Sales tax and eBay: A seller’s guide to common questions and tips
While Amazon may be the 800-pound gorilla of online retail, eBay is undoubtedly a powerful selling platform and one of the world’s largest online marketplaces. To wit, eBay reported nearly 1.7 billion listings and 135 million active users across 190 countries in Q3 of 2022.
Whether launching an online business or selling a few personal items, sellers appreciate eBay’s simplified listing process, finance protection tools, and access to a large customer base. Even though eBay makes selling goods easy, many sellers still have questions regarding their responsibilities when it comes to collecting and remitting sales tax. The five we hear most often are the following:
1. Does eBay automatically collect sales tax for me?
For the most part, yes. All states with a general sales tax have marketplace facilitator laws that put the burden of collecting and remitting sales tax on platforms like eBay.
As eBay explains, “Once eBay starts to collect tax in the required states, no action is required on your part, and there will be no charges or fees for eBay automatically calculating, collecting, and remitting sales tax. … Sellers offering delivery in the U.S. are not able … to opt out of eBay automatically collecting sales tax.”
While the above covers most state and local sales tax, eBay may not collect taxes in some home rule jurisdictions. If you’re required to collect in any jurisdictions where eBay does not collect sales tax, you'll need to handle sales tax yourself.
As an online seller, it’s sometimes difficult to determine where you have sales tax obligations. Although nexus rules vary from state to state, an ecommerce business is usually on the hook if it operates a physical office or warehouse, maintains sales representatives, or markets its products in a given state. A sales tax risk assessment can help you determine if you’re meeting your tax compliance obligations.
2. How do I collect and remit tax on eBay sales?
Filing rules differ by state. Most state treasury departments typically require businesses to file on a monthly or quarterly basis. Not submitting returns on time or in accordance with each individual state’s rules may result in fines. Automating this process can make it much easier.
You also create your own, separate sales tax obligations if:
You sell goods outside of eBay’s platform
You have a physical presence (including offices, employees, or inventory) in a state
It’s also important to note that eBay sales may count toward economic nexus thresholds in a given state. So, if you sell through multiple retail channels, you may have to factor your eBay sales into your totals for each state to determine if you’ve established sales tax obligations. You can download a report of eBay sales and tax totals from your Seller Hub Order Details page.
In order to collect sales tax, you must first register and apply for a sales tax permit (also referred to as a seller’s permit or a sales tax certificate of authority) in each state where you’ve triggered nexus. Once you’ve received the permit, you’re legally allowed to collect sales tax on behalf of the state.
3. Does eBay calculate how much sales tax I owe?
It does … in the jurisdictions where eBay has tax obligations.
For the few local jurisdictions in which eBay is not responsible for collecting sales tax, you’re required to figure out how much sales tax you need to collect and remit to local tax authorities.
Refer to each state’s treasury department to determine the correct and most up-to-date sales tax rate — or use an automated sales tax calculation solution.
4. I’m just using eBay to sell a few personal items. Do I need to collect sales tax?
If you’ve decided to use eBay to get rid of your old camping equipment, chances are you’re not obligated to collect sales tax. These types of one-off sales are known as "occasional, casual, or isolated sales," and are often exempt from sales tax.
States often limit tax exemptions for occasional sales based on the number of transactions or the profit earned within a certain time period. For instance, both California and Texas have exemption limits on resales during a 12-month period.
However, not all states impose these kinds of restrictions. Massachusetts, for example, doesn’t specify a number or amount of tax-free casual sales allowed. As the rules regarding occasional sales vary by state, it’s important to research exemptions everywhere you make sales.
With all that in mind, eBay will automatically apply sales tax to sales in states with marketplace facilitator laws, because the tax responsibility is theirs as a marketplace rather than yours as the seller.
5. I want to buy stuff to sell on my eBay store. Do I need to pay sales tax?
Generally, resale items (purchases from a vendor to be resold to an end user) are not subject to sales tax, as it’s assumed that the end user will pay the sales tax on these items. However, in order to purchase these goods without paying sales tax, you’re typically required to supply a valid reseller license or permit to the vendor.
The eBay buyer exemption program simplifies the process if you’re making these types of purchases through their platform.
Avalara is here for you
If all of this sounds a bit overwhelming, don’t worry. Sales tax is rarely simple, but with help from Avalara you can manage sales tax compliance like a pro.
Our small business solution addresses key steps of sales tax compliance, including:
Calculating tax rates
Filing and remitting taxes
This post has been updated; it originally published in March 2016.
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