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Why and How Sellers Should Use eBay Tax Tables

  • Apr 30, 2016 | Laura McCamy

eBay doesn’t take responsibility for collecting or remitting sales taxes from sales on its site -- this job falls squarely in the lap of the seller. The ecommerce powerhouse does offer a great tool to help you stay on top of your sales tax obligations. Here are a few tips for online sellers about eBay tax tables.

A few fast facts about online sales tax

While some think of the Internet as a tax-free zone, this was never the case. And it is becoming less and less true as states create new regulations to govern online sales taxes. At a minimum, you have sales tax nexus in one state: the state where you are based. If you run your business in one of the 45 states (and the District of Columbia) that has a state sales tax, you need to register and pay sales taxes on the sales you ship from your eBay store to your home state.

You will need to collect taxes on sales to other states where you have nexus as well. Things that might give you nexus in another state include renting warehouse space in that state; working with an employee, salesperson, or contractor based in another state; or engaging in affiliate or click-through selling. In addition, if you also have an Amazon store and use Amazon FBA for shipping, your goods in Amazon warehouses may give you nexus in additional states.

Right about now, you may be thinking that it would be easier to just sell your products on eBay with the sales tax included in your prices. The math to back out sales taxes is actually more complex than adding sales tax on top of the price, so there’s no relief here if you are math-phobic. Plus, paying sales tax out of your sales price will eat into your bottom line. In the long run, your business finances will be easier to manage if you add sales taxes on top of your prices.

The good news is that eBay tax tables are easy to set up and to customize to fit your particular sales tax obligations.

When to set up eBay tax tables

The best practice is to start using eBay tax tables as soon as you set up your eBay store. If you start selling without setting up tax tables, you might have sales that don’t include the applicable sales taxes. When that happens, you still owe those taxes but now they come out of your pocket.

In addition, your eBay tax table settings only affect the listings you add after you create your tax table. To apply your tax rates to listings that were already live, you will need to relist or revise them. Similarly, one downside is that, any time you need to change your tax table, you will need to revise or relist the items you have live at that time because changes don’t affect live listings.

The ecommerce site has clear instructions about the process that take you through each step to set up or change your eBay tax table.

Know your sales tax rates

While the eBay tax table makes it easy for you to collect sales taxes in the states where you have nexus, you still have some homework to do. The default tax rates in the tax table may not be right for you, so you need to understand the correct tax rate to assign in each state.

For states like Michigan, Pennsylvania, and Idaho, all of which charge one flat sales tax rate for the whole state, the default rate in the eBay tax table will work perfectly.

Sellers in California, however, need to charge their California customers a rate based on their location, since California is an origination-based state. So an ecommerce seller in Sacramento will charge 8.5 percent sales tax while one based in San Diego will charge 9 percent. If you have nexus in California or any state with a multitude of different local sales tax rates, you will need to edit your eBay tax table to set the rate that applies to you.

If you have nexus in a destination-based state like New York, figuring out the right rate to charge is a bit trickier. The eBay tax table requires you to pick one rate per state; it’s not sophisticated enough to calculate different rates based on the shipping address of each customer. There is no perfect way to handle sales tax on eBay in a destination-based state, but a good practice is to calculate the average rate you have owed in that state based on past sales and set that average as your rate in the eBay tax table.

Sales tax on shipping charges

A number of states require ecommerce sellers to add sales tax on shipping, not just the price of the merchandise. The default in eBay tax tables is not to add sales tax to shipping and handling. Be sure to click the box in the tax table to charge tax on shipping and handling, if you need to collect sales tax in a state that requires this.

The eBay tax tables are a great tool for online sellers, but they won’t do your homework for you. You still need to understand your tax obligations, including rates, regulations, and filing dates. Tax compliance software that interfaces with the eBay platform can make this task much easier.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Laura McCamy
Avalara Author Laura McCamy

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