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I had a sale today shipping to California. Things did not add up quite right so I reviewed the transaction.
eBay added California state sales tax to the order, which was paid by the buyer.
The sale is with paypal, so I am charged 2.9% of the sales tax amount buried in my paypal fee.
I guess this should not have been a surprise but it was. Seems like eBay should just collect this without involving me.
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Look at it from their point of view. Why should ebay pay the collection fee?
If we were collecting sales tax ourselves and filing every quarter, it would be an expensive nightmare.
When I used Taxjar it was $20 a month, plus $20 e-filing fee quarterly in each state .. you do the math.
eBay is doing that for free for us. (plus many states have a one time start up fee too) – we pay none of this and ebay absorbs the expense. Saves us time and hours of work too.eBay is doing all this on our behalf, not for them. It’s mandated that WE collect sales tax – thanks to eBay we do not even think about it
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Actually, it *is* mandated that EBAY collect the tax. They absolutely HAVE to do it now according to the new laws – well, at least the one in my state. The law says that the marketplace has to do it. So I’m thankful to the legislators who put the onus on ebay rather than on us small (tiny, in my case) businesses.
Since ebay has to collect the tax, they should pay the paypal fee. The money is being deposited into their paypal account, not mine. They are using the paypal service as part of their solution for fulling their (ebay’s) responsibility to collect and remit tax.
“the budget measure requires that online marketplace providers that facilitate third-party retail sales, such as Amazon, eBay, and Etsy, collect and remit sales tax on marketplace sales made to buyers in New York State even if the seller is located outside New York State.”
https://www.bookweb.org/news/new-york-state-imposes-tax-marketplace-providers-571894-
The new internet tax laws are a hodge-podge and inconsistent from one state to another. My state, Missouri, doesn’t have a law for this yet, except mandated sales tax on items Amazon themselves sell. I‘ve always collected and submitted sales tax myself for in-state sales.
Some states have implemented a so-called Marketplace Facilitator Tax provision which pushes the responsibility of collection and submission to the selling platform (eBay, Amazon, etc.). States without an MFT provision require sales tax to be collected and submitted for any purchases from that state but make it the sellers responsibility, some with a low-end dollar limit exception for small sellers. I believe California is actually trying to charge sellers retroactively for sales tax not collected in previous years.
I think what will be a mess for some sellers is where during the year they had both in-state sales that they collected, and MFT taxes collected and submitted by the platform. Another confusion, will only the base state tax be collected and submitted for MFT state, but not the additional city and county tax that would be collected on a retail on-premises sale in a local store? Is an in-state seller still responsible for that?
It’s a mess.
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I just hope that Paypal doesnt show these taxes that eBay collects in our 1099 they send at the end of each year. We never see it so shouldnt be counted as income.
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This ripple effect is new.
This did not happen before yesterday, 11/4/19, for my sales to California or elsewhere.
I had a sale overnight to Colorado. Same issue.
As part of my book-keeping, my custom spreadsheet software reads the payment email from Paypal during my order fulfillment process, and it throws a Warning that the details do not add up.
In the payment email from Paypal, My ‘Total Amount’ received shows as the sum of Item Price, Shipping and Sales Tax. It never included the Sales Tax previously. Of course, I am not really receiving the sales tax; it is being held back for eBay somehow. But it adds to my Paypal fee.
Looks to me as if the Sales Tax may be added to your Sales Total for the year when Paypal processes it in this manner.
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I downloaded my account info at Paypal. (CSV Format)
For an item that ships to Rhode Island @ $50 w/ free shipping and $3.50 tax.
They show the tax as part of the eBay Auction Payment.
Then there is a second line called Partner Fee where it is subtracted.
This indicates to me that it won’t be on the 1099, etc.eBay Auction Payment: 53.50
Partner Fee: -3.50So the only bad news appears to be that eBay is allowing Paypal to charge us 2.9% for the pleasure of eBay collecting the tax.
eBay just passed a little more of their expenses on to their sellers. Sounds naive to think that Managed Payments will be much different than this.
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You really want to get angry… Try this one on.
A representative from the New Mexico Tax & Rev dept told me that while Ebay, Amazon (and all on line markets) are collecting state sales tax… They have not yet remitted the taxes collected back to the states!
The on-line retailers are holding onto the money in order to negotiate some sort of settlement on the sales tax due from previous years.
I am not a tax expert and don’t know if this applies only to New Mexico OR if the woman I was speaking to was mistaken.
Any tax experts out there who know the scoop?
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This is how the ebay-collected sales tax is showing up for me on GoDaddy Bookkeeping:
I created a new non-business expense category to dump these in, but unfortunately, since the “Name” field is “Unknown”, there’s no way to create a rule to put these line items in that category automatically. Maybe they’ll fix that, otherwise it will be a huge pain for large volume stores. At 10-15 sales a week, it’s at least manageable for me.
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Starting a few weeks ago, all of my PayPal-related info loses the “name” category when it gets imported to GoDaddy. Super annoying. Previously it was able to tell that certain charges were inventory costs, now everything just gets dumped to “Unknown” and I have to sort it out once or twice a week by cross-checking with PayPal.
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IndySales – that sounds awful! Did you try contacting GoDaddy about this problem?
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I’m sure they’re aware of it (I hope?) Last time I called with a problem they had to get an actual programmer on the phone to explain what had gone wrong, so I take it they’re pretty scrappy in their approach to fixing problems and probably just need more time.
My theory is that PayPal has stripped this information for privacy reasons and now a deal has to be worked out between GoDaddy and whoever.
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I noticed an $8 sale today and a payment including tax showed up in my paypal. I thought that was really weird and made a mental note to follow up. Now I read this thread and check all three sales today. Sure enough, each transaction shows the tax collected and the paypal fee INCLUDES the tax. Then there is a separate line that subracts the “tax collected by ebay”.
Why is this all the sudden going through paypal at all??? Why was there no communication on this????????
I feel like I need more question marks. I’m SO incredibly PISSED at ebay recently.
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This is incredibly annoying to deal with during Q4. Time should be spent listing and shipping, not figuring out a new column to add to your spreadsheet for bookkeeping. Ugh.
I’m looking at my financial summary from Paypal for the past 6 days, and it doesn’t show anything about sales tax in the fees section. Is it combined with the normal fees? Is it 0’d out? I’m really confused. I do this manually without GoDaddy Bookkeeping, so I’m not sure what to do right now.
Go into each individual sale and log the sales tax as a separate fee? Or is it 0’d out and not a fee? Will it show up on the 1099k?
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I contacted PayPal and they said:
ME: Jessica, the way PayPal has handled the sales tax situation has thrown a wrench into my accounting system. And I am not the only one. Others are having to deal with this crazy way that PayPal and Ebay have made this really awkward.
PAYPAL: This is not us, this is completely eBay, they are the ones dictating how the amount is coming out of your account so we do not have a way to effect how they are processing the amount.
So I can put your feedback forward but only eBay are the ones that can effect this in anyway.
ME: Do you have anything in writing that is issued by PayPal that explains this situation?
PAYPAL: We do not because this was not a change made by us, it was all through eBay.
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And I contacted Ebay. I was referred to the Seller Hub for this announcement:
seller_news_team
Verified Blogger seller_news_team
Verified Blogger
10-01-2019 12:00:00 PM
Last Edited 10-01-2019 02:53:23 PMAs you may be aware, 11 new states have adopted Internet Sales Tax policies as of October 1, bringing the total to 34 states that now require the collection of sales tax. As the impact of this tax law becomes more apparent, PayPal and eBay are making changes that will make Internet Sales Tax collection less complex for buyers and for you.
Starting in November 2019, the way taxable transactions are processed and how taxes are collected for remittance will change, as follows:
In states where eBay is required to collect Internet Sales Tax from buyers, order totals sent for processing will reflect the gross order amount inclusive of tax.
Once settled, the tax amount will be automatically deducted for remittance to the applicable taxing authority.
A record of the sales tax portion of the order will be available on the Seller Hub Order details page and through our Download order report.
Please note the applicable tax will continue to be paid by the buyer and you do not need to take any action.
We understand that the holiday selling season is nearly upon us and we are working to make this transition as smooth as possible.
Learn more about Internet Sales Tax in the eBay Seller Center. If you have questions about how Internet Sales Tax may affect you, we recommend consulting with your tax advisor, or our partners Avalara and TaxJar.
Note: These changes do not apply to sellers in managed payments.
As always, thank you for selling on eBay.
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Ebay says that the new sales tax issue does not effect those sellers in Managed Payments. However they also say…
“We currently do not support the Global Shipping Program for sellers who are participating in managed payments. However, all non-US buyers can shop and pay on eBay.com as they do today. If they are buying from a seller who has opted into managed payments, the non-US buyer can pay using credit or debit cards (Visa, Mastercard, American Express, etc.) and the seller would ship internationally on their own.”
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Looks like eBay moved as fast as possible to move some of the collection cost to their Sellers, or at least those that accept Paypal.
From the Oct 1 announcement quoted previously and above by Sigilini, this was planned by eBay even though the language in their announcement was less than clear.
So it looks like this week’s changes are intended and permanent.
BTW: SixBit has put out a new release to cope with the new way eBay is handling the sales tax. So those of us with custom book-keeping software or spreadsheets may as well do the same.
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I think you mean income, not profit.
That’s a really good question – my guess is that since they have it in a separate field now, they’ll keep it separate from income come tax time. If not, they and/or ebay are going to have a HUGE problem on their hands in Jan/Feb with thousands of sellers complaining. Of course it will be a problem for us, too, but not one that will take up much time – just calling to complain, and subtracting out the total sales tax from income when filing our taxes. -
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