hassle of having to do so. Now I do not sell on Ebay so I'm not sure how they are working this in conjunction with sellers if someone decides to pay by check or other means, and not through a credit card or Paypal through Ebay. By a seller removing the sales tax charges from their customer invoices though, they could be inadvertently circumventing sales tax laws for a particular state. I would not recommend doing that.

Hope this helps some people better understand. And remember, this is only a general overview. Each state has their own specific sales and use tax laws and rules, and the specifics can vary greatly from state to state. If this overview doesn't convince some Ebay sellers to just let Ebay handle the sales tax collections, I don't know what will.

https://www.google.com/search?q=stat...hrome&ie=UTF-8

[Taxman]

Based on destination not origination. IF your resident State has sales tax it will be applied.

[Jim F]

Great information but I do have a follow up question.
An American visiting Canada has an $800 duty free limit. This $800 tax free limit was also applied to any online purchases from Canadian sellers(probably other countries too but not sure).
So which rules take precedent?

[Brian Van Horn]

Originally Posted by jim f

great information but i do have a follow up question.
An american visiting canada has an $800 duty free limit. This $800 tax free limit was also applied to any online purchases from canadian sellers(probably other countries too but not sure).
So which rules take precedent?

good question.

[bnorth]

Originally Posted by Jim F

Great information but I do have a follow up question.
An American visiting Canada has an $800 duty free limit. This $800 tax free limit was also applied to any online purchases from Canadian sellers(probably other countries too but not sure).
So which rules take precedent?

I am sure there is a form for it. Personally I couldn't care less about the few dollars it would save. Now my wife would spend days finding and filling it out to save a few dollars. For the life of me I can't figure out that attitude but hey we all have our quirks.

[steve B]

Originally Posted by Jim F

Great information but I do have a follow up question.
An American visiting Canada has an $800 duty free limit. This $800 tax free limit was also applied to any online purchases from Canadian sellers(probably other countries too but not sure).
So which rules take precedent?

Import duty and sales/use tax are different things. I believe technically in my state, it's sales AND use tax, so it applies to all purchases that aren't exempt. But paying it is a nuisance, I think there's forms to fill out. Like I bought a $10 wrench at home depot in NH where there's no sales tax, and brought it home, so here's the 62.5 Cents I owe. I haven't met anyone who does that.

It does make me wonder though...
If a state calls it a use tax......Can I buy something like a coffee maker, leave it in the package unopened and then ask for a refund since I never used it?
If my state didn't call it both, I might just try it to be a nuisance.

[BobC]

Originally Posted by Jim F

Great information but I do have a follow up question.
An American visiting Canada has an $800 duty free limit. This $800 tax free limit was also applied to any online purchases from Canadian sellers(probably other countries too but not sure).
So which rules take precedent?

good question

Actually it is not a good question and you may be confusing apples and oranges, so to speak.

Sales and use taxes are state based taxes here in the U.S. and are to be levied on the purchase of goods (and services in some cases) that are either purchased by a customer/user in that particular state, or are delivered to them from an out of state purchase for use/consumption in that state where the customer/consumer lives and/or operates their business. Custom and duty fees are federal/national taxes on the movement of goods back and forth across international borders. The one really has nothing to do with the other. If you purchased something online below the $800 Canadian duty free limit and had it mailed/delivered to your home in a U.S. state that has sales/use taxes, you as the purchaser would still be technically liable for the sales tax (or in this case use tax assuming the Canadian seller wasn't required to charge you the sales tax for the state you live in) owed to the state you lived in and had the item delivered to. Whether you had to pay a Canadian duty/fee or not, would have nothing to do with whether or not you also owed sales/use to your home state.

[BobC]

Originally Posted by steve B

Import duty and sales/use tax are different things. I believe technically in my state, it's sales AND use tax, so it applies to all purchases that aren't exempt. But paying it is a nuisance, I think there's forms to fill out. Like I bought a $10 wrench at home depot in NH where there's no sales tax, and brought it home, so here's the 62.5 Cents I owe. I haven't met anyone who does that.

It does make me wonder though...
If a state calls it a use tax......Can I buy something like a coffee maker, leave it in the package unopened and then ask for a refund since I never used it?
If my state didn't call it both, I might just try it to be a nuisance.

In pretty much every state it is sales and use taxes, not just sales tax. The term "use" is just a name tag more or less for the part of the law applicable to when the buyer/consumer did not get charged sales tax by the seller. It is deemed that if you bought it, you are going to use/consume the item you purchased, and the "use" tax applies whether you actually leave it in the box or not! For all the states care, they'll just assume you left the item in the box to use as a door stop or whatever.

And as for the comment about driving over to New Hampshire, where you then buy a hammer because there is no sales tax in that state, before then driving back to your home state that does have sales/use tax laws in effect and where you actually live and will use the hammer, you don't need to worry about reporting and paying a use tax on that purchase to your home state. That is because you actually completed the sales transaction yourself, in person, in New Hampshire. When the purchaser/consumer actually goes to a seller's location/store to buy something and takes it with them, that seller's location/store is considered the point of sale and the sales tax charged is based on whatever applicable sales/use tax laws and rates are in effect for that store location.

Think about the opposite side of your scenario. What if you lived in sales tax free New Hampshire and traveled to another state that did have sales tax to purchase that same hammer before then going home to New Hampshire to actually use it? Because you physically went to the store in another state, the sale was completed in that state at that store's location. The sale is deemed completed at that location and you will be charged the applicable sales tax on on the hammer. If you try telling the store clerk that you live in New Hampshire and and are planning to drive home right away to use it so they shouldn't be charging you any sales tax, they will tell you it doesn't matter because you're buying the hammer in their state and therefore they have to charge you the applicable sales tax on it (or at least they should).

Plus, if states tried to monitor and enforce their sales and use tax laws on purchases like that, it is virtually impossible. Think about it, you throw away the receipt for the hammer right after you bought it for cash, so how could someone then prove you bought it in a sales tax free state? And what state is going to waste the time, effort and cost in going after someone for sales tax on a hammer.....they aren't. And that is also why virtually no individual person in any state that has a use tax voluntarily reports and pays it to their state. They know the state isn't going to come after them as an individual because of the time, cost and effort it would take to enforce the use tax laws on them. Also it would be political suicide for legislators in any state that started trying to enforce it. So many people buy so much stuff online any more that they didn't previously get charged sales tax on, if a particular state started trying to target its residents for use taxes, I can only imagine the political implications and speed at which elected officials would be voted out of office that pushed for the enforcement.

And that is also why in most states with use tax laws, they really only go after larger companies and businesses that may be buying things from out of state without having paid the sales/use tax on it. States don't have the resources to go after small amounts from individuals. They go after the bigger companies and businesses where they may find some significant dollars that are owed them for use taxes. Or they find out about specific situations and circumstances where they become aware of sales/use tax abuse and go after that sector. For example, I'm in Ohio and a few years back the Ohio sales tax department started looking specifically at Ohio dentists for sales/use taxes. Turns out someone at the Ohio Department of Taxation figured out that most dentists that did implants and provided dentures for their patients were all acquiring them from just a couple of companies that produced them here in the U.S., but because none of them were located in Ohio, they didn't have to charge sales tax to any of the dentists. And in turn, the dentists weren't treating the dentures and implants as sales of taxable, tangible property to their patients and collecting the sales tax on it like they probably should have. So the state deemed that the dentists were then the users of these items and went after them for the sales/use taxes. They knew who these several companies were that provided the dentures and implants and just started asking dentists for those invoices, and bingo......they had them!!!!!

[Brian Van Horn]

BobC,

I just wanted to thank you for your input on this matter and the clarification on the use tax. As for international purchases, I still feel it's an end around by the states, but it is what it is.