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ebay charging tax on taxes; is this legal?
Summary: mdinyeg raised concerns regarding eBay charging fees on total sales, including taxes, and questioned the legality of charging GST on fees, which they perceived as taxing the tax. femmefan1946 defended eBay's practices, comparing it to credit card fees, while darak10 critiqued this defense, noting that taxing fees lacks examples in other industries. Other participants, like ilikehockeyjerseys and reallynicestamps, explained that eBay's fee structure is typical in the payment processing industry, but noted challenges for casual sellers due to added sales taxes. The discussion touched on potential rebates and the broader impact on sellers, with some considering alternative platforms like Facebook Marketplace. The thread revealed differing opinions on the fairness and transparency of eBay's practices with various perspectives shared.
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.)
intimewithmusic
·3 years agoAs long as we are splitting hairs....
It's more complicated than that. With respect to PST no one mentioned eBay is being reimbursed by the provincial govt to collect provincial taxes in the first place. They receive a rebated commision as do all retailers collecting PST. I'm not sure what the commission (if any) is in other provinces. From the prov of bc website here is the commision all remitters receive in the form of an instant rebate on remittances;
"
Commission
"If you are registered for PST and report and pay on time, you are entitled to receive a commission of up to $198 per reporting period. The amount of commission you’re entitled to is calculated on your PST return.
If you have more than one PST account, you may claim commission for only one account. There is no commission available for the collection of MRDT, and it must be reported separately from the PST."
This isn't a lot of money, however, it's no doubt money eBay realizes directly from the sale of the seller merchandise they charge a FV fee on. As @femmefan1946 points out "EBay does not charge fees on taxes." That said they charge FV fees on the full amount. Part of that full amount is then returned to them in the form of a government funded commision. Not sure if they have multiple remitting accounts for a province or just one. If they have one remitter account for BC the amount " back" is $198 per filing period.
I'm not sure what arrangement the other provinces make with provincial remitters. This is specifically for BC PST tax collection. There is no commision paid for the collection of the GST.
Seems to me charging a fee for tax collected for which a partial refund is received is pretty much "Having your cake and eating it too".. but of course I'm splitting hairs and no one enjoys a cake with hairs in it..
;>}
IT
reallynicestamps
·3 years agoWith respect to PST no one mentioned eBay is being reimbursed by the provincial govt to collect provincial taxes in the first place.
Ontario no longer pays shopkeepers to collect and remit taxes, and hasn't for over 15 years.
recped
·3 years agoOntario has no PST so no compensation! Back when Ontario had PST the compensation was modest and capped so even if it existed it would only be a few hundred Dollars a year.
While it certainly feels like longer the switch to HST only happend in July 2010.
brettjet38
·3 years agointimewithmusic
·3 years agoBC sales tax used to fluctuate between 5, 6 & 7%. A few decades back we changed to HST. It didn't go down well with tax payers and was revoked by referendum. Ever since it's been stuck on 7%.
During my decades as a retailer I would receive .03% commission for collecting PST up to a limit which is now set at $198 per reporting period. Most of us smaller retailers reported quarterly.
@reallynicestamps It sounds like your saying in Ontario there's no commision for collecting HST which is a real shame.
kh-phdan
·3 years agoHello Everyone,
Due to the age of the thread, it has been closed to further replies. Please feel free to start a new thread if you wish to continue discussing this topic.
Thanks for your understanding!
33nhl
·3 years agoThis is now the reality of selling online forums as such.
Buyers pay sales tax on the entire purchase and shipping cost . Then ebay takes its fee % and then as seller you have to pay sales tax on that fee Ebay collects.
I have to say it stinks but this is what it is and i have been seeing many buyers making purchases offline reason they dont want to pay the sales tax on used items, and techinacally no sales tax should be chgarged on used items, as its no different then a yard sale if trying to sell used items and you tell the buyer at the yard sale that they got to pay sales tax.
It is Ebay rule and if we dont like it we just have to improvise and search for other selling/buying platforms and slowly i have been seeing it on Facebook narket volumes have been increasing in listings and sale aswell as in many facebook groups.
If thers a will thers away you just have to search for it and think outside of the box.
mrdutch1001
·3 years agoI agree Facebook Marketplace is ok for local clientelle, but rest assured it's not without its own multitude of problems, so be ready for the late showups, the no shows,those that when they view the item decide they don't want it, those that agree on a price come to the meetup and want to offer you less ...and those other time wasters who send messages they want the item, they are coming for the item and then oops, you find out they are in another province...
Experiences with FB Marketplace may vary, but I feel have seen it all and then some over the past few years...
marnotom!
·3 years agoSelling with a marketplace facilitator such as eBay is actually considerably different than selling one's goods at a yard sale without an intermediary. I used to subscribe to the myth that used goods weren't subject to tax, but it's actually the venue or the nature of the seller that affects whether the sale is taxable or not. The often-cited examples of Value Village merchandise and used cars are examples of previously-owned merchandise that's subject to taxes.
The main reason why yard sale items aren't subject to tax isn't because they're used, but because the seller isn't (or shouldn't be) registered to collect taxes at the point of sale. eBay charges and collects taxes because it's registered to do so and has to do so as per recently revamped consumer law.
reallynicestamps
·3 years ago@brettjet38
reallynicestamps
·3 years agoEBay charges FEES (not taxes) on the entire payment that passes through our accounts.
The GST (and HST/QST/PST as applicable) is charged on eBay's fees.
As explained above, this is Standard Practice in the payment processing industry and has been since at least the 1980s when we got our first Moneris merchant credit card processing account.
We were charged FEES by Moneris on the entire payment, including the Ontario Sales Tax, and later on the GST, and later yet on the Ontario HST.
Fees are charged by private companies.
Taxes are charged by governments.
You don't have to like the fees. You do have to pay the fees if you use the service.
Many eBay sellers have never run a business or worked retail, so here is a link to Moneris which is probably the largest of the payment processors in North America.
You may notice that they are advertising their competitive rates compared to other processors active in Canada.
https://go.moneris.com/switchandsave?utm_source=google&utm_medium=cpc&utm_campaign=f2f-f2f+acquisition-f2f+switch+save+offer&utm_content=original-products+and+services-creative+cta-moneris-sem+ao+ma+brand+netnew+en-switchnow+savewithmoneris---english&cmfc=proactive&dsch=paid&trgtaud=prospect+merchants&audind=&cstjrnstg=awareness&cstprs=&cmpobj=acquisition&cmpfcs=product&cmpsgm=in+person+payments&cmpprnt=f2f&cmpnm=f2f+acquisition&cmpsub=f2f+switch+save+offer&cntapp=original&cntpll=products+and+services&cntheme=creative+cta-moneris-sem+ao+ma+brand+netnew+en-switchnow+savewithmoneris--&cntlng=english&utm_campaign=branded_search&gclid=CjwKCAiAkfucBhBBEiwAFjbkr4PLHx_dCUpeWY25EDHAcD0rvAkDxpda0cwBqn8pKZOYsJdomrL8DBoCH5MQAvD_BwE
bn880
·3 years agoThe facts are posted in my post above, people can look up their charges line by line. The truth will win, and charging fees to charge taxes is BS, especially 13%. I'm not going to be at all surprised if there is another class action.
raanana
·3 years agoWe can just complain,but there are only two choices here to sell or not to sell.
There are taxes on fees and fees on taxes,nothing we can do ((
Last sample,sold a card,buyer in UK, ebay add to my total UK import taxes -30.00CAD,so the charge me 12%,international fee 1% and On a top 13%HST.So I pay fees and taxes on UK import tax.Maybe someone would sa,that its OK,but for me is absolutelly wrong.Even after top seller discount I paid more than 3.00$ for what,taxes and fees on nothing ?
bn880
·3 years agoThere is another option, a class action if there is wrong doing, fees charged for no service, or unreasonable charges. There is a long history of these actions against actions by large companies that have been successfull.
ebay charges a tax on the item, then charges a tax on the shipping that you already paid taxes for. Then they calculate fees on both, including on the tax. Then there is a tax on the fees.
mrdutch1001
·3 years agowell, good luck with your class action law suit...please be sure to come back to the forums with the details. We all anxiously await hearing your success story!!
brettjet38
·3 years ago...Class Action, LOL HA HA if I had a $1.00 for every time someone screams 'Class Action" or "Boycott"
Maybe you would be better off going after your elected officials who put this system in place & eBay has to follow the TAX RULES...
ilikehockeyjerseys
·3 years agoeBay 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.
lotzofuniquegoodies
·3 years agoThrowing this out there for anyone who may have the answer.
Is there an official eBay explanation why .999 % bullion is tax exempt if it is listed in the correct category understanding that the tax is charged/based on the transaction and not the item? Then compare it to for example clothing, food or books depending on the jurisdiction when the item is not supposed to be taxed.
-Lotz
-Lotz
femmefan1946
·4 years agoEBay 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
·4 years agoyour 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!
mdinyeg
OP3 years ago"as the original poster confused the issue by terming a fee a tax. It is not."
Acutally, no I'm not. I'm not talking about the fee charged based on the total including tax, I am talking about the tax ebay then charges me on their fees. If ebay is charging me tax on the total amount including the state tax the seller pays, then ebay is levying tax on tax.
Years ago I ran into this while building a home in BC. There we had two taxes, the provinical tax of 7% and the federal GST of 5%. The builder was required to deduct the GST from the cost of materials before levying their own GST to me, the end user, because those are the rules: all sales taxes are in/out. The builder was contractually only allowed to charge us GST on their SERVICES, that is, the building and architecture fees. But that's not what happened. For example:
Lumber: $100.00
Provincial tax @ 7%: $7.00
GST @ 5%: $5.00
Total: $112.00
The builder then charged us $107.00 for the lumber + $5.00 GST = $112.35. See the difference? That's $0.35 GST charged on the $7.00 provincial tax. Ergo, taxing the tax.
So here's an example from ebay:
mrdutch1001
·3 years ago"You might say, well, that's only about 4 cents. But if you are a large-volume seller, those pennies add up. They're not in ebay's pocket -- they pocketed the first $0.87 to do what ebay has to do anyway -- they're in the government's pocket. But most importanly, they're not in yours."
...and that's why you have the choice to accept,adapt,adjust and carry on with eBay or go sell on Kijiji,Craigslist,FB Marketplace,etc...
recped
·3 years agoIf you are a large volume seller or even if you are not any and all GST/HST you pay to eBay on your eBay fees is FULLY REFUNDABLE if you register with GST/HST. In addition to GST/HST on the fees you can also get a refund of any GST/HST you paid on shipping, shipping supplies, cost of goods etc. etc. etc.
If you let Ottawa keep the money that is on you, it's not eBay's fault, it's not the governments fault.
mdinyeg
OP3 years agoI am GST registered, so it's not my problem. Doesn't mean I cannot care for or want to look out for others instead of just myself. Putting the onus on citizens not to be screwed by their government or agents acting on its behalf is a shallow, simplistic, passive view of the world.
"All it takes for evil to flourish is for good people to do nothing."