mtn
mtn MegaDork
1/7/20 6:12 p.m.

Got a bunch of stuff I'm going to throw on ebay in the coming week. I've always done free shipping on auctions, figuring that ultimately the price that people pay is the price that people pay. 

Now that they're collecting sales tax, do they collect it on the shipping? Would it make sense to charge a flat rate for shipping to decrease the sales tax, hence the overall payment to the buyer? 

 

Not trying to pull any funny business, but I don't know how the new sales tax works - I do know that if I were regularly buying on ebay, I'd figure it out and factor that into my bids. But most people probably don't put as much thought into this as I do.

Patrick
Patrick MegaDork
1/7/20 6:46 p.m.

Ebay is collecting it before it hits me.  I've been using flat rate boxes and charging a hair over the rate to make up for ebay taking 10%.  Doesn't seem to be slowing people from buying 

Keith Tanner
Keith Tanner MegaDork
1/7/20 7:03 p.m.

Basically, there's a new Supreme Court decision that means that you now have to pay sales tax on online purchases. There's a minimum threshold that a seller has to hit to reach "nexus" and start collecting tax, which is why you may not see it on some small vendors or on vendors that are sticking their heads in the sand and hoping they don't get caught. Look up the Wayfair decision if you want to know more.

eBay, being the size they are, have decided that they have nexus basically everywhere and that they are the seller of record (I guess) so they have to collect tax. And the definition of that tax is determined by the state where the products are being shipped. Or the county. Or the town. Or all three. Or, in Lousiana, things are really crazy. So now online vendors have to have tax calculation software that will go right down to the rooftop (I get charged a different rate than the guys over my back fence, because I'm not in the city and they are) and they have to submit tax returns basically everywhere. It's a huge extra expense and overhead for online sellers, let me tell you.

To answer the direct question, I don't think it usually applies to shipping. But it's going to vary depending on the destination.

imgon
imgon HalfDork
1/7/20 7:21 p.m.

I just bought a set of wheels and they were free shipping.  Got dinged $25 on a $400 purchase, if they had charged shipping it probably would have been $320/$80 and tax would have been $18.75. On expensive and/or heavy/hard to ship items separating the shipping might be a significant tax advantage. This was my first time getting wacked for sales tax on ebay,  was a bit surprised, must have been something in one of those 80 emails I deleted from them about collecting it.

wae
wae UltraDork
1/7/20 8:01 p.m.

Here's the really nifty part...  Not only does your buyer have to pay sales tax but that sales tax is combined in the final value and deposited into your PayPal account.  It is then immediately removed from Paypal and sent back to eBay who pinky-swears to submit the tax to the appropriate taxing authority.  But you just paid the PayPal fee on the sales tax amount.  So whatever the buyer's sales tax winds up being, you pay 2.9% of that.  Sell a $500 final value to someone with a 7% sales tax?  Your profit just went down by a buck.

As to if the sales tax gets charged on shipping, it might depend on the taxing jurisdiction.  I'm pretty sure that in the Commonwealth of Kentucky we are required to pay sales tax on shipping fees so $400 with free shipping or $320 with $80 shipping would get taxed either way.

Cooter
Cooter UltraDork
1/7/20 8:19 p.m.

It is no different than accepting a credit card payment at a brick and mortar.   The CC company will take their percentage off the total sale including tax.    The difference is that you don't have to do the bookkeeping.  

I still do free shipping on most of my items (But not all of them)     I'm doing just fine.  (I put my handling time to 20 days while I was on my trip to Portland over the last two weeks, but still had a couple sales)

mtn
mtn MegaDork
1/8/20 12:15 a.m.
imgon said:

I just bought a set of wheels and they were free shipping.  Got dinged $25 on a $400 purchase, if they had charged shipping it probably would have been $320/$80 and tax would have been $18.75. On expensive and/or heavy/hard to ship items separating the shipping might be a significant tax advantage. This was my first time getting wacked for sales tax on ebay,  was a bit surprised, must have been something in one of those 80 emails I deleted from them about collecting it.

Thanks, this confirms what I thought. I guess I’ll charge for shipping. Small amount, but small amounts add up - even if it’s not me paying for it. 

Keith Tanner
Keith Tanner MegaDork
1/8/20 11:33 a.m.
wae said:

Here's the really nifty part...  Not only does your buyer have to pay sales tax but that sales tax is combined in the final value and deposited into your PayPal account.  It is then immediately removed from Paypal and sent back to eBay who is legally required to submit the tax to the appropriate taxing authority. 

Fixed that for you. Smaller companies might play a little fast and loose here (I know there's at least one Miata vendor who is just hoping nobody will notice) but a company the size of eBay would not get away with it.

That double hit of fees on taxes hits anyone who takes credit cards. As a vendor, say you have a 3.0% processing fee on Visa. If you have to collect sales tax, you'll get to pay the processing fee on that sales tax even though you have to give the tax to someone else. And it costs you something to give the tax to someone else, so it's a lose all around. The winners are the tax collecting agency and the tax accountants. 

NOHOME
NOHOME MegaDork
1/8/20 4:48 p.m.

Just saw for the first time that Jegs charged me tax on a part that I had shipped to Michigan that I will then drive over and collect.

I guess I just paid Michigan sales tax? Then on top of that I will have to pay another 13% when I drive over the border. This keeps getting suckier and suckier for Canadian car enthusiast! 

 

The good side is it might be worth shipping the stuff to Canada if that means I only pay the 13%.

Pete

Keith Tanner
Keith Tanner MegaDork
1/8/20 5:09 p.m.

You did pay MI sales tax because you effectively bought the part in MI. It's no different than if you'd walked into a brick and motar store on the US side. 

International borders are a real thing, despite Canadians wishing that sometimes wasn't the case :)

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