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.)

[bn880]

It's not true, I have it right in front of me :  Fee calc on a sale of 190USD:

US $214.70 x 13.0% = -US $27.91

(notice 214.70 US?  that is already with taxes that they charged the buyer ! and then 13% final value fee aplied to that)

Next lines:

FVF  -US $0.30  Per order fixed amount

Total fees

-US $28.21

GST/HST(13.0%)

-US $3.67

Total fees (includes GST/HST)

-US $31.88

So they charge 13% on the sum including taxes, then they charge Taxes on that Fee  again.

On a transaction like the above, where shipping was 15USD, the effective fee that eBay takes (with eBay's high exchange rate fee) ends up being around 22%.

NO, paypal does not do that.  Also paypal does not charge 13% either

[reallynicestamps]

EBay 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+acquisiti...

[bn880]

The 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]

We 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 ?  

[brettjet38]

https://raceroster.com/articles/marketplace-facilitator-tax-what-you-need-to-know#:~:text=What%20is%....

What is Marketplace Facilitator Tax?

Marketplace Facilitator Tax is the concept that Marketplace Facilitators are responsible for collecting and remitting the state sales tax on retail sales made by Marketplace Sellers on behalf of the Marketplace Seller.

What is a Marketplace Facilitator?

A Marketplace Facilitator is simply a business that provides an online infrastructure to facilitate the purchase and sale of goods and services between third parties. The definition of a Marketplace Facilitator is quite broad. In essence, any business that provides a platform to facilitate retail sales, process payments, and communicate the completion of the sale would fall under the definition of a Marketplace Facilitator. Some examples are Amazon, eBay, and Etsy.

What is a Marketplace Seller?

A Marketplace Seller is an individual or business who sells products and services via a marketplace. You, as a Race Roster client, would be a Marketplace Seller.

This applies to everyone and everything, almost!

As for @bn880 "I'm not going to be at all surprised if there is another class action", there has never been one that got anywhere... that includes Boycotts!

If you do not want to pay service fees, go sell on Kijiji or Marketplace while you still can, the CRA Taxmen looketh there also...

[postit4me]

I was wondering also about the charging tax on postage when Canada Post already charges tax on their transaction. Is this what you mean by a tax on tax?

[flipistics]

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@postit4me wrote:

I was wondering also about the charging tax on postage when Canada Post already charges tax on their transaction. Is this what you mean by a tax on tax?

---

You kind of are paying taxes on taxes (assuming you don't have a tax number), but I think the biggest issue people have is they view a sale as a single transaction when it really is not. When you make a sale the transactions are basically:

1. Between buyer and seller: Buyer pays tax on their purchase just like they would in a store.
2. Between seller and shipping company: Seller pays tax on the actual shipping cost of the item just like they would if they walked to the post office to send a package to a family member. If the seller has a tax number, they can get this back.
3. Between seller and ebay: Seller pays tax on the fees ebay charges to facilitate the sale and run the infastructure just like they would for any other service.  If the seller has a tax number, they can get this back.

There's really 3 transactions between 3 different entities, so it makes complete sense that all three have to be taxed on what they provide.

[bn880]

There 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]

well, 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]

...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...

[reallynicestamps]

@brettjet38 

[33nhl]

This 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]

I 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!]

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@33nhl wrote:

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.

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Selling 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.

[mdinyeg]

"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:

Fees based on C$116.56:

Item price C$75.00

Shipping and handling C$35.00

Buyer's sales tax C$6.56

Final value fee @12.9%: $15.04

International fee @.4%: $0.47

Final value fee: $0.30

Total ebay fees:  $15.81

GST 5%: $0.79

Total fees and taxes: $16.60

So you're paying ebay a fee of $0.87 (13.3%) to remit the $6.56 tax to the state.

Then you're paying another 5% on the $0.87 because the collection and remittance of the tax is ostensibly a service provided by ebay. The 5% equals $0.043 cents.

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.

[mrdutch1001]

"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]

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@mdinyeg wrote:

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.

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If 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.

[lotzofuniquegoodies]

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@ilikehockeyjerseys wrote:

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.

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Throwing 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

[mdinyeg]

I 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."

[intimewithmusic]

As 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