What eBay Sellers Need to Know About Sales Tax
- Mar 21, 2015 | Ryan O'Donnell
If you're looking for ways to pick up some extra cash, you may very well have glanced around your house and identified a number of items you could sell on eBay. eBay makes it so easy for newbies to get started that some people make a lucrative profession out of "flipping," or buying things at local sales and reselling them for a profit on eBay. Regardless of whether you're selling the dog sweaters you knit, or the occasional antique silverware that you find at a yard sale, as an eBay vendor you can't afford to ignore sales tax.
What are casual sales?
Casual sales refer to any transaction in which you sell something for a profit that is outside the ordinary line of business that you conduct. Many state revenue websites give examples similar to this one, provided by the Connecticut Department of Revenue Services: "A grocer selling his cash register or an insurance company selling a typewriter." This may sound simple, but there are many more layers. Even that Connecticut site goes on to list six other categories of items that fall under the term "casual sales."
Do I have to collect sales tax for my casual sales?
Whether you need to collect sales tax on casual sales depends entirely on the state in which you live (and on any other states in which you sell or store items). Some states, like Ohio, exempt all casual sales from taxation except for vehicle sales. Ohio has very specific laws about paying sales tax on vehicle transfers, however, even if you barter for the vehicle or don't make any money when you sell it.
Other states, like Washington, pay attention to casual sales only when they're made by someone who is a licensed vendor with the state.
New York, by contrast, requires anyone who sells anything to remit sales tax to the state, and they even provide a special form for a non-registered vendor to remit. Every state has entirely different reporting rules, so as an eBay seller it is your responsibility to learn which laws apply to casual sales in your state.
Regular eBay sellers need to register with their state
If you customarily earn money by selling items on eBay, then you are running a business and the items you sell are not considered casual sales - even if you sell roller skates one day and kitchenware the next. As a retailer in your state, you must register as a vendor, collect sales tax from your in-state customers, and remit that tax on a certain schedule. Each state has their own schedule for sales tax reporting, which is often based on your gross expected sales; some states require that you report even if you made no sales during that period.
Learn your home state's taxing regulations
Since you have to charge sales tax when you sell to non-exempt customers in your state, you have to know whether to charge the tax rate that's current in your own neighborhood or whether to charge the rate that applies to your customer's neighborhood. The states are divided in how they handle this question. Also, taxing districts don't necessarily follow city and county boundaries, so you'll need to check your state's maps.
Another crucial point for an eBay seller to look up are the laws that govern whether you are required to charge sales tax on shipping. You may be required to list shipping separately in order to avoid charging sales tax on it.
Selling through eBay can provide an outstanding second income, and it's worthwhile to do your research and handle tax collection in a thoroughly legal manner. That way, you'll be able to face any possible audit with complete confidence, and you'll be building a strong foundation for the future of your business.