eBay US Sales Tax & PayPal Refund Calculator

[tryubik-useonlyasdirected]

How are returns handled in PayPal now that eBay is routing the US Sales Tax through seller accounts?

Our first one since the switch occurred recently and, if I understood the new PayPal's auto-calculator correctly, it requires the seller to calculate the amount of us sales tax charged on the sellers refund into the requested refunded amount?

The auto-calculator extrapolates the amount paid by the seller refund, PayPal fee refund, and eBay sales tax refund. As Canadian sellers it is not our responsibility to know the Sales Tax for all the US States, why is PayPal and eBay asking sellers to calculate this amount?

I mean its easy math but an extra and confusing step not required by Canadian Sellers. The eBay representative encouraged me to put in the amount I refund only and I'm fairly certain it calculated an amount less that required to be returned.

[tyler@ebay · Accepted solution]

Hi @tryubik-useonlyasdirected - 

If you are issuing a refund (full or partial) through PayPal directly you will need to include the relevant amount of sales tax in your refund amount. As you saw, the PayPal calculator will adjust your 'total refund amount' to include the portion of sales tax. That can be confusing to be sure, and as far as I'm aware is something that they're looking to streamline in 'the future'. 

The simplest way to handle this is to issue refunds through an eBay request - sales tax percentages and amounts are handled automatically through the back end. 

If you are issuing directly through PayPal:

Full Refunds: make sure to include the entire amount the buyer paid (inclusive of sales tax). 

Partial Refunds: you'll need to include the amount inclusive of sales tax the buyer paid. As you saw, it requires some playing around to make the 'Refund issued by you' box match the amount you're actually wanting to refund.

In both of these situations you'll see a deposit into your PayPal account of the sales tax amount from us, which is combined with your stated refund amount and sent back to the buyer.

Sorry to muddy the waters on a Friday morning, but hoping that helps at least a bit! 

[tryubik-useonlyasdirected]

tyler@ebay  Your answers are most helpful, thank you for taking the time to clarify this issue.

PayPal was used at the direction of an eBay representative. Due to COVID, and other strange buyer issues, the package delivery had an extended delay and the regular eBay refund or sale cancellation window had closed. While this representative was not aware of the PP calculation procedure they were expedient in issuing the FVF refunds.

It would also be beneficial if eBay could state the percentage of sales tax charged in the original transaction for purposes of clarity.  Given that Canadians are not aware of the various rates for US Sales Tax I hope this is amended in the near future that the issue pass away as soon as possible. It is easy to make an error with unknown figures and this can result in adverse buyer confusion.

[pjcdn2005]

I have to agree that the tax percentage should at the very least be on the invoice so that buyers and sellers know the percentage.  In some states shipping is taxed and in other states it isn’t so that can also make it difficult to figure out the tax percentage.  And, I don’t think buyers should ever have to figure it out...the percentage should be clearly stated imo.

[tyler@ebay]

Definitely agree that the percentage rate would make things simpler! I'll make the suggestion. 🙂

[jt-libra]

I had to refund a couple of U.S. buyers recently due to late deliveries, through PayPal, and I was not required to do anything with regard to the sales tax.  The amount refunded was the total amount paid by the buyer but I was credited with not only the sales tax but also the PayPal fee (which I thought they were no longer going to do), i.e.

Refund details

Total refunded to xxxxxxx                               $21.49 USD

Fee reversal                                                         -$ 0.80 USD

Tax collected by eBay                                     -$   1.59 USD

Total paid by you                                                 $ 19.10 USD

I'm not sure I understand the conversation about refunding sales tax.  Is the conversation related only to those who registered for Managed Payments?  To be honest, I'm not too knowledgeable about MP even though I've received policy notices.  First I didn't think I had to concern myself because I had such few sales, but as soon as Covid started, my other selling account, DVD's, just exploded so I didn't even have time to familiarize myself with MP.  I was confident that no one was watching DVD's anymore, since there are so many streaming platforms, but while people were quarantined, I sold several high-priced boxsets and single DVD's and Blu-rays, more than I sold in all of 2019.  Things have slowed now so I probably won't sell much more for the remainder of the summer.

I apologize for going off-topic, but hopefully I won't be penalized for the refunds I've sent.  Many buyers were willing to wait 3 to 4 weeks, and others weren't.  They requested a refund through eBay and I obliged.

[tryubik-useonlyasdirected]

@jt-libra   I am not enrolled in MP and do not know what the process would be using this platform.

This question was directed to any seller who may be giving refunds through PayPal to US customers where US Sales Tax was collected by eBay through the sellers PP account.

My experience was as follows. Two items were refunded. They were purchased by the buyer separately, one purchase had a shipping cost (not to be refunded) and one did not (the whole amount was to be refunded).

The Full Refund I never even looked at the amounts just hit refund because I was in a hurry. A Full Refund is a Full Refund.

The Partial Refund asks the seller to input the amount to refund. $35, the full cost of the item not including postage, was to be refunded to the buyer from my seller account.

THE ISSUE: when $35 is entered manually into the PP auto-calculate box they calculate the seller refund, PP refund, and tax collected inclusive of this amount. Therefore ie. a refund of $35 turns out to be a refund for $33 from the seller and an eBay tax of $2.00. The result is the buyer is still owed $2.00 from the seller and the tax on that $2.00 from eBay.

Tyler has here confirmed in order to make a partial refund through PP the amount entered in the auto-calculator be the amount being refunded plus the tax on that amount. (ie. $37.00 = $35.00 refund + $2.00 tax refund; $37.00 must be manually entered in the box.).

[jt-libra]

THE ISSUE: when $35 is entered manually into the PP auto-calculate box they calculate the seller refund, PP refund, and tax collected inclusive of this amount. Therefore ie. a refund of $35 turns out to be a refund for $33 from the seller and an eBay tax of $2.00. The result is the buyer is still owed $2.00 from the seller and the tax on that $2.00 from eBay.

I see ... thanks for the explanation.