On Wednesday eBay released its 2018 Q2 earnings. During the earnings call with Wall Street analysts, eBay’s CEO Devin Wenig discussed the recent decision by the US Supreme Court in South Dakota v. Wayfair, Inc. that effectively changed the way out-of-state or remote sellers may have to collect and report sales tax.
Wenig stated that eBay believes the $100,000 threshold South Dakota’s law requires remote sellers to reach before merchants must collect and report sales tax “is far too low” for more populous states.
He did say that internal data shows that over 80 percent of eBay sellers would not be affected by the sales tax ruling, even if the $100,000 threshold becomes the most common standard threshold used by other states.
However, Wenig did not make mention of the other metric South Dakota used to establish Nexus or the requirement by remote sellers to collect and remit sales tax.
In the South Dakota law the requirement also included an alternative threshold of a minimum number or transactions, which for most sellers may apply well before the Dollar threshold is reached.
Therefore, it is not entirely clear if eBay considered this alternative minimum transaction threshold in its internal research on how many sellers may be potentially impacted by the South Dakota standard if copied by other states.
“In the Supreme Court case South Dakota set a small business exemption threshold of $100,000, which we believe is far too low for states that are more populous. However, hypothetically if that threshold were applied to each individual state, approximately 80% of our GMV would be excluded from sales tax.”
Devin Wenig, CEO, eBay, Inc.
eBay Appears to Have Technical Ability to Collect Sales Tax
To date, two states, Washington State and Pennsylvania, have enacted so called Marketplace Facilitator laws that require marketplaces, such as eBay, to collect sales tax on sales from remote sellers going to customers in those states.
Amazon and Etsy already follow these laws for their sellers, but eBay does not as the existing Marketplace Facilitator laws are based on the previous standard of physical Nexus, which eBay does not have in those states.
Although, Etsy doesn’t have the physical presence Nexus as required by those two states, but they apparently have decided to voluntary follow those requirements.
“Regardless of how it plays out eBay sellers currently have the ability to collect applicable taxes on their eBay transactions, and we will have the capability to collect and remit sales tax on behalf of our sellers should that become a requirement.”
Devin Wenig, CEO, eBay, Inc.
To the best of our knowledge, this is really the first time that eBay has acknowledged that the platform is ready to collect sales tax and remit those monies to states for sellers.
Even before the Wayfair decision, many in tax community have argued the easiest way to solve this sales tax problem is for marketplaces to take on sales tax collection on behalf of sellers.
It would simply the process, provide one point of contact for both sellers and revenue departments, and bring in more of the “lost” sales tax revenue states claim they are missing.
So, this begs the simple question, why isn’t eBay at least voluntarily conforming to Washington State and Pennsylvania as its biggest rivals are already following the Marketplace Facilitator laws in those states?
Are current changes on the platform creating too much friction among its base of existing buyers and sellers that preemptively adding sales tax collection for those two states may result in a significant drop of sales?
As it stands today, it seems this is just a matter of when, not if, marketplaces must collect sales tax on behalf of sellers.
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