IS IT LEGAL FOR eBay TO DIVERT TAX MONEY THROUGH MY PayPal ACCOUNT?

[gwrocen]

Does anyone know what the US and Canadian laws would be on this?  Can eBay legally deposit and withdraw the tax,  that eBay is required to collect,  through MY PayPal account?  I am really bothered by this.  We do not have a nexus in the US and are not registered to collect taxes from anyone.    I would like this to be spelled out very clearly.

Can anyone help on this?

Thanks.

[mcrlmn]

It's being laundered.

[renata6]

Simply put, if EBAY is "the seller", they must use their own accounts to collect and remit the applicable taxes.  You are not responsible for these taxes and so,  your Paypal account should not be used. 

By using your Paypal account, Ebay is implying that you are responsible for the tax. If we were responsible, there would be no taxes paid, as we (individually) would not meet the minimum thresholds to each state. 

We are being used as pawns in this game and definitely should not be paying fees on money that Ebay owes.

[marnotom!]

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@renata6 wrote:

Simply put, if EBAY is "the seller", they must use their own accounts to collect and remit the applicable taxes. 

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eBay is a "marketplace facilitator".

https://quaderno.io/blog/us-marketplace-facilitator-sales-tax-laws-everything-you-need-to-know/

[lady.stark]

Even if eBay is a marketplace facilitator, it does not change the fact that they should have their own account to collect and remit the tax.

If I sold stuff on my own website, I would not have to collect taxes because I do not have a physical nexus and I do not "qualify" for an "online" nexus as my revenue is waaayyy below the amount required.

[marnotom!]

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@lady.stark wrote:

Even if eBay is a marketplace facilitator, it does not change the fact that they should have their own account to collect and remit the tax.

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I would think that's how it's being done now.  I can't imagine these taxes going straight to state treasuries.  Perhaps I'm misunderstanding your post.

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@lady.stark wrote:

If I sold stuff on my own website, I would not have to collect taxes because I do not have a physical nexus and I do not "qualify" for an "online" nexus as my revenue is waaayyy below the amount required.

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 Yup.  Different rules apply according to how you choose to sell your merchandise.

From what I can see--and forgive me if I'm repeating stuff I've posted elsewhere--the problem isn't so much eBay's as it is PayPal's.  As Pierre noted, PayPal bases its fees on the transaction amount.  Until this somehow changes (and I doubt it will unless credit card companies allow marketplace facilitators some flexibility) how eBay handles state taxes doesn't really matter a whole lot.

[gwrocen]

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@gwrocen wrote:

Does anyone know what the US and Canadian laws would be on this?  Can eBay legally deposit and withdraw the tax,  that eBay is required to collect,  through MY PayPal account?  I am really bothered by this.  We do not have a nexus in the US and are not registered to collect taxes from anyone.    I would like this to be spelled out very clearly.

Can anyone help on this?

Thanks.

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Wonder if anyone from eBay is following this tax discussion?

They are probably waiting for the tax issue discussion to fizzle out

which is what usually happens with issues like this.

eBay will continue using Canadian sellers' PayPal accounts to pay eBay's PayPal fees

for eBay's and the American states' tax income.

[gwrocen]

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@renata6 wrote:

By using your PayPal account, eBay is implying that you are responsible for the tax. If we were responsible, there would be no taxes paid, as we (individually) would not meet the minimum thresholds to each state. 

We are being used as pawns in this game and definitely should not be paying fees on money that eBay owes.

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Hello all,

I guess eBay management will be happy to know that it looks like the discussion
about eBay using our PayPal accounts  to collect state taxes has fizzled out.
That’s what happens when consumers know they cannot win
against a corporate giant.

However, I would still like to know how eBay will compensate me
for being forced to pay the fees to PayPal for the payment of taxes
collected by eBay ---  taxes that are income for the American States' treasuries.

Those tax payments are not MY income and yet eBay is putting them

on my PayPal invoice and forcing me to pay fees to PayPal

for processing that tax payment ----fees that should be paid

either by eBay or by the American state
for whom the tax is collected and whose income it is.

Or is eBay going to further reward ME (Canadian seller) as I read in some other posts,
by levying an additional fee on ME (and/or Canadian sellers) - a fee that eBay

will charge me because eBay is collecting those taxes "on my behalf" - taxes

which are not my responsibility?

Thanks.
gwrocen

tyler@ebay

[lady.stark]

Believe me, I am upset too. And I'll try to keep this thread alive.

Does anyone tried to ask PayPal about this?

[lotzofuniquegoodies]

@lady.stark  @gwrocen 

Here is a recent discussion from PayPal's forum. Think I am going to sit this one out. May the force be with you!! It appears to have the same amount of frustration attached.

https://www.paypal-community.com/t5/Business-Tools/Fees-being-charged-for-the-amount-of-SALES-TAX-Eb...

-Lotz

[gwrocen]

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@lady.stark wrote:

Believe me, I am upset too. And I'll try to keep this thread alive.

Does anyone tried to ask PayPal about this?

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@lady.stark; @lotzofuniquegoodies 

I have sent PayPal Customer Service 15 messages asking why PayPal is allowing eBay to use my PayPal account for processing the collection of State taxes that are not my responsibility and why I have to pay PayPal a 3.7% fee for processing an American State’s income.  So far I have received 14 replies with 14 different explanations.  I have tried to make my questions simple and easy to understand but PayPal CS have no clue.  I have even asked them to have PayPal legal department answer my question but so far no luck. 

Here are a couple of PayPal’s more senseless replies:

_________________________________________________________________

From:  PayPal Customer Solutions

Upon reviewing your account I have found that the "tax collected by eBay" you are showing, are in fact fees from eBay. When conducting business on eBay they have their own sets of fees and rules. When you are using Paypal to process payments through eBay, eBay will send over everything to be processed i.e sales, partner commission, taxes, eBay monthly fees, etc. If you think these fees are incorrect you will need to speak with eBay on the matter as they are the ones who added the tax to your transaction and will be the only one able to make any corrections.

____________________________________________________________________________

From:  PayPal Customer Solutions

I understand your concern regarding the additional charge of $2.06 USD charged on your purchase.  (My note:This is the tax that eBay added and withdrew.)

On reviewing your account, this charge is nothing but the Partner Commission charge charged by eBay for using its platform for this purchase. Its been charged on the payment received from the customer end for the purchase made through eBay. Its not tax of any state or illegal fee.

----------------------------------------------------------------------------------------------------------

This is a message I received from the eBay “Team” with their simplistic explanation:

Hello gwrocen,

Your topic recently received replies.

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Topic: IS IT LEGAL FOR eBay TO DIVERT TAX MONEY THROUGH MY PayPal ACCOUNT?
Date: 11-30-2019 12:36 PM

Did it solve your problem?

eBay thinks this legal. 

American rules apply since PayPal is USA based. 

The sales taxes are all outside Canada so Canadian tax law does not apply.

Thanks for being a member of The eBay Canada Community.

Yours, The eBay Canada Community Team

   

[renata6]

Having worked in systems,  I believe Ebay could easily fix this issue, by changing their app, as follows:

When a buyer makes payment, Ebay should generate two transactions. One to the seller's Paypal account (excluding the tax amount), and another to their own Paypal account (tax only).  

Paypal will still get their full  fees from both parties. Buyer invoices would stay the same.  Taxes would be paid by the responsible party (Ebay) from their own account.

It's really simply logic and I'm sure Ebay could do it, but would they want to?

[marnotom!]

@gwrocen, how do you think eBay and PayPal should be handling the collection and remittance of state taxes for purchases American eBay buyers make from out of state sellers?

My apologies if I missed a post from you that was made elsewhere about this.

[gwrocen]

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@marnotom! wrote:
@gwrocen, how do you think eBay and PayPal should be handling the collection and remittance of state taxes for purchases American eBay buyers make from out of state sellers?

My apologies if I missed a post from you that was made elsewhere about this.

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@marnotom!

They should be collecting the taxes the same way they were doing so from the beginning of October until they started using my PayPal account in the middle of November and started passing the 3.7% PayPal fee on to me. 

[lady.stark]

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@marnotom! wrote:
@gwrocen, how do you think eBay and PayPal should be handling the collection and remittance of state taxes for purchases American eBay buyers make from out of state sellers?

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I know this was not addressed to me specifically, but I would like to say they should do it the way GSP fees are collected. The way they did it in the beginning.

[lady.stark]

Wow, these are all stupid replies with no clue as to what they are talking about!

[marnotom!]

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@lady.stark wrote:I know this was not addressed to me specifically, but I would like to say they should do it the way GSP fees are collected. The way they did it in the beginning.

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I'm sure that if eBay and PayPal could do it "the way they did it in the beginning" they would have had no reason to change their procedure for handling state sales taxes in the first place.

My hypothesis for why this change occurs is based on how credit card issuers handle taxes for direct credit card sales, which is to say, they don't.  They charge merchants on the full value of the sale and the merchant has to remit the tax paid by the buyer.

PayPal lopping off the taxes due on a sale and having the merchant only pay fees on the item plus shipping (if applicable) creates an uneven playing field when it comes to sales made through marketplace facilitators versus sales made directly between buyer and seller.  It also means that the credit card issuers and credit card companies get a little less from each sale.

I suspect that eBay and PayPal was pressured by the powerful law firms retained by credit card companies to cease "doing things the way they did it in the beginning" and there's a gag order preventing eBay and PayPal from stating this publicly, so we're left with the story that too many buyers were complaining about mysterious sales tax charges on their PayPal statement.

If you want to be less generous to eBay and PayPal, the angle you can take is that numbers were crunched and it was concluded that the "old way of doing things" would have a serious effect on PayPal's bottom line.

I'm sure eBay and PayPal realize that sellers were quite happy with "the old way" once they figured out what was going on, but the toothpaste is out of the tube on this.  Perhaps they're hoping that some sellers out there have better solutions, but if threads like this are any indication, those solutions are going to be a long time coming.

Besides, as I believe I noted on another thread, until credit card companies come to grips with marketplace facilitators' unique role in the world of retail sales, I think eBay and PayPal's hands are tied.  They're trying to make the best of an awkward situation.

[teenytrinkets]

I think this issue requires MEDIA ATTENTION.

Then Ebay Canada will be forced to provide a singular, legal and ethical explanation to the public as to why they are handling US buyer taxes this way.

Anyone think one of those financial segments on the news would report this?

[lady.stark]

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@marnotom! wrote:

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@lady.stark wrote:I know this was not addressed to me specifically, but I would like to say they should do it the way GSP fees are collected. The way they did it in the beginning.

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My hypothesis for why this change occurs is based on how credit card issuers handle taxes for direct credit card sales, which is to say, they don't.  They charge merchants on the full value of the sale and the merchant has to remit the tax paid by the buyer.

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Credit card issuers? Why did they never complained about how Canadian taxes are collected by GSP then? They would have done it a long time ago if that was the case. No, the real reason is because eBay does not want to pay PayPal fees on those taxes.

As Sir Arthur Conan Doyle would say through Sherlock Holmes "when you have eliminated the impossible, whatever remains, however improbable, must be the truth".

[marnotom!]

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@lady.stark wrote:

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Credit card issuers? Why did they never complained about how Canadian taxes are collected by GSP then? They would have done it a long time ago if that was the case. 

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The GSP doesn't collect taxes or duties.  That's done by Pitney Bowes or an agent of PBI.  When buyers pay "import charges" (note the wording used by the GSP), they're just repaying whatever PBI or its agents paid out for taxes, duty and processing charges as well as a pad for contingencies,  and a li'l something for eBay.  Maybe even something for PayPal.  It's basically following established practice for the handling of commercial imports handled as freight, a practice that's been in place for decades.

Similarly, the practice of sales taxes being subject to credit card merchant fees has been going on for ages, too.  Marketplace facilitators such as eBay and credit card intermediary services such as PayPal may be old school in internet terms, but they're still weird young bucks in the eyes of ye olde banking system.  Stodgy old banks and credit card companies are probably having a tough time wrapping their heads around much of what's going on with financial matters online.

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@lady.stark wrote:

No, the real reason is because eBay does not want to pay PayPal fees on those taxes.

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There's something to that hypothesis, but bear in mind that if eBay were to continue with the original practice of sales tax collection, they'd have to come up with some way for the seller to bear those fees anyway, and it likely wouldn't be on a pure cost-recovery basis the way it is now.

[gwrocen]

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@marnotom! wrote:

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@lady.stark wrote:

No, the real reason is because eBay does not want to pay PayPal fees on those taxes.

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There's something to that hypothesis, but bear in mind that if eBay were to continue with the original practice of sales tax collection, they'd have to come up with some way for the seller to bear those fees anyway, and it likely wouldn't be on a pure cost-recovery basis the way it is now.

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eBay is not collecting US state Sales Tax ON MY BEHALF.

I do not qualify for collecting US State sales taxes for any state

as set out in US Tax regulations.  I do not sell over a certain dollar amount

and I do not make more than a specified number of sales into any state.

Since eBay has a nexus in the USA,  eBay is collecting taxes

because eBay has to collect state taxes on eBay’s own behalf. 

https://blog.taxjar.com/international-sellers-deal-sales-tax-u-s/

https://blog.taxjar.com/economic-nexus-laws/

https://blog.taxjar.com/amazon-collecting-sales-tax-behalf-3rd-party-sellers-oklahoma/

So why do Canadian sellers have to pay the cost of eBay doing business in the USA?

That’s like me passing on MY expenses to YOU for my office phone line

because I am using the phone to talk to you or something like that.

I’m sure you get the idea of what I mean.

More references:

Is it illegal to not charge sales tax?

There is no sales tax obligation for the retailer if it has not established nexus in a state. However, if a retailer does collect sales tax in a state in which it is not registered to do so, that constitutes an illegal activity.

https://www.salestaxinstitute.com/sales_tax_faqs/sales_tax_liability_customer_does_not_pay_use_tax