eBay Sales Tax: A Complete Guide for Sellers

For many online sellers, eBay is the perfect place to start your eCommerce business. Getting started is easy, but  eBay sales tax can confuse many new sellers.

Check out our in-depth post on eCommerce sales tax for more general info on the subject.

eBay Sales Tax Overview

Sales tax is a state levied tax, so policies vary significantly depending on where you live.  Most states impose some kind of sales tax on goods sold, but there are a few exceptions, including  Alaska, Delaware, Montana, New Hampshire, and Oregon.

However, most Americans live in a sales tax state, so most online transactions will impose some sort of sales tax requirement on the seller. As an online seller, it is your responsibility to comply with your sales tax responsibilities, and eBay sales tax is no exception.

It is important to note that each state views the sales tax of online goods differently. Some apply sales tax at the point of origin and some apply sales tax where the buyer is located.  In addition, recent legislation in 2018 established that you do not need to have a physical presence in a state to owe sales tax. This is why it is important to do your research on eBay sales tax early on, and set your listings up accordingly.

sales tax map

What are My Tax Responsibilities as an eBay Seller?

Due to the recent internet sales tax regulations, sellers have a few fewer tax responsibilities. However, sellers do need to be aware of their income tax obligations. If you operate a full-time shop on eBay with consistent sales, you will be liable for income tax. However, if your operations on eBay are more akin to a sporadic yard sale or garage sale, then typically the income is tax-free because you are reselling goods for less than you paid for them.

eBay may or may not issue you a 1099-K. Previously eBay was only required to issue a 1099-K if you reach over 200 transactions and over 20K in revenue. However, thanks to new IRS regulations, sellers will receive 1099s from eBay if they earn more than $600 on the platform starting in tax year 2024.

Learn more about the 1099 change in our article on Amazon 1099 forms. 

Regardless of whether your receive a 1099-K, you must accurately report any business income to the IRS. They’ll know if you hold back because they also receive a copy of the 1099-K.

However, small-time sellers who are offloading their used goods may not be responsible for taxes on the sales. Most used items are sold at a loss, so there’s no taxable income generated from the event. Consult with your tax advisor to see where you stand.

Does eBay Automatically Deduct Taxes?

Yes, as of our latest update to this post, eBay automatically collects sales taxes where applicable. However, it wasn’t always this way. In fact, eBay left the responsibility for collecting & remitting sales tax on the user until a recent Supreme Court case set a new landmark in eCommerce tax policies.

In 2018, a Supreme Court ruling in South Dakota v. Wayfair compelled online sellers like eBay to automatically calculate, collect and remit sales tax for most states. Prior to this ruling, eBay required users to set up a tax table and apply it to their listings to calculate sales taxes. The old system required you to input each state’s tax rate and determine which states imposed sales tax on shipping and handling.

However, after the new internet sales tax regulations, eBay collect sales tax on all orders to states with sales tax laws, as well as sales outside of the US. This process is much more streamlined for sellers, although it comes at the cost of less control over their cash flow.

Where Can I Find Sales Tax Totals on eBay?

eBay sales tax totals are important to be aware of. This information is available on your sellers’ hub. You can also find information on related sellers and processing fees on your sellers’ hub as well. This information is important when it comes to seeing which deductions you can qualify for. As an online seller, eBay processing fees are an ordinary and necessary business expense and therefore may qualify as a tax deduction.

ebay sellers hub

How to Pay Sales Tax on eBay

For the most part, eBay is now calculating, collecting, and remitting sales tax for purchases made in most states. However, if you need to remit sales tax for states that are not included, or for other selling platforms, the easiest and most secure way to pay your tax bill is online.

Most state that charge sales tax want to make the process of paying your sales tax as easy as possible, and therefore allow you to make payments online. You can find more information on how to pay taxes in each state here.

Third-Party Tools for eBay Sellers

When it comes to paying eBay taxes there are a couple of programs that make eBay taxes a lot easier. For example, Avalara and Tax Jar integrate seamlessly with eBay and greatly simplify tax & compliance on the platform.

ebay sales tax chart

Avalara for eBay Tax Compliance

Avalara is a great program for tax compliance. The program monitors your sales and establishes whether or not you have a physical presence or nexus in any given state, city, or jurisdiction. This determines if and where you are required to collect sales tax. When the nexus is determined, Avalara can help you register with each tax board you are liable to. In addition, Avalara stays up to date on the latest tax rates and changes and applies for applicable exemptions. This helps assure accuracy, which in turn helps prevent fees and penalties. Avalara can also automate the whole process which saves you time, money, and headache. Some key benefits of Avalara are:

  • Ease of use
  • Offers in-person training
  • Assists with calculating use tax in addition to sales tax
  • Assists with calculating value-added tax
  • Excellent customer service
  • Over 700 + integrations including eBay and Quickbooks online

Tax Jar for eBay Tax Compliance

Tax Jar is another great program that can make your tax compliance simpler. Tax Jar monitors over 14,000 tax jurisdictions for the most accurate and up to date tax rates. This ensures you are collecting and remitting the right rate on every product sold in each jurisdiction you have nexus. Tax Jar can also help you establish where you have nexus and automate the process of collecting and remitting sales tax so you can stay compliant.  Some key benefits of Tax Jar are:

  • Offers free 30-day trial
  • Lightning fast, uploads are updated within minutes or hours
  • Excellent customer support
  • Easy to understand interfaces
  • Great for multi-channel sellers
  • Boasts an over 99% accuracy rate

Staying compliant and keeping up with your tax obligations is the best way to avoid a surprise tax bill or, worse yet, an IRS audit. The tools mentioned above can help you maintain these standards, but they’re only two examples. There are many more third-party tools for eBay sellers that can simplify your obligations as a seller.

Closing Thoughts

eBay has greatly improved its sales tax management features in recent years, but doin business across state lines still has the potential to complicate your tax situation. We advise you to consult with a state and local tax specialist to get more personalized advice on your unique tax situation. Proper tax planning can slash your tax bill & protect your from IRS scrutiny.

Tax Hack specializes in SALT strategies for online sellers. Our tax pros are masters of strategic tax planning, and they can help you save big with the R&D tax credit and other valuable incentives. Get started now with a complimentary one-on-one strategy session with one of our tax pros using this link to see how much you can save with Tax Hack.

About the Author

Miguel Alexander Centeno

Miguel Alexander Centeno is an author, speaker, and tax leader at Tax Hack Accounting Group. A former Big 4 tax manager, he represents taxpayers in all matters before the IRS, including the U.S. Tax Court. He has been quoted in the Wall Street Journal, Fox Business, and MSNBC on tax related articles and has testified before the U.S. House of Representatives as a part of hearings for the Tax Cuts and Jobs Act. A father of three, Miguel is an avid acoustic guitar player, gravel cyclist and once-a-week yogi.
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