eBay has announced that beginning in November there will be changes to how Ebay collects taxes on sales, as a majority of states now require Internet sales tax to be charged for online purchases. (See below for list of states requiring Internet sales tax.) In a letter to eBay sellers, eBay claims that they and sister company PayPal are “making changes that will make Internet Sales Tax collection less complex for buyers and for you.”
Primarily these changes will affect eBay buyers who live in a state that requires that Internet sales tax be collected whenever one of their residents purchases something online. However, with a majority of the states now requiring the collection of Internet sales tax, that means, generally speaking, that the majority of eBay buyers will have sales tax tacked on to their eBay purchases.
List of States Requiring Internet Sales Tax be Collected as of October 2019
Alabama
Arkansas
California
Colorado
Connecticut
District of Columbia
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Nebraska
Nevada
New Jersey
New York
North Carolina
North Dakota
Ohio
Oklahoma
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Washington
West Virginia
Wisconsin
Now, while this of course impacts eBay buyers, as they will have sales tax added to their eBay purchases, the collection of sales tax on eBay purchases also affects sellers, although in a less obvious way.
One of the advantages that many eBay and other online sellers have had over the years is that they didn’t charge sales tax, making purchasing from them more attractive as compared to buying the same product from an outlet that did add on sales tax. In many cases, for many purchases, not paying that sales tax made the product less expensive even when factoring in shipping charges, and especially if shipping was free.
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Of course, the handwriting has been on the wall for a while. We first started covering the march to an Internet sales tax as far back as 2005, when Wisconsin contemplated a tax on Internet downloads such as audio books, through recent events, culminating in the Wayfair decision, in which the Supreme Court said that “The Court will sustain a tax so long as it (1) applies to an activity with a substantial nexus with the taxing State, (2) is fairly apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly related to the services the State provides.”
What eBay is doing
As eBay explains in their letter (see below), with the majority of states now imposing Internet sales tax on online purchases, eBay will be:
- automatically adding sales tax to any purchase made by a buyer who is a resident of one of those states
- deducting that sales tax from the buyer’s payment and sending it to that state
- passing the original purchase amount, minus that sales tax, on to the seller.
Here is eBay’s letter which they sent to sellers:
As 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.
As always, thank you for selling on eBay.
Sincerely,
eBay Team
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