US Internet Sales Tax

[lotzofuniquegoodies]

"Starting in November 2019, the way taxable transactions to US buyers are processed and how taxes are collected for remittance will change, as follows:

• In states where eBay is required to collect Internet Sales Tax from buyers, order totals sent for processing will reflect the gross order amount inclusive of tax.
• Once settled, the tax amount will be automatically deducted for remittance to the applicable taxing authority.
• A record of sales tax portion of the order will be available on the Seller Hub Order details page and through our Download order report."

Regarding this recent announcement and the Internet Sales Tax.

It should NOT be inclusive. It should appear as a separate line item with the state noted and the percentage for clarity.

-Lotz

[tyler@ebay]

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@lotzofuniquegoodies wrote:

@ricarmic 

That is the interpretation that sellers are making on the US side in viewing the several discussions and the comments in the ecommerce page. (Upset/majorly peeved comments added frequently to ecommerce). Nothing is really clarified in the recent announcement. Nowhere does it actually state "separate". Paypal Fees would come from the total total. FVF opinions varied.  And as soon as the new payment system takes effect they were confident this would definitely be the case. Gross translates as combined. Combined makes it a "hidden" tax with new seller fees!!! 

-Lotz

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Hi @lotzofuniquegoodies - to be clear: the way Final Value Fees are calculated is not changing with this announcement - full stop. 

Final Value Fees will continue to be assessed on the item price and any shipping costs you charge to the buyer. 

The Buyer view on eBay is not changing - they will continue to see their costs broken out in checkout, purchase history and 'view order details' (Item price, any shipping costs, and the appropriate sales tax if applicable).

What is  changing from a Buyer perspective is they will see a single transaction in their payment records with their financial institution. Previous to this they were seeing two separate payments: one to you, one to the state taxing authority. This was causing confusion and contacts to both eBay sellers and eBay CS. After November 1st they will see one payment, to you, with the total they paid. Thanks!

[lotzofuniquegoodies]

@ypdc_dennis 

Similar to the recent announcement regarding sending best offers to buyers it was a little vague on specifics with questions that should have been answered with this announcement. (Both points made many times on dot com.) What would have helped is something expressing  specifically FVF's would not be affected, Paypal fees(The common payment system in place for sellers) would not change and a sample of how the revised packing slip would display. All information that should be available.

-Lotz

[ypdc_dennis]

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@lotzofuniquegoodies wrote:

... Paypal fees (The common payment system in place for sellers) would not change ...

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PayPal is a separate company and is being replaced by managed payments -- so perhaps something about the impact on ebay's managed payment fees.

I assume the current rules are in place unless changed. PayPal has not announced any changes for this,  so I assume they will be getting their fees as usual -- on the full amount that flows through the Seller's account. So for Canadian sellers on the average shipment to the USA an additional cost of around 0.2% on the sale (2-3 cents on a $10 sale).

-..-

[femmefan1946]

My question was:

We we get paid every penny the buyer pays, then the tax is taken from the money we receive?

And how does that affect our gross income-- which in turn has an effect on our Canadian income tax?

@ypdc_dennis  said

FVF is currently not accessed on "gross amount".

There is a separate FVF on sale value.

There is a separate FVF on shipping.

There is no FVF on sales tax.

But FVF is an eBay term.   Do you mean there is no fee taken by Paypal on sales taxes?

@ricarmic   I think you are registered to collect Canadian sales taxes -- does PP take a fee on the taxes that you collect?

[femmefan1946]

@ypdc_dennis 

PayPal is a separate company and is being replaced by managed payments -

If PP is charging fees on pass through sales taxes and Managed Payments does not, that would be an excellent encouragement for sellers to move to MP.

On the other hand, I understand that sellers can continue to use PP, which buyers like and trust, although MP will be the processor of record, just as Guest Buyers today can use their credit cards directly but they are processed by PP.

[tyler@ebay]

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@femmefan1946 wrote:

My question was:

We we get paid every penny the buyer pays, then the tax is taken from the money we receive?

And how does that affect our gross income-- which in turn has an effect on our Canadian income tax?

@ypdc_dennis  said

FVF is currently not accessed on "gross amount".

There is a separate FVF on sale value.

There is a separate FVF on shipping.

There is no FVF on sales tax.

But FVF is an eBay term.   Do you mean there is no fee taken by Paypal on sales taxes?

@ricarmic   I think you are registered to collect Canadian sales taxes -- does PP take a fee on the taxes that you collect?

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Hi @femmefan1946 - I'm not certain of PayPal's handling on this - but my understanding is that they charge percentage fees based on the total gross  amount they process for you. It may be something worth verifying with them to be sure. 

When it comes to eBay Final Value Fees: no charges on the sales tax amount, only the item price and any shipping costs you charge the buyer. 

[ricarmic]

Hi Femme! For Canadian buyers, I cover the taxes for them so I'm not a good example.... (ie the taxes are already built into my price)

[lotzofuniquegoodies]

In speaking to Paypal yesterday...First person wasn't aware of the upcoming process change....2nd person advised checking with eBay. I believe 2nd person was a supervisor but they wouldn't confirm.

From ecommerce post:

"If eBay's plan is to remit the entire amount collected (i.e., inclusive of any mandatory site collected sales taxes) to sellers PayPal accounts, then debit the tax portion of the payment after transfer, the taxes collected will be subject to PayPal fees and (for some sellers) PayPal Working Capital loan repayment requirements." 

by: NoMoreEbay

"...order totals sent for processing will reflect the gross order amount inclusive of tax."

The way I read it is beginning Nov 1, ebay is going to consider the price of the item and the tax as the final value and charge a FVF on that total, then submit the tax like before. Before Nov 1 the tax is considered a separate transaction without a FVF.

But that is purely a guess as the verbiage is incomprehensible."

From Brian.T@eBay
''in states where eBay is required to collect Internet Sales Tax from buyers, order totals sent for processing will reflect the gross order amount inclusive of tax. The PayPal processing fee applies to the gross transaction value (item value, shipping and sales tax). eBay Final Value fee's will be based on item price and shipping cost. No eBay Final Value fee will be charged for sales tax. ''

So yes, we will be responsible for paying for the processing fees for sales tax we will never see.... "

-Lotz

[pjcdn2005]

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@lotzofuniquegoodies wrote:

In speaking to Paypal yesterday...First person wasn't aware of the upcoming process change....2nd person advised checking with eBay. I believe 2nd person was a supervisor but they wouldn't confirm.

From ecommerce post:

"If eBay's plan is to remit the entire amount collected (i.e., inclusive of any mandatory site collected sales taxes) to sellers PayPal accounts, then debit the tax portion of the payment after transfer, the taxes collected will be subject to PayPal fees and (for some sellers) PayPal Working Capital loan repayment requirements." 

by: NoMoreEbay

"...order totals sent for processing will reflect the gross order amount inclusive of tax."

The way I read it is beginning Nov 1, ebay is going to consider the price of the item and the tax as the final value and charge a FVF on that total, then submit the tax like before. Before Nov 1 the tax is considered a separate transaction without a FVF.

But that is purely a guess as the verbiage is incomprehensible."

From Brian.T@eBay
''in states where eBay is required to collect Internet Sales Tax from buyers, order totals sent for processing will reflect the gross order amount inclusive of tax. The PayPal processing fee applies to the gross transaction value (item value, shipping and sales tax). eBay Final Value fee's will be based on item price and shipping cost. No eBay Final Value fee will be charged for sales tax. ''

So yes, we will be responsible for paying for the processing fees for sales tax we will never see.... "

-Lotz

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FVF will not be charged on the taxes collected by ebay but it definitely sounds as if we will be paying PP fees on the tax.

[lotzofuniquegoodies]

By reviewing what I read on dot com/ecommerce that is the takeaway. Just not clearly expressed in the announcement. And the 2.9 goes up for International transactions(fixed fee). The other thing that was concerning sellers was the issue of tracking Sales Tax for tax purposes for the ones that applied to. By sounds of things it will make it quite a bit more complicated.

-Lotz

[ricarmic]

Whilst every little bit extra we pay is more of an expense, as ypdc pointed out, the actual $$ value for most of us is going to be pretty trivial.

What I am most worried about is whether the $$$ actually "physically" arrives and leaves my PAYPAL account. If it does that has greater accounting/effort impact on me than otherwise.

Time will tell....

[femmefan1946]

It's quite a windfall for Paypal.

A penny here and a penny there for the seller, but with a billion transactions a day, more than half to the USA and about half of those to states that charge the "internet" sales tax.... it could mean a million dollars a day in fees on pass-through charges.

Now it is legitimate that PP charge a fee on payments they process, it's just who pays that fee.

In my opinion, and based on having been the processor of ON sales taxes, those fees should be paid by the receiving government.

Just as ON allows shops to take a tiny percentage of the sales taxes they collect as a fee for keeping track of them and remitting them monthly.

And eBay should enable PP (and other processors including the Managed Payments) to keep the taxes as a line item so they are easy to see.

[ricarmic]

I'm not sure this is any different than it is already for Canadians.

Today if a Canadian buyer pays me $113, $100 for the item plus 13% HST, as far as I know, PAYPAL gets their cut from the Canadian taxes on that bill.

I think it's been a while since you've seen the ON tax remission.... I miss the days when we used to get a kickback from the Province for collecting the provincial tax, the loss of which was part of being HST'd .....

[pjcdn2005]

 It is a similar situation but you are paying PP for processing money which you actually have.  We will be paying PP for money that we never had access to.

[ypdc_dennis]

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@femmefan1946 wrote:

It's quite a windfall for Paypal.

A penny here and a penny there for the seller, but with a billion transactions a day, more than half to the USA and about half of those to states that charge the "internet" sales tax.... it could mean a million dollars a day in fees on pass-through charges.

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A bit more money, because up to now eBay has been paying PayPal for the sales tax money processing fee. However, eBay likely got a better fee rate than mere Sellers, so PayPal  will still be happy.

It does help explain why eBay wants to move .com to managed payments as soon as possible. Keeping those fees in house, so to speak.

-..-

[lotzofuniquegoodies]

From eBay Customer Service Supervisor Dot com: Oct 4, 2019 2:34 PM

As discussed, the new update will also take place on PayPal. We have confirmed that the full payment which consists the item cost, shipping cost and sales tax will be charged the PayPal processing fee.

We have already raised the concerns about the taxes being charged for PayPal fees and we're waiting for updates about it. Any updates will not be communicated to you directly but rather be announced soon if there are changes to happen.

-Lotz

[ricarmic]

I also sent Tyler an offline message, asking if he can get confirmation from someone about the following:

How will things look to us in terms of the emails and Dr/Cr in our PAYPAL accounts:

Hypothetical example:

Buyer buys 3 $10 items, $5 shipping, 10% Tax:

Paypal "instant payment received" email displays:

$10.00 purchase price for item one

$10.00 purchase price for item two

$10.00 purchase price for item three

=====

$30.00 total purchase

$  5.00 shipping

$  3.50 taxes (assuming purchase price and shipping are taxed)

=====

$38.50 Total payment by buyer.

PAYPAL transaction showing in seller's account:

Debit sellers account                 $38.50

Instant credit sellers account ($3.50)

OR

Debit sellers account                $35.00

(ie seller never sees the tax physically show up in the account)

I'll let you know what I hear back, or Tyler may post it here directly.....

[marnotom!]

If we had credit card merchant accounts, wouldn't the card processing service also apply its percentage fee to the taxes charged in the transaction? I can't remember the last credit card receipt I received where PST and GST were separate line items.

[recped]

Three points........

As stated by Marnotom (and somebody else upthread), I (or we) already pay PayPal fees on GST/HST or PST when selling to Canadians and registered to collect.

I realize this would be new for small time sellers who never collected taxes on Canadian sales.

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IF PayPal recovers the taxes for eBay from the original gross payment as a partial refund from the original gross payment there would be an associated refund of fees just like a normal partial refund. I realize that PayPal recently made an attempt to no longer credit fees on refunds but I believe they backed down on that. If they bill the seller for the sales tax recovery as a separate charge then the processing fees will probably not be refunded.

[pjcdn2005]

Paypal sent out a new letter saying that they would stop refunding fees on Oct. 11.  But I haven't received anything about it so I think that right now it just applies to US Paypal accounts.