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As an eBay buyer, paying sales tax is the least on your list, even though It’s an obligation. Fortunately, this article exposes how to avoid paying taxes on eBay sales. Of course, you can avoid paying sales tax on eBay, but “you can’t evade taxes”.
eBay clarifies that sellers are responsible for complying with tax laws in their state (if applicable). All states in the US do not charge sales tax, so ensure to verify. Also, a seller must inform a buyer about potential charges or taxes applicable in their country.
Meanwhile, bear in mind that selling to particular states in NZ, AU, EU, and the US is subject to applicable sales tax, Goods and Services Tax, or Value Added Tax, or any term used to describe sales tax in that country.
Why is eBay Charging Sales Tax?
eBay charges sales tax to comply with marketplace facilitator laws or however it is described in your country. Typically, the sales tax is applied during checkout. Note that eBay charges sales tax on purchases on behalf of an eBay seller, and the seller does not have to set up the charges.
Is there a way to avoid sales tax on eBay?
Yes, there are ways to avoid sales tax on eBay; however, you can’t evade taxes, except you’re going the illegal route. You may avoid eBay taxes on sales by submitting your tax exemption certificates to eBay through eBay’s buyer exemption system. Also, a buyer can avoid sales tax if their jurisdiction laws do not mandate eBay to collect applicable Internet Sales Tax on every transaction.
Read Also: The truth about selling fakes on eBay!
How to Avoid Paying Taxes on eBay Sales
This section will discuss all the options you can apply to avoid paying taxes when you buy on eBay. Below are the ways regarding how to avoid paying taxes on eBay sales:
Trade from a State with no Sales Tax
You can trade from a state where sales tax is not applicable. In most cases, when sellers trade with buyers from tax-applicable states, the buyer is charged applicable Internet Sales Tax, which reflects in the transaction.
Unfortunately, a seller whose services and delivery is registered in the US can’t sign out of selling items into the required states or sign out of eBay, automatically collecting sales tax.
Submit a Resale Tax Exemption Certificate
You can submit a resale tax exemption certificate on eBay to avoid tax on an eBay sale. eBay supports buyer exemption through their buyer exemption system, where a buyer can submit tax exemption certificates and make purchases without paying tax. Follow the embedded link under “Submit Other Tax Exemption Certificates”.
Submit Other Tax Exemption Certificates
Suppose you operate a charitable entity; you can submit your tax exemption certificate to eBay, enabling you to make purchases without paying tax. Make sure to upload your document here (as specified by eBay).
Sell to Buyer Through Direct Payment
You can avoid eBay sales tax by holding the transaction outside eBay. Unfortunately, eBay’s seller and buyer protection policy does not apply when transactions are done outside the platform. Moreover, scammers may leverage this method to scam you. You can learn the popular CL scam here. It’s not an advisable option in any ramifications, except you know the party you’re dealing with.
Return Items to a Seller
eBay can refund sales tax to a buyer if the buyer requests a refund – full refund, purchase cancellation, or partial refund. For eBay to refund taxes on the sales, the refund must take place on the eBay platform.
If a refund is done on PayPal, the seller is responsible for refunding the payment and applicable sales tax or Internet Sales Tax. The seller must review the total tax amount to be refunded to the buyer from the original PayPal transaction. The refund can be partial or full.
Note that after a seller refunds a buyer, eBay will credit them with the refunded taxes on sales.
Don’t Trade on eBay
You can avoid trading on eBay entirely to avoid paying taxes on sales. Note, however, that some other platforms may be forced by state laws to implement taxes on internet sales. Make sure to refer to your state’s law on internet sales tax. You can’t tell whether a state collect sales tax through eBay’s tax policy page; the page only explains how eBay handles tax collection and remittance.
How eBay Taxes Work
Some states or jurisdictions require eBay to collect Internet Sales Tax from buyers. After a purchase is made, the processed order totals will reflect the gross order amount, including the sales tax or internet sales tax.
After the charge is settled, eBay deducts the tax amount or applicable tax for remittance to the taxing authority of the buyer’s country. The seller is not responsible for the remittance; eBay does everything. The Seller Hub Order details page will contain a record of the tax portion on sales and can be downloaded from eBay’s Download Order Report.
eBay Sales Taxes Responsibilities
As mentioned earlier, a seller is responsible for informing a buyer about applicable sales tax, and a buyer is responsible for paying applicable taxes associated with eBay purchases. You may refer to eBay’s Tax Policy and User Agreement page to learn more about their policies.
A buyer’s tax responsibilities may include paying applicable internet sales tax (if applicable). A seller’s responsibility, however, includes informing the buyer about tax charges and validating what taxes are collected on sales transactions.
Is it Illegal not to Pay Sales Tax on eBay?
It is illegal not to pay sales tax on eBay if applicable in your jurisdiction. However, it is not unlawful to ‘avoid’ sales tax through tax exemptions or ethical tax exemption practices, as mentioned in this article. Following the Supreme Court, paying tax on eBay sales is a buyer obligation, and a buyer must pay taxes on products shipping into the country.
In essence, to evade taxes on eBay sales is a crime but tax avoidance is legal. Nonetheless, it’s not likely that the government will manhunt an independent seller for ‘evading’ tax on eBay sales, although it’s a felony. The reason is that they may have to invest too many resources costlier than the evaded tax.
After buying on eBay, you’re charged sales tax, which is legal, following your state laws. eBay does not charge internet sales tax on purchases in states where it’s not applicable, and a seller is not responsible for the tax remittance.
A seller must always inform buyers about the potential charges they must pay to obtain their item.