The rules around sales tax on eBay sales can be confusing, especially with new regulations and changing laws. This blog post will cover everything you need to know about sales tax when selling on eBay, including what to do if you sell from your own website in addition to marketplaces.
Does eBay Collect Sales Tax?
Yes, eBay collects sales tax on purchases from buyers based in most states. The platform is classed as a Marketplace Facilitator and therefore is obligated to collect and remit sales tax on behalf of sellers. This means that in most cases, eBay automatically calculates, collects, and remits sales tax to the appropriate state tax authority.
Does that mean sellers can ignore sales tax? Sadly not.
If you’re selling items on eBay for a profit, you still have to register for a sales tax permit in each state where you have nexus. You may need to report your sales too.
Does eBay Handle Sales Tax for All Sellers?
eBay is a marketplace facilitator – it manages transactions between buyers and sellers. As long as your state has marketplace facilitatator sales tax laws in place, you can trust that eBay will handle the collection and remittance of sales taxes.
- If you are selling on eBay as a business: you still need to monitor your nexus obligations and register in states where you pass the economic threshold.
- If you are selling personal items on eBay: your sales are unlikely to be profitable, therefore you do not need to register with any tax authorities.
What About Home Rule States?
A “home rule state” is a state that allows local governments (such as cities or counties) to create and enforce their own laws and regulations, including those related to taxes, without needing approval from the state government.
If you have nexus in a home rule state – like Illinois or Colorado – there may be local jurisdictions that do not require eBay to collect and remit sales tax for you. Check with a tax professional if you are obligated to pay sales tax to any of these localities. eBay’s tax policy explains how to set up sales tax for locations where it is not collected for you.
Do You Pay Sales Tax on eBay?
If you’re buying on eBay, you might wonder if sales tax is applied to purchases. It depends on where you live. If you live in a state that requires sales tax on online purchases, then yes, you will pay sales tax on your eBay purchases. eBay automatically adds this to your purchase total.
How to File eBay Taxes
Tax season can be confusing for marketplace sellers. You need to check the rules in each state where you have nexus to guarantee compliance.
- Typically, there’ll be a section on your sales tax return for non-taxable or marketplace sales so you can easily mark that the tax has been collected and remitted by eBay.
- You’ll also need to factor eBay sales into your income tax return or gross receipts tax form.
Selling on eBay and Your Own Website
If you sell on both eBay and your own website, you probably want to use sales tax software that can automatically separate the two streams of your business. You’ll need to monitor your nexus obligations, collect tax from applicable direct sales, and include accurate figures for your direct, marketplace and total sales in your sales tax returns.
How to Report eBay Income on Taxes
To report eBay income on a sales tax return, you’ll need to include your sales in the ‘total sales’ figure and the ‘non-taxable sales’ or ‘marketplace sales’ field.
To report eBay income on an income tax return, you’ll need to total up your gross sales from the year. Include this amount on your tax return as income. You’ll also need to deduct any expenses related to your sales, such as shipping costs, packaging materials, and eBay fees. This will give you your net income, which is what you’ll pay taxes on. If you sell more than $5,000 or surpass 200 transactions in a tax year, eBay will issue a Form 1099-K detailing your sales.
“Many businesses who sell on marketplaces make the mistake of thinking that they can just ignore sales tax. You do still have certain obligations so it’s important to stay informed and keep detailed records.” – Gareth Kobrin, Global Tax Expert
Conclusion
Selling on eBay comes with its own set of tax responsibilities, but the good news is that eBay manages collecting and remitting sales tax. Keep good records, know your obligations, and consult a tax professional if you need some help.
Automate Your Sales Tax as a Marketplace Seller
Sales tax rules can become complex when you operate on more than one marketplace or as an omnichannel seller. Many businesses use automated software to streamline the process.
A solution like Yonda Tax manages everything for you:
- Automatic nexus monitoring
- Registration in each state where you have obligations
- Accurate calculations for each state and jurisdiction
- Reporting that automatically separates marketplace and direct sales
- Integrations with your marketplace for automated filings
- Remittance of any sales tax you’ve collected
- A dedicated sales tax manager to ensure you’re compliant
Book a free consultation to understand your obligations as a marketplace seller. We take the stress out of running your business and help you stay compliant as your company grows.