eBay is Already Prepared to Collect Sales Tax for Sellers

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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.

READ MORE: Supreme Court Decision on Sales Tax – But What Does It Mean?

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.

READ MORE: The Fuzzy Math by States in Sales Tax Case South Dakota v. Wayfair

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.

eBay apparently is waiting for more clarification by states or Congress, but Wenig revealed that eBay is prepared to collect sales tax for sellers, if it becomes necessary.

“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.

We end this article with questions and look forward to hearing your thoughts. Head over to our Facebook Discussion Group or use the comments section below.

8 COMMENTS

  1. More taxes never good. For proof look at places like Illinois. More more more broke broke broke broke. Take a drive around town. I see more business than ever before forget this crybaby brick and mortar story. If there is damage it’s from the likes of bigger box stores moving in or discount stores. This is nothing more than a bunch of broke states trying to shore up their pension funds. Outlaw public unions would be a great first step.

    • I can’t even look at this with a straight face. With the way current tax law is, eBay would have to be turned inside out for sellers to be able to charge the right tax amount (origin vs. destination, charge on shipping cost or no, tax brackets, etc.). If this gets enforced, I’m ditching the platform. The only way they could prevent me from doing so would be:
      – if taxes were calculated *after* eBay seller fees were deducted
      – if eBay automatically deducted seller fees from the final payout at the time of purchase
      – if eBay automatically withheld both sales and income tax for me

      I’m already being double-taxed as is, so at least make it less of an administrative pain. I’m losing my money left and right here. At least give me a reason to stick around…

      • The only tax eBay would collect is sales tax which is based on the gross sales amount and depending on the law of the state may or may not apply to shipping charges. If applicable to a sale, Sales tax laws define the amount eBay needs to collect and it is pretty straight forward. All other issues you are mentioning are part of income tax calculations and not part of sales tax collection.

        The only other way eBay, PayPal or other payment processors would hold back any monies from online sales is through an IRS requirement which has to be disclosed on the W-9 form a seller files with the payment entity. But that has nothing to do with sales tax and only applies to a very small number of sellers with specific IRS tax problems. And this unique situation has been around for many years if it is applicable to a seller.

        Richard

      • …After eBay seller fees? Hell, eBay is the one who tacked seller fees onto shipping costs; something that none of us profit from. So eBay gets to profit off of shipping and make money hand and fist off of something that is break-even for sellers. You think eBay cares about sales tax AFTER your fees are paid? Looks like you’re definitely ditching the platform.

  2. One would think that ebay could just send each buyer from those (two) states, a monthly invoice stating what State Sales Tax they charged them for their purchases that month, and take it out of the buyer’s paypal /pymt account automatically; WithOUT getting the Sellers involved at all ~ ???
    I just noticed ebay put a Washington state sales tax charge on an invoice I was preparing to send out to a buyer,.. and I’m trying to figure out why I need to be in the middle. Seems to me I will get charged fees from paypal, at least, if not from both ebay & paypal (it just doesn’t seem right!)

    • The lawmakers are putting eBay in the middle of these transactions and the marketplace facilitator laws some of these states pass requires eBay to deal with the seller. eBay doesn’t really have a choice as they are following the requirements of the laws being passed by the states.

      Richard

  3. What concerns me most is eBay sellers that collect sales tax and never send the remittance to the state they charged the tax to. Now eBay is collecting for some states, but other states, it’s up to the seller to collect and remit. So, what is to stop them from collecting, but never sending the check to the state’s revenue department? Who is going to catch them doing this?

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