eBay Fees on Buyer-Paid Sales Tax

[Gusturd]

Ebay likely is reporting all the sales tax remitted, but that doesn't change the fact that they are collecting who knows how many dollars worth of unnecessary sales tax and collecting a nice fee for themselves off it. I'm not even referring to the sales thresholds previously mentioned. I'm talking about the people like my wife that sell 10-20 items a year to clean out the garage/closets. These types of transactions don't require the collection of sales tax. How many of these sales are made on ebay each year?

[BobC]

Originally Posted by Gusturd

Ebay likely is reporting all the sales tax remitted, but that doesn't change the fact that they are collecting who knows how many dollars worth of unnecessary sales tax and collecting a nice fee for themselves off it. I'm not even referring to the sales thresholds previously mentioned. I'm talking about the people like my wife that sell 10-20 items a year to clean out the garage/closets. These types of transactions don't require the collection of sales tax. How many of these sales are made on ebay each year?

First off, your statement that sales like your wife's aren't subject to the collection of sales tax may be inaccurate. It depends on what state the seller is in, and if that state has a sales tax. And then it further depends on if any of those 10-20 sales were to a buyer(s) that lives in the same state as the seller, because if so, that state may require the seller to collect sales tax on any same state sales since the seller is physically present in the state in which the item is shipped to.

However, I would still suspect a lot more sales that really don't require the collection of sales tax by the seller occur on Ebay than people might think or ever realize. Would not be surprised if far more than half of all Ebay sales are technically NOT legally subject to sales tax collection by the actual seller, and would not be shocked if it turned out only about 20%-30% (or maybe even less) of all Ebay sales would actually be subject to sales tax collection by the true seller.

What I wonder is how did Ebay get all sellers to agree to let them do this sales tax collection on seller's behalves in the first place. Remember, Ebay doesn't actually sell anything. Did they have a special update in their Ebay rules/contract for sellers where they effectively had all sellers sign off and agree to grant Ebay the exclusive right to act as their agent for sales tax collection? This was a very well thought out idea and plan by Ebay that does also benefit them. As some posters to this thread mentioned, they are not upset to pay a little something to Ebay to take care of the sales tax for them, so they don't really tick off all their sellers. And like another earlier poster mentioned, a lot of sellers likely feel the additional cost is very nominal. But as I tried pointing out in an earlier post, if you feel that buyers do take sales tax into consideration when making Ebay purchases now that effect the final bid/price they're willing to pay, the actual cost to sellers is likely much higher than they imagined. They just don't realize it, which is their loss and Ebay's gain.

[FrankWakefield]

I think that eBay shouldn't charge a fee on the taxes and pull that fee out of the seller's proceeds.

AND I think that eBay shouldn't calculate taxes on the shipping and handling portions of the money collected.

[buymycards]

I only know about Wisconsin taxes. Here in Wisconsin, all shipping, handling, and transportation fees are subject to sales tax.

We can blame the sellers who were charging $1 for the item plus $25 shipping in order to avoid paying the taxes.

[BobC]

Originally Posted by buymycards

I only know about Wisconsin taxes. Here in Wisconsin, all shipping, handling, and transportation fees are subject to sales tax.

We can blame the sellers who were charging $1 for the item plus $25 shipping in order to avoid paying the taxes.

Hey Rick,

They may not have necessarily only been trying to avoid taxes by doing that. I think they were possibly interested in getting buyers to win cheap items, and forget to pay attention to the excessive shipping charges so they could end up making more money that way as well.

[jbsports33]

Most transactions for all the states are taxed on eBay now, something we need to adjust to if we sell on eBay or maybe just don't - It kills me I need to charge extra fees to consignors for this change. The one good thing is eBay collects and tracks it all - started doing more flea markets now! Can pay more back to people I sell for, I balance it out now with shows and other ways to sell - not just eBay.

Jimmy

[Gusturd]

Originally Posted by BobC

First off, your statement that sales like your wife's aren't subject to the collection of sales tax may be inaccurate. It depends on what state the seller is in, and if that state has a sales tax. And then it further depends on if any of those 10-20 sales were to a buyer(s) that lives in the same state as the seller, because if so, that state may require the seller to collect sales tax on any same state sales since the seller is physically present in the state in which the item is shipped to.

LOL You're going to have to convince me with a precedent of a garage sale getting busted for not collecting and reporting sales tax. Or even a garage sale that collected sales tax. That would be good enough. Otherwise, in every practical sense, it's not really required.

[BobC]

Originally Posted by Gusturd

LOL You're going to have to convince me with a precedent of a garage sale getting busted for not collecting and reporting sales tax. Or even a garage sale that collected sales tax. That would be good enough. Otherwise, in every practical sense, it's not really required.

I didn't say it is always true, and it additionally depends on the state you're in and their specific rules. Also, you were originally talking about sales made on Ebay, a very well-known online marketplace, now you're talking about garage sales, which is distinctly and entirely different. Some states do have rules regarding occasional or casual sales where the party selling does not normally sell things as part of their business, and in such cases those sales may be exempt from sales tax in those particular states. And in that case, a garage sale by an individual would likely meet the casual/occasional sales exemption. And you're right, most states don't have the personnel to go out and track down sales taxes from things like garage sales, so they end up putting such laws in to exempt them from sales tax so they never have to waste the time. But you mentioned someone selling 10-20 items a year maybe, and doing so on Ebay, which is an online marketplace. That is not the same as a garage sale type of casual sales activity. And even though the number of sales you mentioned aren't that many, I don't believe states that allow such a sales tax exemption for casual/occasional sales actually have defined what qualifies as such using a specific number of sales or dollar amount.

Plus, don't forget that it is online sales that triggered this whole sales tax thing coming from the Supreme Court's ruling in the S Dakota vs. Wayfair case back in 2018. So the authorities are saying online sales platforms are most definitely generating business sales, especially since records of the transactions and the parties involved, as well as dollar amounts of all sales, are maintained by the party providing the online platform and can be accessed if need be by tax authorities. That info and data would likely never be kept by someone doing a garage sale. So your question/point is a possible grey area and may or may not be arguable, depending on what specific state you are in.

[Gusturd]

Originally Posted by BobC

I didn't say it is always true, and it additionally depends on the state you're in and their specific rules. Also, you were originally talking about sales made on Ebay, a very well-known online marketplace, now you're talking about garage sales, which is distinctly and entirely different. Some states do have rules regarding occasional or casual sales where the party selling does not normally sell things as part of their business, and in such cases those sales may be exempt from sales tax in those particular states. And in that case, a garage sale by an individual would likely meet the casual/occasional sales exemption. And you're right, most states don't have the personnel to go out and track down sales taxes from things like garage sales, so they end up putting such laws in to exempt them from sales tax so they never have to waste the time. But you mentioned someone selling 10-20 items a year maybe, and doing so on Ebay, which is an online marketplace. That is not the same as a garage sale type of casual sales activity. And even though the number of sales you mentioned aren't that many, I don't believe states that allow such a sales tax exemption for casual/occasional sales actually have defined what qualifies as such using a specific number of sales or dollar amount.

Plus, don't forget that it is online sales that triggered this whole sales tax thing coming from the Supreme Court's ruling in the S Dakota vs. Wayfair case back in 2018. So the authorities are saying online sales platforms are most definitely generating business sales, especially since records of the transactions and the parties involved, as well as dollar amounts of all sales, are maintained by the party providing the online platform and can be accessed if need be by tax authorities. That info and data would likely never be kept by someone doing a garage sale. So your question/point is a possible grey area and may or may not be arguable, depending on what specific state you are in.

Well the whole thing is very convoluted. On the one hand, your saying sales tax shouldn't be triggered unless you exceed $100K and 200 transactions (I realize it may vary by state) and on the other your saying every sale made online is a business sale and should have tax collected. If the government really wanted to boost tax revenue for this country, they'd simplify or at least clarify the rules so people knew what they were supposed to do. The whole thing is one big gray area that simply compels people to pay tax 100% of the time, whether it's really required or not. Maybe that's intentional.

[BobC]

Originally Posted by Gusturd

Well the whole thing is very convoluted. On the one hand, your saying sales tax shouldn't be triggered unless you exceed $100K and 200 transactions (I realize it may vary by state) and on the other your saying every sale made online is a business sale and should have tax collected. If the government really wanted to boost tax revenue for this country, they'd simplify or at least clarify the rules so people knew what they were supposed to do. The whole thing is one big gray area that simply compels people to pay tax 100% of the time, whether it's really required or not. Maybe that's intentional.

You don't really understand this at all, do you? It all starts with the Supreme Court saying decades ago that a seller wasn't liable to collect and remit sales tax to a state in which they had sold/shipped something to the buyer, unless that seller had a physical presence in that same state. That means they have a building, inventory, employees, something in that same state as where they just made the sale to. The recent Supreme Court ruling from 2018, setting the $100K or 200 transactions thresholds, only has to do with a seller that does NOT have a physical presence in a particular state. It now makes a seller who surpasses those sales threshholds in a state they do not have a physical presence in liable for now having to collect and remit sales tax in that state, the same as if they had a physical presence in it. A seller is still always liable to collect and remit sales tax in states they have a physical presence in. So in your example, the 10-20 items per year your wife may sell on Ebay, if she sells something to a person that lives in the same state she lives in, your wife is physically present in that state and technically should be collecting sales tax on those same state sales if those sales are deemed as being retail business sales and the items she is selling are subject to sales taxes for that state. The sales she makes to people who live in a different state than where she physically lives are counted in determining if she meets the $100K/200 transaction threshhold for any of those other, non-resident, states then. She would only be liable to start collecting sales taxes for those other non-resident states that her sales volume/quantity hits either of the threshholds then. That is not a grey area, you are always going to be liable to collect sales taxes on taxable business/retail sales in the state in which you live and have a physical presence in, if that state has a sales tax. The grey area I was referring to had to do with whether or not 10-20 sales per year could be argued as being exempt from sales tax as casual/occasional sales, depending on the state you are in and if they even allow such an exemption, and what their specific rules and definition of casual/occasional sales are.

I was then saying that in light of the courts in now looking at online sales more rigorously in regards to taxes and all, the courts and tax authorities may view parties selling items online with someone like Ebay as a true business as opposed to having a garage sale. And by the way, are you familiar with Ebay's current reporting requirement to tell the IRS how much your wife may have sold on Ebay each year? It is currently set at $20K AND 200 or more transactions. So I'm assuming your wife doesn't currently get a 1099 for her 10-20 sales a year. But guess what, starting in 2022 the IRS reporting threshhold for sending them a 1099 to show how much your wife had in Ebay sales for the year is being lowered to just $600, with no minimum number of transactions. So it is possible you may have to start reporting her "business" on your income tax returns if she hits $600 in sales for a year. And if the IRS is going to consider that level of activity as a retail business, what do you think a state sales tax authority is going to do? Now do you see the difference between a garage sale and selling on Ebay?

I need to start charging you people for all the free advice tax advice I keep giving on here, especially when I get questioned like I don't know what I'm talking about and have to explain even further to get some to understand.

[Gusturd]

I think it's you who can't understand what I'm saying because nowhere in your bloviated wall of words did you contradict anything I said. If you did, please identify. I can't find it.

Despite eBay being a worldwide marketplace, you seem to be hung up on the belief, that all of my wife's 10-20 sales are to residents of our own state. You do know how ebay works right? In reality maybe one was? Possibly two. Maybe none. Wouldn't that mean, using your explanation, that eBay unnecessarily collected sales tax on the rest? And charged a fee on top of it?

That's the only point I'm trying to make. If that is wrong, please say so.