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Quote:
Originally Posted by Jobu
Collecting fees on the tax doesn't really end up hurting the seller that much though.
Ebay also figures out the appropriate taxes for us, collects them, and remits them on the seller's behalf for every jurisdiction. Certainly it is worth it to everyone who sells on Ebay to pay an additional dollar to not have to do that ourselves, no? In addition to the fact that we shouldn't expect Ebay to do that for free, as the new agent responsible for the money (including the tax portion) in the transaction, Ebay should be able to charge a % on that as I don't know of any organization which will process money for you, and take risk associated with sales guarantees, and just exempt a portion of it and do that bit for free. All of the above is certainly worth a dollar, isn't it?
An example of the new system vs. the pre-tax system from a recent sale:
Sale price: $985
Price + tax: $1,044.10
12.35% of price + Tax: $128.95
Fixed final value fee: $0.30
Total fee: $129.25
Total payment to me: $855.75
Under the pre-tax, pre-managed payments system, I would have paid 10% of the $985 to Ebay ($98.5) + 3% of the $985 to Paypal ($29.55) = $128.05 in total fees. So the new system, where Ebay handles all of the tax stuff for me, costs me an extra $129.25-$128.05 = $1.20.
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I don't sell anything on Ebay so I may not know all the nuances, but not sure your logic is entirely accurate. First off, Ebay buyers living in states with a sales tax know the sales tax will get tacked on to their winning bid, just like when bidding on AH auctions they know they'll have to add the buyer's premium to their top bid if they end up winning. So you have to assume that most bidders are going to factor in that sales tax or buyer's premium into what they are willing to bid. So in the case of your example where the top bid was $985, you wouldn't be wrong to assume the buyer would have actually paid $1,044.10 for it as a top bid if they knew no sales tax was being charged. So under the old pre-tax system in your example, the combined 13% Ebay and Paypal fees would have cost you $135.73, which is even higher than the $129.25 figure you came up with in your example. However, that total fee comes off the higher sales price of $1,044.10 so that you now end up with net proceeds of $909.37, which is significantly higher than the $855.75 you netted in your example, for a total difference of $53.62 more it costs the seller, not $1.20.
Secondly, these new sales tax rules really only apply to Ebay sellers whose sales are to buyers not in the same state(s) they are in. So technically, even under the old rules, anyone selling something on Ebay going to a buyer in the same state they are in (assuming that state has a sales tax) should have been charging and remitting sales tax on all those in-state Ebay sales from day one. These new rules are simply to extend that obligation of sellers to now collect and remit sales tax in those states they are not physically in, and per the Supreme Court ruling it is now based on a seller's sales amount and volume. And that threshhold is not that small for a seller to become responsible for collecting and remitting sales tax to a state they don't reside in. Per the Supreme Court a seller crosses that threshhold once they've reached an annual total of $100,000 in sales or 200 transactions in a particular state. And remember, those threshholds aren't just the annual amounts for the seller. A seller on Ebay can easily surpass these numbers in total, but not necessarily for any one particular state, and therefore under the law would not be required to collect and remit sales tax on Ebay sales to any state (except potentially for the state the seller actually resides in).
So yes, there are going to be some large Ebay sellers that are going to cross those sales tax threshholds, but I'd be willing to bet the vast majority of Ebay sellers never come close, and therefore wouldn't be required to do any of this (again, except maybe for their resident state). Also, Ebay chose to take on this sales tax responsibility by choice, not by any specific legal requirement I'm aware of. These sales tax laws are for the actual product sellers. Ebay doesn't physically sell anything, they simply provide an online platform for those that do. But the states are also willing participants in all this by allowing Ebay to act as an agent for all these sellers. Remember, most all of these sellers aren't actually required to collect and remit sales tax, and you know that virtually none of the buyers of those Ebay items on which no sales tax was charged are going to volutarily remit the use tax they should then be paying to the states they live in. So the states obviously view this as a huge win as they get sales tax revenue they normally wouldn't collect, and don't really have the time or resources to go after otherwise.
But who actually pays for all this? Let's look at your example in another way. The added cost to a seller from Ebay collecting sales tax, based on your example and using my additional assumptions, came out to be $53.62 on a proposed sale of $1,044.10. Well if that is the only sale that seller has to an out of state buyer, they clearly aren't legally liable to collect and remit sales tax on that sale. But what if we bump up the out of state sales to sellers in that same state from $1,044.10 to $99,999.99, just under the sales tax threshhold (and assume still under 200 transactions for the seller)? Assuming the Ebay fee percentages remain the same as in your example, you are now talking about a potential additional cost to the seller of around $5,000.00. Not such a small amount anymore. I'm not saying this is right or wrong, or that it is 100% accurate, just that based on how most things are being done by buyers and sellers on Ebay that this presents a more accurate view of the additional cost to the average sellers on Ebay. And in the end, Ebay appears to end up with more revenue in their pocket from doing this.
I assume that for a seller there is no choice in deciding if you wanted Ebay to collect sales taxes for you or not. As stated before, I don't sell on Ebay, so don't know for certain. So I wonder what happens to those sellers who previously did collect and remit their own sales tax? Don't believe Ebay lets the states know on whose behalf they are remitting sales taxes, so what happens if some state also comes calling on some seller because their sales tax returns and payments suddenly changed drastically because of Ebay involvement? Is Ebay going to reimburse them for the time and hassle in dealing with that state? Or what about a seller that doesn't sell everything on Ebay alone, they now have to keep records of Ebay sales by state anyway to go along with non-Ebay sales to see if they hit the sales tax threshholds somewhere and now have to collect sales taxes for non-Ebay sales in those certain states as well. So the thinking that Ebay taking over the responsibility for sales taxes is doing all sellers a great service they should be more than happy to pay for, at a very nominal cost, isn't necessarily that true. The vast majority of Ebay sellers aren't even subject to these non-resident state sales taxes. And for the much larger Ebay sellers that would be subect to them, they are most likely big and responsible enough to take care of their sales taxes themselves. And in some cases for these large sellers, Ebay taking over part of their sales tax collection and reporting requirements can actually end up creating more work and hassles for them, not less.
And as to why Ebay would voluntarily take on this sales tax collection and reporting requirement, there can be many possible reasons. For one, if the large sellers on Ebay get caught up in now having to collect and remit sales taxes, whereas the average seller doesn't, that suddenly puts the large sellers at a disadvantage as things they sell will cost their Ebay buyers more due to the sales tax. So a large seller could end up dropping Ebay, partially or entirely, and moving to other platforms, or doing their own online platform, all so the disadvantage isn't so evident. So by Ebay making sales taxes the same for all sellers, it can help to keep their larger sellers happy and less likely to sell elsewhere than on Ebay. For another reason, Ebay may have looked ahead and realized that with all these forthcoming sales tax law changes, and because of the huge number of sellers and overall amount of sales on their platform, that they would eventually get approached by multiple states to start providing them with more and more info about all their sellers and their respective Ebay sales. Can easily imagine Ebay thinking proactively and deciding that if they would eventually have to do all this extra work and reporting anyway, why not figure out a way to get paid for it? And yet another reason for possibly doing it is to potentially create another profitable service they can provide. Not only does it solve the possible issue of Ebay trying to get large sellers to pay them for providing info to states they'd end up probably having to do anyway, but by adding in the collection and remittance function of sales taxes they can not just try to break even on the additional reporting costs, but turn sales taxes into a potential profit center and end up charging all sellers for it. Going back to the original example, the earlier poster came up with an additional $1.20 of Ebay fees on a sale (plus sales tax) totaling $1,044.10 under the new sales tax/fee system versus the old system, which is roughly about 0.1% more it ends up costing the seller in fees. Don't remember exactly from where, but seem to recollect hearing or reading somewhere that total annual Ebay sales for just sports cards and memorabilia and such in a recent year was around $340M. So 0.1% of that would come to around $340K, which in itself isn't that much, but that is for just one small part of Ebay. So I'm guessing that Ebay is easily getting millions of dollars a year in addditional fees from this new system to cover the cost to handle the sales tax work, which frankly, after the initial setup in the 45 states that do charge sales taxes, is programmed into their automated system and likely not very difficult and time consuming at all. After recouping their initial costs to do sales taxes, can easily see Ebay profiting from it every month thereafter. And that leads to even another potential reason for Ebay wanting to do this. Monies collected for sales tax by Ebay are held until due to the individual states. So while in their hands, Ebay is free to invest this money, and make more off of it. Granted, interest rates being paid on short term investments nowadays are next to nothing, but most knowledgeable people feel confident that interest rates will be rising at some point in the future due to a lot of factors, and if/when they do, this would be found money to Ebay.
So the thinking that Ebay isn't getting much of anything out of this may not be entirely accurate.