eBay Sales Tax Treatment in the US

eBay now collects the tax due ‘ marketplace facilitator law’. 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. 


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. Shopify merchants have to find the tax liability nexus and product taxability in that state. 


As an eBay seller, you have to comply with all 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.


The sales tax treatment is us for eBay sellers or any other eCommerce seller 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 the eBay sales tax policy is:


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 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 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. Shopify tax treatment is more complex for Shopify merchants than the normal retailer.


What we would try to explain


  • Tax liability and nexus finding

  • 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.

Shopify 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

  1. Sale tax Nexus:

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 state, 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 requirment

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:


Marketplace facilitator law: 

 

No there is a marketplace facilitator law in many states that make the marketplace such as Amazon, Shopify, eBay, etc has the responsibility to collect on behalf of the seller.


  1. 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.

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