Questions Answered for eBay Sellers

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.

The Wayfair decision changed the sales tax landscape by introducing the concept of economic nexus, and paved the way for individual states to pass “marketplace facilitator” laws.

Long story short, states are always on the lookout for sales tax revenue. States use this revenue to pay for things like schools, roads and public safety. And the states realized that they had a better chance to get that revenue from online marketplaces like eBay, Amazon or Walmart than they do from small sellers who might not understand their sales tax obligations.

The state of South Dakota went so far as to take a case regarding ecommerce sales tax all the way to the Supreme Court. And the Supreme Court agreed with the states. This means states now have much more leeway when it comes to requiring online sellers to collect sales tax. Individual states can now require sellers to collect sales tax based on the number and value of sales to the state, called economic nexus, not just physical presence.

Another way states have now exercised their new right is by requiring the big marketplaces like Amazon, eBay, Walmart and Etsy, to collect sales tax from buyers on behalf of third-party sellers. The states win, because they receive large sales tax payments from marketplaces. And, in many cases, sellers win because they no longer have to worry about collecting sales tax from buyers in states with marketplace facilitator laws.