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Sales Tax on eBay: Questions Answered for eBay Sellers

EBay wants sellers to be successful and legally protected, wherever you do business. Yes, we have a buyer exemption system that allows you to submit tax exemption certificates to eBay and make purchases without paying tax. A Form 1040 return with limited credits is one that’s filed using IRS Form 1040 only (with the exception of the specific covered situations described below). If your eBay store earns more than the IRS stipulated threshold, you will have some extra tax compliance steps to consider.

  1. EBay is required to apply federal, and if applicable state backup withholding until you provide us with your valid TIN (SSN, EIN, or ITIN).
  2. Marketplace responsibility refers to states where eBay collects and remits sales tax on behalf of sellers.
  3. If you used any other sales platforms, like Etsy or Vinted, you’ll include your income from those sources too.
  4. For tax years beginning with 2023, if you have third-party payment transactions totaling more than $600 then you should receive a 1099-K form reporting this income to the IRS.
  5. If you haven’t opted-in to paperless and don’t receive your physical copy by January 31, please contact us.

If you and the IRS classify your eBay sales as a hobby, you’ll have to report the income on Form 1040. For tax years prior to 2018, you report your expenses as an itemize deduction on Schedule A. Beginning in 2018, you are no longer eligible to take a deduction for hobby expenses. EBay is required by the California Department of Tax and Fee Administration (CDTFA) to collect and remit the Electronic Waste Recycling (eWaste) Fee. The eWaste Fee is a fee imposed on the retail sale or lease of certain electronic products that have been identified by the Department of Toxic Substances Control (DTSC).

The 1099-K form lists all your eBay earnings in one place and is designed to improve voluntary tax compliance. The IRS also receives a copy of your 1099-K form, so make sure your numbers match what’s written on the form. Even if you don’t receive a 1099-K from PayPal, you still need to report any income you earn on eBay to the IRS. EBay does not collect VAT on items with a value above 3000 NOK as this is generally collected at the Norwegian border. If the item is being shipped from outside the EU into an EU country, the buyer or recipient may need to pay VAT and customs duty. We will send you a confirmation email when your tax exemption status has been verified.

Electronic waste recycling fee

You can also find information on related sellers and processing fees on your sellers’ hub as well. This information is important when it comes to seeing which deductions you can qualify for. As an online seller, eBay processing fees are an ordinary and necessary business expense and therefore may qualify as a tax deduction. While it may be true that Ebay is required to withhold sales tax, there is no law saying they have to charge final value fees on those sales taxes. I understand Ebay recouping the cost to process sales taxes, but that cost is nowhere near the 12.9% to 15% they charge sellers on those taxes.

The only states in the US that don’t charge sales tax are Alaska, Delaware, Montana, New Hampshire, and Oregon. If you sell goods in any of the 45 other sales tax states, you’re responsible for https://turbo-tax.org/ collecting and paying taxes on the applicable tax laws, and the tax rates vary by state. Bear in mind, however, that the Wayfair decision also changed what nexus means for online sellers.

I Sold a Few Things on eBay. Do I Need to Report the Income?

Make sure you save receipts or other evidence of these deductions so they can be easily referenced when filing taxes down the road. Tip
We’ll send your Form 1099-K with the information you’ve used to register your account, in accordance with IRS recommendations. For more information, visit Understanding your Form 1099-K – opens in new window or tab on the IRS website. Miss a quarterly tax payment, and you’ll have penalties to deal with. Late filers will pay an extra 0.5% on top of their tax bill if they file even a day past the due date.

These include sales tax, GST, VAT, or other consumption-based taxes. Researching and understanding the tax obligations in each country where you sell on eBay is crucial. By any means, you should stay on the right side of the law, which doesn’t exclude cases of your eBay selling taxes.

Yes, eBay adds sales tax to all orders shipped to buyers in states with marketplace facilitator laws. The only exception is for buyers who have a state-issued sales tax exemption certificate and have uploaded it to eBay. Buyers on eBay, and other marketplaces, used to have something of a free ride when it came to sales tax. It would only be added if the seller had set up their eBay account to charge sales tax in the buyer’s state. So, most of the time, buyers could avoid sales tax just by purchasing from sellers outside their own state. If it is required, eBay will take care of collecting and remitting it for you.

TaxJar is Here to Help

This post will show you how to get around that and protect your business. As an eBay seller, you can enjoy numerous benefits of having an eBay store. However, it is crucial to pay attention to the importance of eBay selling taxes.

The IRS requires eBay to withhold 24% on all gross payments from sellers that fail to provide a valid W-9. A B Notice is a backup withholding notice for the seller that eBay receives from the IRS. EBay is required to send a letter to every seller for whom the IRS sends a backup withholding notice unless the seller’s information has been updated. Only goods that are sold for a profit are considered taxable, so you won’t owe any taxes on something you sell for less than what you paid for it. For example, if you bought a bike for $1,000 last year, and then sold it on eBay today for $700, that $700 you made would generally not be subject to income tax.

Filing and Paying Your Tax Obligations

These charges are determined by the country you’re sending the item to, and are usually based on the item’s price, postage weight, dimensions and country of origin. EBay Inc. is a registered New York State sales tax vendor and will collect sales tax on all taxable sales of tangible personal property that it facilitates for delivery to a New York State address. EBay Inc. is registered with DRS to collect Connecticut sales tax and will collect sales tax on all taxable Connecticut sales facilitated on our site.

Charging sales tax on eBay sales

Most states impose a sales tax on goods sold with the exception of Alaska, Delaware, Montana, New Hampshire, and Oregon who do not have sales tax. If you sell goods in any of the 45 states that do impose sales tax, you will be responsible for collecting and paying that state’s sales tax. Important
If you see a sales tax charge at checkout and filing ebay sales tax your item is being delivered to a state where eBay hasn’t started collecting sales tax yet, that tax amount is being charged by the seller. You should contact the seller directly to understand the tax amount or to claim a sales tax exemption for your purchase. When it comes to taxes, eBay is no different than any other form of business.


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