A dependable platform to handle the blocking and tackling of your eCommerce sales can be a real lift to your online business. Companies, many of them now well-known, have sprung up to provide just this service.
A marketplace facilitator is a platform where third-party sellers of any size and location can facilitate retail sales by listing their products. These companies process payments, collect receipts and might help with shipment – and assume the collection and remittance of sales tax. Household names among facilitators include Amazon and Etsy.
(Marketplace facilitators do face the same sales tax challenges in many states as eCommerce companies do. Revenue departments have realized that platforms like Amazon were taxing sales of their products but not necessarily charging sales tax on sales.)
Thirty years ago, a “facilitator” appeared with the initial homespun mission of helping people sell individual valuables. Since 1995, of course, eBay has become a lot more – and with this platform’s growth has come the need to field sometimes complex sales tax obligations.
eBay tax management
The now-famous auction site collects and remits sales tax for buyers (including a growing number of companies and non-individual sellers) in many states. If the shipping address is in one of eBay’s marketplace responsibility states within the U.S. – i.e., one of the states with a statewide sales tax, plus Alaska – eBay collects the sales tax and includes it in the order total. If the shipping address isn’t in one of the marketplace responsibility states but the seller has a responsibility to charge sales tax, eBay provides tools to calculate taxes.
(If neither eBay nor the seller is required to collect sales tax on the purchase, sellers may need to pay taxes directly to the state or local tax authority.)
eBay tries to make sales tax as easy as possible considering the platform is not a specialist in the subject. The sales tax guide for eBay offers a quick overview of sales tax in the U.S. and notes that “eBay collects and remits Internet Sales Tax” for sellers. Among other points covered:
- In jurisdictions 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 taxing authority.
- eBay collects sales tax only on the sale price of an item, not on any fees sellers pay to eBay, and collects sales tax on shipping and handling in states where it’s applicable.
Seller sales tax tools include a “Seller Hub Order” details page and a drop-down FAQ page that covers, among other topics, tax-exempt buyers and exemption certificates and eBay’s system to handle them. The site also has a state-by-state table for sales tax information, with additional filters for the buyer’s type of entity.
“Please note,” eBay adds to sellers, “the applicable tax will continue to be paid by the buyer and you do not need to take any action.”
Nevertheless, the platform isn’t yet a complete solution for sales tax management, admitting on the FAQ page that its still working on sales tax reporting tools and a table for differing sales tax rates within individual states, as well as on partnerships with sales tax service providers.
“If you are selling on eBay as a business,” adds the platform’s FAQ page, “we strongly recommend seeking professional advice about your tax obligations.”
Sound advice whenever dealing with sales tax.
If you think your business may be impacted by sales tax developments, contact TaxConnex. TaxConnex provides services to become your outsourced sales tax department. Get in touch to learn more.
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