eBay now collects the
tax due ‘marketplace facilitator law’. Based on applicable tax laws, eBay will calculate, collect and
remit eBay sales tax on behalf of sellers for items shipped by eBay to
customers in certain states.
For Sales tax purposes eBay sellers are treated as a
retailer whether online or in physical stores. Sales tax is a reality. Being an
eBay seller, you have to find tax liability, in which state its falls, and
whether you have to collect taxes or not.
eBay due to marketplace
facilitator law as has a tax automation system, submit your taxes to
authorities. If the eBay seller-buyer is in a different state eBay seller has
to comply with the ta authority himself. eBay sellers have to find the tax liability nexus and product taxability in
that state.
As an eBay seller, you
have to comply with all eBay sales tax laws and rules and regulations. If you
are selling through eBay in US to the customer outside the country, you have to
inform them about the potential import tax they would bear.
eBay sales tax treatment in US is complex, as every state has its own rules and
regulation when it comes to sales tax collection.
What we will explain
·
eBay seller responsibility according to eBay sales Tax policy
·
Types of taxes eBay sellers might be subjected to
·
Destination-based states
·
Does eBay collect Tax for its seller?
·
Physical and economics Nexus.
·
Table for nexus identification and rates
·
Product taxability.
·
Marketplace facilitator law
·
Sale tax compliance
·
Sale tax registration and
What is eBay sales tax policy?
As an eBay seller, you
have to comply with all sales tax laws and rules regulations. If you are
selling through eBay in us to the customer outside the country, you have to
inform them about the potential import tax they would bear.
The two main points from eBay policy relating
to eBay seller and sales tax are
·
Based on applicable tax laws, eBay will calculate, collect and
remit sales tax on behalf of sellers for items shipped by eBay to customers in
certain states.
·
Once eBay starts to collect tax in the required states, eBay
seller has nothing to do with their liability and is discharged regarding this
sale tax. eBay charges no fees. eBay automatically calculates, collects, and
remits eBay sales tax.
·
The collection process will apply to all sales with delivery in
the required states whether the seller is located in or outside of the United
States.
·
Sellers offering delivery in the US are not able to opt out of
eBay automatically collecting sales tax.
Based on the state in
the US and various countries such as Australia, New Zealand, the UK, and the
European union you are subjected to.
·
Sale tax on products and services.
·
Value addition tax
Destination-based Tax:
There are some states
that charge eBay sale tax based on your buyer's location. For this, you might
have to find the tax rate and charge sale tax to the nexus and the state where
the buyer is located.
For Example
“Let’s
say you live and/or sell in Columbia, South Carolina. You sell a taxable
product to a customer in Chesterfield, SC. According to the State of South
Carolina Department of Revenue, you are
required to charge that customer 8% sales tax. That 8% is the sum of the state
rate of 6% [South Carolina] PLUS a 2% local tax [Columbia].” - TaxJar
The US state's authority
also needs you to have a tax permit before the collection of any sale
tax.
eBay being the concept
of a new era brings technicality to the related services such as accounting,
taxation legality many more. eBay tax treatment is more complex for eBay
merchants than the normal retailer.
What we would try to explain
·
Tax liability and nexus finding
·
eBay Sale tax registration
·
Compliance with sales tax law
·
Where to submit sales taxes, you have collected
Sales taxes are indirect
taxes collected by the seller from the end consumer and submitted to the
government.
Tax liability finding
Before
you set up US taxes, you need to determine sales tax liability, which means whether
you are required to collect tax from your customer and submit it to the state
tax authority.
eBay merchant like other
E-commerce sellers is considered retailers for the purpose of sales tax. They
have to collect taxes, file the sale tax return, and submit the taxes collected
from their customer. Every eBay seller is liable to collect tax when they meet
certain criteria:
1.
Sale tax nexus
2.
The product is either taxable or exempt
Sale Tax Nexus for eBay Taxes
This is a legal word
used to represent the connection between taxpayers and the state before the
state has the responsibility to tax taxpayers. In other words, it is the
jurisdiction of the state to collect and impose a tax on taxpayers. If you're
an us-based merchant you probably have tax liability in your own state, because
of physical nexus.
Frequent sales in a particular state create nexus in the same state this is
termed an economic nexus. Economic nexus is the threshold of the monetary value
of sale set by the state to fall in the nexus of the same state.
In the United States, the sale tax charge ability is affected by several
factors, such as;
·
The location product is shipped from
·
The location product is shipped to
·
Registration with the tax authority
·
Product taxability
·
Any exemption
Through the supreme
court 2018 decision, physical presence was required in the state for sale tax
and USA tax nexus.
Being an eBay seller if you are in-state nexus, you have to collect tax from
your buyers for the state. One always has tax nexus in their home town but some
states have broad definitions, Conditions, and circumstances for physical
nexus, this might include any of the following:
·
Inventory: If you have an inventory store located in the state
even though you don’t have business management and further business activity
you are considering in the same state nexus.
·
Business employees: if you have employees, a sales force
contractor, and another person responsible for running your business
activities.
·
A drop shipper: if you have a drop shipping relationship with
someone who resides in the state you have nexus in that state too.
·
Trade event and festival sale: Some states consider the
temporary sales to have nexus
·
Affiliate: Someone who advertises your product and taxes part of
the profit in some states it also creates nexus.
·
Economic nexus: if you exceed the monetary threshold of sale set
by the state. The nexus of the business is considered in the same state.
State |
Tax Basis for resident
Sellers |
Tax Basis for Remote
Sellers |
economic Nexus
Threshold in $/per Annum* |
Link to Official Site |
Average Combined Tax |
No. of Jurisdictions |
Shipping &
Handling Tax |
Register Permit
requirement |
Alabama (AL) |
Destination |
Destination |
$250,000+ |
AL |
8.36% |
805 |
Here |
|
Alaska (AK) |
Destination |
Destination |
$100,000+ |
AK |
1.54% |
109 |
1 |
Here |
Arizona (AZ) |
Origin |
Origin |
$100,000+ |
AZ |
Calculate |
131 |
Here |
|
Arkansas (AR) |
Destination |
Destination |
$100,000+ |
AR |
8.57% |
400 |
1 |
Here |
California (CA) |
Destination |
Origin |
$500,000+ |
CA |
8.26% |
401 |
Here |
|
Colorado (CO) |
Destination |
Destination |
$100,000+ |
CO |
6.47% |
305 |
1 |
Here |
Connecticut (CT) |
Destination |
Destination |
$100,000+ |
CT |
6.35% |
2 |
1 |
Here |
Delaware (DE) |
Destination |
Destination |
DE |
0.00% |
0 |
Here |
||
District of Columbia
(DC) |
Destination |
Destination |
$100,000+ |
DC |
6.00% |
1 |
1 |
Here |
Florida (FL) |
Destination |
Destination |
$100,000+ |
FL |
6.82% |
67 |
1 |
Here |
Georgia (GA) |
Destination |
Destination |
$100,000+ |
GA |
7.33% |
162 |
1 |
Here |
Hawaii (HI) |
Destination |
Destination |
$100,000+ |
HI |
4.24% |
4 |
1 |
Here |
Idaho (ID) |
Destination |
Destination |
$100,000+ |
ID |
6.04% |
12 |
Here |
|
Illinois (IL) |
Origin |
Destination |
$100,000+ |
IL |
Calculate |
635 |
1 |
Here |
Indiana (IN) |
Destination |
Destination |
$100,000+ |
IN |
7.00% |
1 |
1 |
Here |
Iowa (IA) |
Destination |
Destination |
$100,000+ |
IA |
6.89% |
1028 |
Here |
|
Kansas (KS) |
Destination |
Destination |
(All sellers) |
KS |
8.05% |
594 |
1 |
Here |
Kentucky (KY) |
Destination |
Destination |
$100,000+ |
KY |
6.00% |
1 |
1 |
Here |
Louisiana (LA) |
Destination |
Destination |
$100,000+ |
LA |
9.58% |
388 |
Here |
|
Maine (ME) |
Destination |
Destination |
$100,000+ |
ME |
5.50% |
1 |
Here |
|
Maryland (MD) |
Destination |
Destination |
$100,000+ |
MD |
6.00% |
1 |
Here |
|
Massachusetts (MA) |
Destination |
Destination |
$100,000+ |
MA |
6.25% |
1 |
Here |
|
Michigan (MI) |
Destination |
Destination |
$100,000+ |
MI |
6.00% |
1 |
1 |
Here |
Minnesota (MN) |
Destination |
Destination |
$100,000+ |
MN |
7.18% |
98 |
1 |
Here |
Mississippi (MS) |
Origin |
Destination |
$250,000+ |
MS |
Calculate |
3 |
1 |
Here |
Missouri (MO) |
Origin |
Destination |
(None) |
MO |
Calculate |
1491 |
1 |
Here |
Montana (MT) |
Destination |
Destination |
(None) |
MT |
0.00% |
10 |
Here |
|
Nebraska (NE) |
Destination |
Destination |
$100,000+ |
NE |
5.86% |
252 |
1 |
Here |
Nevada (NV) |
Destination |
Destination |
$100,000+ |
NV |
7.78% |
19 |
Here |
|
New Hampshire (NH) |
Destination |
Destination |
$50,000+ |
NH |
0.00% |
0 |
Here |
|
New Jersey (NJ) |
Destination |
Destination |
$100,000+ |
NJ |
6.63% |
2 |
1 |
Here |
New Mexico (NM) |
Origin |
Origin |
$100,000+ |
NM |
Calculate |
145 |
1 |
Here |
New York (NY) |
Destination |
Destination |
$500,000+ |
NY |
8.19% |
78 |
1 |
Here |
North Carolina (NC) |
Destination |
Destination |
$100,000+ |
NC |
6.90% |
106 |
1 |
Here |
North Dakota (ND) |
Destination |
Destination |
$100,000+ |
ND |
5.51% |
154 |
1 |
Here |
Ohio (OH) |
Origin |
Destination |
$100,000+ |
OH |
Calculate |
96 |
1 |
Here |
Oklahoma (OK) |
Destination |
Destination |
$100,000+ |
OK |
7.86% |
594 |
Here |
|
Oregon (OR) |
Destination |
Destination |
OR |
0.00% |
0 |
Here |
||
Pennsylvania (PA) |
Origin |
Destination |
$100,000+ |
PA |
Calculate |
3 |
1 |
Here |
Rhode Island (RI) |
Destination |
Destination |
$100,000+ |
RI |
7.00% |
1 |
1 |
Here |
South Carolina (SC) |
Destination |
Destination |
$100,000+ |
SC |
7.36% |
46 |
1 |
Here |
South Dakota (SD) |
Destination |
Destination |
$100,000+ |
SD |
5.60% |
258 |
1 |
Here |
Tennessee (TN) |
Origin |
Destination |
$100,000+ |
TN |
Calculate |
129 |
1 |
Here |
Texas (TX) |
Origin |
Destination |
$500,000+ |
TX |
Calculate |
1659 |
1 |
Here |
Utah (UT) |
Origin |
Destination |
$100,000+ |
UT |
Calculate |
321 |
Here |
|
Vermont (VT) |
Destination |
Destination |
$100,000+ |
VT |
6.04% |
16 |
1 |
Here |
Virginia (VA) |
Origin |
Destination |
$100,000+ |
VA |
Calculate |
175 |
Here |
|
Washington (WA) |
Destination |
Destination |
$100,000+ |
WA |
8.76% |
385 |
1 |
Here |
West Virginia (WV) |
Destination |
Destination |
$100,000+ |
WV |
6.10% |
62 |
1 |
Here |
Wisconsin (WI) |
Destination |
Destination |
$100,000+ |
WI |
5.46% |
76 |
1 |
Here |
Wyoming (WY) |
Destination |
Destination |
$100,000+ |
WY |
5.29% |
24 |
Here |
Market Place
Is the platform where
many sellers offer their products. Some states define economic nexus based on
the marketplace.
Here is some marketplace
that might be considered for determining the economic nexus:
·
Google
·
Amazon
·
Shopify
·
Best buy
·
Etsy
·
Newegg
·
Facebook
·
eBay
Marketplace Facilitator Law:
No there is a
marketplace facilitator law in many states that make the marketplace such as
Amazon, Shopify, eBay has the responsibility to collect on behalf of the
seller.
Product Taxability
Now if you have
confirmed your nexus fall in which states the next criteria is to check for
product taxability, whether the product you are selling is taxable or
not. All tangible products are taxable and the non-tangible that is
services are nontaxable. But there are exceptions depending upon the state.
There are products that are either not taxed or taxable at different rates.
There
are states that offer product-specific exemptions for categories including food,
clothing, prescription medicines, and medical (prosthetic) devices. Those
states that don't provide a complete exemption for these items often impose a
lower tax rate on them.
Sales Tax Compliance
Once
you have found the right nexus, now you have to register with that state. In,
order to collect the tax you have to register otherwise it is considered
illegal to collect tax without registration.
Once
you get registered you get a permit, frequency, and due dates for filling the
sale tax return. The filling frequency may be monthly, quarterly, or annually
depending upon your sale volume.
As the
volume of your sale increases more states want you to file taxes fatly. In
other words, the frequency of sale return is correlated with your sale volume.
To comply with sale tax it's a technical exercise you need an accountant/Bookkeeper to
make tax compliance on your behalf.
Reports and Filing
If eBay
has collected the sale tax due to the marketplace facilitator, and remitted it
to the authorities then you are not required to submit a report.
Online Filing
By
logging in to tax authority
software through the registration you can file a sale tax return. It can also
be done automatically through accounting software.
Things
to remember:
·
File the tax return in the state you have a
permit even if the marketplace is collecting it for you.
·
Always file a tax return “Zero returns” even if
you don’t have collected sale tax. States required all having permits to file
sale tax returns whether they have collected sale tax or not.
Important resources
Amazon
Sales Tax Treatment in the US
Shopify
Sales Tax Treatment in the US
eBay
Sales Tax Treatment in the US
How
Etsy sellers will report their Income to the IRS