Navigating Sales Tax When it Comes to Selling Products on eBay
For online sellers, eBay is a great platform to offer your goods up for sale. They have an excellent reputation, generate a lot of traffic, and are user friendly, making the whole online selling process easy to understand. Because of this, many online sellers find it the perfect place to get started. Once you get your listings up and running the process is pretty straightforward. However, there is one area that causes a lot of confusion for online sellers and that is eBay sales tax.
Is There Sales Tax on eBay?
Sales tax is a tricky thing in and of itself. The reason why sales tax can be so tricky is that it is a state levied tax. This enables each state to enact its own laws in regards to sales tax. Most states impose a sales tax on goods sold with the exception of Alaska, Delaware, Montana, New Hampshire, and Oregon who do not have sales tax. If you sell goods in any of the 45 states that do impose sales tax, you will be responsible for collecting and paying that state’s sales tax.
As an online seller, it is your responsibility to find out if you are responsible for eBay sales tax. 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.
Does eBay Automatically Deduct Taxes?
After the recent Supreme Court ruling in 2018 regarding internet sales tax, eBay will automatically calculate, collect and remit sales tax for most states. Prior to this ruling, if you wanted eBay to collect sales tax at the time of sale you had to set up a tax table and apply it to your listings. This 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 will now collect sales tax on all orders to states that charge internet sales tax as well as sales outside of the US. Sellers can view records of all eBay sales tax on their sellers’ hub.
What are My eBay Tax Responsibilities?
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. In addition, it is important to note that eBay may or may not issue you a 1099-K. eBay is only required to issue a 1099-K if you reach over 200 transactions and over 20K in revenue. If you do receive a 1099-K, it is important to accurately report the income to the IRS, as they also receive a copy of the 1099-K.
Where Can I Find My eBay Sales Tax Totals?
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.
How to Pay eBay Sales Tax
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. For more information on how to pay taxes in each state click here.
Tools That Can Simplify Paying eBay Taxes
When it comes to paying eBay taxes there are a couple of programs that make eBay taxes a lot easier. Avalara and Tax Jar are two great programs that integrate seamlessly with eBay, making the whole process of paying eBay taxes and staying compliant less of a chore. Staying tax compliant is the best way to avoid a surprise tax bill, unnecessary penalties, or even a tax audit. Having a program that helps you stay compliant is priceless to your business and your peace of mind.
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
More eCommerce Tax Tips
When it comes to conducting business across state lines, your tax situation gets a little confusing. This is why working with a tax advisor who specializes in SALT (state and local taxes) is crucial. Having a sound tax strategy can save you a lot of money at tax time, so schedule a strategy session with one of our experts today. Subscribe to our tax tips newsletter below for regular updates on the latest small business tax news.