eBay Fees on Buyer-Paid Sales Tax

[Santo10Fan]

On a recent ebay sale, I paid a fee of $23.22 that was solely calculated from the $188 sales tax my buyer paid to his home state. I will concede eBay justifying the standard processing fee of 2.9% ($5.45) on the funds transaction.

So should we view the remaining $17.77 as a convenience fee for handling the taxes, or a cash grab? I just don't see how tax remittance could be discrete from overall operating costs, but what do I know.

[swarmee]

Originally Posted by Santo10Fan

On a recent ebay sale, I paid a fee of $23.22 that was solely calculated from the $188 sales tax my buyer paid to his home state. I will concede eBay justifying the standard processing fee of 2.9% ($5.45) on the funds transaction.

So should we view the remaining $17.77 as a convenience fee for handling the taxes, or a cash grab? I just don't see how tax remittance could be discrete from overall operating costs, but what do I know.

If this is accurate, that's the kind of stuff that would make for a lucrative class action lawsuit, right?

[D. Bergin]

They definitely do take a final value fee on the sales tax collection. Also they’ve started collecting VAT taxes for a lot of countries and charging full final value fees on those, which traditionally is much higher then our sales taxes. They’ve been doing it ever since they took over payment processing from Paypal. I’m pretty sure they started collecting from states and countries they didn’t even have to, once they figured out they were making money hand over fist collecting taxes from their sellers.

[D. Bergin]

It’s a fee hike, without them having to admit it’s a fee hike.

[swarmee]

Originally Posted by D. Bergin

I’m pretty sure they started collecting from states and countries they didn’t even have to, once they figured out they were making money hand over fist collecting taxes from their sellers.

There are some other companies that seem to be doing this as well, making the assumption that all states with sales tax will at some point pass legislation mandating the collection and remittance of the use tax under Wayfair. I think Florida was one of the last few holdouts, but are going to begin requiring it July 1.
If the company is collecting *and* remitting the actual tax back to the state (even when it's not technically required), I don't think they're technically doing anything illegal. If they are collecting "tax" and not remitting it back to the state, then report them to the state in question. That would be a clear cut case of tax fraud, I believe.

[D. Bergin]

Originally Posted by swarmee

There are some other companies that seem to be doing this as well, making the assumption that all states with sales tax will at some point pass legislation mandating the collection and remittance of the use tax under Wayfair. I think Florida was one of the last few holdouts, but are going to begin requiring it July 1.
If the company is collecting *and* remitting the actual tax back to the state (even when it's not technically required), I don't think they're technically doing anything illegal. If they are collecting "tax" and not remitting it back to the state, then report them to the state in question. That would be a clear cut case of tax fraud, I believe.

Yeah, I'm sure they're remitting the appropriate amount back to the states/countries when they collect. What should stick in everybody's craw is they're also collecting a 12.55% to 15% vig from the seller, on the sales and VAT taxes they collect. That's a bit more then a 2 to 3% merchant processing fee, which should be enough to cover their "accounting".

They went from lobbying against individual states sales tax collection as being onerous on business's and detrimental to inter-state commerce, to embracing and even advancing it as a way to increase revenue and claiming they aren't hiking your fees in the process.

That doesn't even account for their "final value" money grab on the shipping costs also.

[Jobu]

Collecting fees on the tax doesn't really end up hurting the seller that much though.

Ebay also figures out the appropriate taxes for us, collects them, and remits them on the seller's behalf for every jurisdiction. Certainly it is worth it to everyone who sells on Ebay to pay an additional dollar to not have to do that ourselves, no? In addition to the fact that we shouldn't expect Ebay to do that for free, as the new agent responsible for the money (including the tax portion) in the transaction, Ebay should be able to charge a % on that as I don't know of any organization which will process money for you, and take risk associated with sales guarantees, and just exempt a portion of it and do that bit for free. All of the above is certainly worth a dollar, isn't it?

An example of the new system vs. the pre-tax system from a recent sale:

Sale price: $985
Price + tax: $1,044.10
12.35% of price + Tax: $128.95
Fixed final value fee: $0.30
Total fee: $129.25
Total payment to me: $855.75

Under the pre-tax, pre-managed payments system, I would have paid 10% of the $985 to Ebay ($98.5) + 3% of the $985 to Paypal ($29.55) = $128.05 in total fees. So the new system, where Ebay handles all of the tax stuff for me, costs me an extra $129.25-$128.05 = $1.20.

[Santo10Fan]

Originally Posted by Santo10Fan

I will concede eBay justifying the standard processing fee of 2.9% ($5.45) on the funds transaction.

I consulted with a friend of mine who codes software. His theory is that when eBay folded the processing fee within a single closing value fee, that the breakdown I described may have simply been overlooked-or deemed simpler for the coders to ignore. We concluded that the coders likely were instructed to ensure all processing fees were collected on gross sales tax. I've had some experience at my current job where there is certainly a disconnect, if not outright miscommunication with IT and my dept. I've also noticed different totals appearing on iOS notifications from the eBay app after sales, which strengthens the argument the software is out of order-possibly from being hastily implemented.

I have no doubt eBay fully remits what it collects on my behalf. Logically, the Wayfair decision of collecting based on the buyer's physical location was the only way to settle the matter. Otherwise, all eCommerce would flock to incorporate in the states that collect the lowest, or zero, sales tax.

A greater debate on the merit or lack of merit of sales tax was not my intention with this thread. My motivation is to bring awareness to the fact gross tax amounts are included in the FV fee. I have a resale certificate and you can actually leverage that under this fee structure by reminding the seller they will pay less in fees with me than a buyer paying sales tax-and to consider splitting that savings 50/50.

[Tabe]

Originally Posted by Santo10Fan

I consulted with a friend of mine who codes software. His theory is that when eBay folded the processing fee within a single closing value fee, that the breakdown I described may have simply been overlooked-or deemed simpler for the coders to ignore. We concluded that the coders likely were instructed to ensure all processing fees were collected on gross sales tax. I've had some experience at my current job where there is certainly a disconnect, if not outright miscommunication with IT and my dept. I've also noticed different totals appearing on iOS notifications from the eBay app after sales, which strengthens the argument the software is out of order-possibly from being hastily implemented.

I've got over a decade of experience working in software development. Yes, oversights happen all the time. I *guarantee* there was no oversight or disconnect here. Ebay implemented this exactly the way they intended.

[ALR-bishop]

Gosh. After reading Bob’s post do I owe him for advice ? Is that taxable too ?