ebay charging tax on taxes; is this legal?

[mdinyeg]

There has been a lot of discussion about the underhanded way in which ebay began charging FVFs on taxes it collects and remits to state/provincial/federal authorities on behalf of sellers. But I haven't seen anyone comment on the fact that ebay then charges tax on the tax.

As a service, ebay must charge its sellers sales tax, in my case 5% GST paid to the Canadian federal government. As a rule, companies are not supposed to tax taxes, but ebay is doing exactly that.

For example, in a sale crossborder to California:

$100 purchase

$30 shipping

= $130

x 4.36% state internet tax = $5.67

Total purchase: $135.67

ebay's fees are 12.9% + .4% for international transactions + $.30 transaction fee; on $135.67 that = $18.34

ebay then charges me 5% GST on $18.34, which means it is charging me 5% GST on 13.3% of the 4.36% California state tax, in this case $.04.

If there is an accountant out there who can weigh in on this, I would like to know if this is legal. And does it profit ebay or only the government that collects the GST?

Also, I noticed on a recent transaction that ebay charged me $1.48 GST when it should have been $1.47. Since GST is an input/ouput tax, this seems only to benefit the government that is actually then receiving more than 5%, but is it possible ebay is collecting those extra pennies and pocketing them? (On billions of transactions per day, a penny here and there adds up to hundreds of thousands in additional profits.)

[marnotom!]

Why not also question whether it's legal for PayPal to charge fees on the entire transaction amount including taxes?

Why not also question whether it's legal for credit card processors to charge fees based on the entire transaction amount including taxes?

Why not also question whether it's legal for other marketplace facilitators to charge fees based on the entire transaction amount including taxes?

[dobo5250]

you are absolutely right-- the man wants what the man said it wants - nothing you can do about - except not to play the mans game - course what  is the alternative -- cry to the other  the man - whos takes even more from us - leaving the rich to get richer tax writeoffs and offshore accounts  and the poorer to lose ground

see what that gets you -- i feel your pain just like all the others the hundreds the thousands who have asked the same question looking at their reports here and seeing discreptisces  only a few cents here a dollar there -but sometimes you just have to move on and up 

that's why lotteries do so well- people grasping at a chance 

doker bohm

[marnotom!]

Okay, I can see I missed the point of the OP's post because I was posting late at night.  The issue is the taxes on FVF being applied to the foreign taxes charged on a transaction, not eBay charging fees on those foreign taxes.

I think it amounts to the same-ish thing, though, and it would be better to take it up with the Canada Revenue Agency as eBay is just following CRA guidelines based on advice its received.  The foreign taxes add to the transaction value and GST/HST is charged on the total transaction value, no matter what its makeup is.

It's a bit like duty and taxes being charged on an import.  If an imported item is subject to those, the duty is charged first, and then the taxes are charged on the item plus duty.

[femmefan1946]

EBay does not charge fees on taxes.

EBay , as Managed Payments, charges fees  on the entire payment processed.

Just like every credit card, and just like Paypal.

MP is a bit more transparent about it.

This seems to upset people who never complained when PP did it "secretly".

[darak10]

your response is disingenuous - you try to set up strawmen and ad hominem arguments that are not true, reasonable or fair.  I cant think of anyone who liked the pp double and triple dipping and they arent hypocrites as you suggest just because you didnt personally hear or see them complain.   And that as well does not dismiss the validity of the posted criticism for this issue, there is absolute validity to this persons criticism whether you want to acknowledge it or not.  

here, we need to clarify terms, as the original poster confused the issue by terming a fee a tax. It is not.  What he is referring to is a tax being levied on a fee, which happens and is visible in the transaction detail section for every sale we make, they are indeed levying and thereby collecting GST on what they term 'sales fees' including the final value fee.   As for GST being levied on a fee, i myself would love to hear a tax lawyers opinion on that.  If it fits under Revenue Canadas definition of a good or a service, then fine, have at it.  But I cant think any other examples of someone charging a sales tax on a fee, not even banks do this....can anyone imagine Royal or TD or whoever slapping GST on top of your monthly bank account service fee?  If they did, there would be a thing on the news the day after they started with endless person in the street interviews reflecting how outrageous such a behavior is. With us, there's only a handful of us, so it becomes an in house issue and those who espouse the "dont rock the boat" type responses are largely to blame for the issue never being addressed let alone acknowledged.  

I just dont understand the condescending, patronizing, aspersion-casting style responses by a number of the self appointed experts in this forum whenever anyone wants to bring up an issue like this.  To these people: you dont know everything, no matter how much youve told yourselves that you do, so please dial it back for the sake of the rest of us, including me, as I barely come around here anymore as all the know-it-all-ism going on here most of the time is off the charts.  Thanks!

[canada_goose_whisperer]

This is a good point, I would be interested in a tax lawyer's perspective on this issue as well. My gut feeling is it doesn't seem right for some reason (taxes on fees on ebay-collected taxes), but I don't have a tax law background so I don't really know how to articulate it.

[rocketscollectibles]

ebay would charge fees on the amount of air we breathe while we list if they could count it

[reallynicestamps]

We got our first credit card machine around 1979 or 1980.

At that time, and until we closed our store in 2014, we paid fees on the total of every client payment that we ran.

That included the Ontario sales taxes and later GST.

It also included our shipping charges.

So if a client bought $100 worth of goods and had it shipped to him for a $5 shipping charge, there would be  13% HST making the payment $118.65.

And the 2% fee to the card company (actually to Moneris, not the card directly) would be $2.373.

Yes. Three decimals.

It's Standard Practice.

[salestaxsuck]

Ebay has charged me sales tax on silver, where in Illinois I'm exempeted from paying. And Ebay is refusing to refund me. Sounds criminal 

[ilikehockeyjerseys]

eBay isn't charging you tax on tax. They base their final value fees on the total cost of the transaction. You are then charged tax on the final value fees. 

The new tax program is a double whammy for casual sellers who would otherwise not register to collect GST. While some items have more variance in prices, assuming they previously priced their item as efficiently as possible, they now have to lower the price by as much as 15 percent to account for the added cost to the buyer of GST/HST. That takes a 15 percent chunk out of their margin, and they still are charged 13 percent fees (or whatever number it is) on that 15 percent chunk they lost since it doesn't disappear from the total cost, it re-appears at checkout as taxes. 

eBay seems to be moving away from casual garage sale type sellers who want to dump some stuff. Unless something is really niche where you need the eyeballs eBay brings to it, it makes no sense at this point for a casual seller to sell on eBay. Facebook marketplace and Kijiji make more sense, especially for larger items where shipping will eat into the profits. 

At the end of the day, the switch over to collecting taxes is good for small business sellers who already had to charge taxes. It is bad for casual sellers, who don't sell enough to justify registering, might not have even been claiming their income since it was so casual, and now have to lower their prices to account for the price increase caused by taxes. Fees on taxes is just another element of this.

[sniper10000]

Yes but ebay is charging the 13% tax to a customer and we pay 12.9% of that then they charge gst/hst on the fee for tax they collected.

No business should be charging a fee for tax collection as the Government lets them keep a % for collecting.

What next grocery store charging tax then charge a fee for collecting tax then charging tax on tax??

It is Ebay being greedy nothing more...I am sure a class action will pop up at some point.

[sniper10000]

When PP did it I posted then also. But with PP it was the 2.9% or whatever not the category 10% the 2.9% then tax on both. So if we pay processing fee for them we should be able to charge them a fee for us selling so they can collect tax.

[mrdutch1001]

...I am sure a class action will pop up at some point.

HAHA!.. good joke! LOL!! and  good luck with that!

just another uninformed who seems to think the class action lawsuit threat is the answer to everything they don't like., and/or don't agree with it...

maybe add that to the list of grievances for those of you who think "freedom" comes without a price tag, that "everything" should be "free"...

[reallynicestamps]

No business should be charging a fee for tax collection as the Government lets them keep a % for collecting.

No.

Ontario did that up to some point in the 90s, but has not for decades.

As stated, eBay is not charging a fee on the sales tax. They are charging a fee for processing the customer's payment.

Part of that processing is calculating, collecting, and remitting appropriate taxes to the correct governments.

Canada has 13 tax collecting departments. The USA has over 45, possibly over 50 since some counties and cities (like New York City) also charge sales taxes. The UK, EU, and Australia also charge sales taxes (VAT) to their residents and eBay deals with those for us too.

And again, this is Standard Practice with payment processors. We got our first merchant credit card account in the early 1980s, and we were charged fees by Moneris on the entire payment then too, including Ontario sales tax. Later the fee covered GST and our shipping charges when we started shipping.
Most businesses also pay fees for payments made by debit cards.

[brettjet38]

It is Ebay being greedy nothing more...

...LOL!

No, you can actually thank the elected members of parliament who you voted into power for this "TAX", eBay is just the "middleman" and you pay your fees based on the whole transaction, just like on Amazon, etsy, and others.

As for a "class action lawsuit", I have lost track of how many threads have made that threat/rant over the years, and non have ever blossomed into anything more than a lively thread filled with wit, sarcasm and usually, facts that the posters still deny are facts even with links to the Government Of Canada tax information website.

[mcrlmn]

In Canada, coins, bars, ingots, or wafers of gold, silver and platinum must be refined to a minimum purity of 99.50% for Gold and Platinum, and 99.9% for silver to be exempt from GST/HST.

https://aubullion.ca/is-there-tax-on-gold-and-silver-in-canada/

 Buying Gold & Silver in Illinois  Illinois Sales Tax on Gold & Silver Bullion 

98% in Illinois, to be tax exempt.

[reallynicestamps]

What next grocery store charging tax then charge a fee for collecting tax then charging tax on tax??

You seem to be unclear on the concepts of "buyer" and "seller".

The grocer charges tax on purchases.
The tax is remitted to the Revenue.

If the customer paid with a credit or debit card, the payment is processed by another business (often the above-mentioned Moneris).

The payment processor charges the grocer for their service.

The payment processor pays taxes on their income from those charges.

In PP's case, they were only dealing with the payment and doing it immediately. EBay was taking their fees (FVF+shipping+30c service fee) separately and monthly. This is one way the transactions were less immediately apparent.

In eBays case, they are dealing with their own fees (FVF+shipping+30c service fee) AND their charges for processing the payment all on one invoice, making it easier to see.

[firearcher]

Ebay IS charging fees on taxes.  You are wrong.  Included in the total payment are taxes.  Ther fees are not onkly charged on the non taxed portion. They are taxed on the total amount which includes the taxes which means they ARE charguing fees on taxes.  This is juts logical if you take the time to think about it.

[ontariosurpluscanada]

True, but at that time and up until July of this year, you and all sellers on eBay were responsible for collecting the tax and then submitting it to the CRA, which meant that anyone could technically "charge tax" and withhold it for themselves. In that case it would make sense for eBay to charge fees on tax as all the revenue was going through the sellers hands. Now the tax is remitted directly to the CRA and the seller is no longer seeing that portion of the revenue go through their bank accounts and there is no chance of the seller benefitting from taxes collected but not submitted.  Maybe now eBay should be charging the CRA fees on the money they collect for them!