eBay Sales Tax 101

How to Collect Sales Tax on eBay (The Right Way)

by Mark Faggiano

Updated on May 4th, 2016

We get a lot of questions about how to collect sales tax on eBay the right way. The short answer is that it’s literally not possible to collect accurately on eBay in a lot of cases. This post will show you how to get around that and protect your business.

eBay’s tax collection works fine if you have nexus in a state that has a single tax rate. But if you have nexus in a destination-based sales tax state, sell in multiple states or have some other reason to collect a variety of sales tax rates (i.e. you sell products like groceries or clothing that are sometimes taxed differently) you could run into trouble very quickly on eBay.

Take the case of TaxJar customer Charlotte (name changed) for example. She ran into this exact problem recently. She was collecting what she thought was an adequate rate for Wyoming. When she went to file her most recent return she noticed the WY efile system telling her she had not collected enough sales tax. It turns out that two Wyoming counties in this destination-based state have a higher rate than the others. Because eBay only allows her to choose a single, flat rate for the state, she had under collected sales tax in those two counties.

As a result, Charlotte had to pay the difference out of her own pocket.

So, eBay sellers, given eBay’s simplistic tax collection “system,” what are you supposed to do?

Use TaxJar to Determine Which Rates to Charge Your eBay Customers

If you’re running into a situation where you can’t decide which sales tax rate to charge, TaxJar has your back! Our eBay Sales Tax Rates chart, based on the millions of eBay transactions we’ve run through the TaxJar system, will help you determine the sole sales tax rate you should set for each state.

Just find your nexus state (or states) on the chart and determine the rate you should charge.

Find out a whole lot more about how to use TaxJar’s eBay sales tax rate chart here.

How to Setup Tax Collection on eBay

Once you’ve determined the sales tax rate to charge your customer in your state (or states) it’s time to set up sales tax collection on eBay.

1. Sign into eBay and head to the My eBay page.

sales tax My eBay 2. Select the Account tab and then click on Site Preferences.

eBay Sales Tax

3. In the “Payments from buyers” section click the Show link.

Sales Tax on eBay

4. In the “Use sales tax table” area click the Edit link.

eBay Sales Tax Tables

5. Here’s where you’ll fill in the information you got from TaxJar’s eBay sales tax rate chart.  Make sure you also pay attention to shipping & handling tax if the state requires it.  There’s a box titled “Also charge sales tax on S&H” to click if you do find you need to collect tax on shipping. TaxJar’s eBay sales tax rate chart provides this information, too. (You can also read more about states that require sales tax on shipping.)

eBay Sales Tax Table

6. Click Save.

Now when you make a sale through that particular state, eBay will collect based on your new sales tax table. Naturally, if you have sales tax nexus in more than one state you’ll need to make sure you’ve entered sales tax collection information for all of them.

TaxJar is Here to Help

Totally confused about how much sales tax you collected versus how much you should have collected? TaxJar’s “expected sales tax due” report will straighten you out.

Just login to TaxJar and make sure you’ve added all the states where you have sales tax nexus to your TaxJar dashboard.

If there’s a discrepancy in the sales tax you’ve collected vs. what TaxJar expects you should have collected, the state will appear in yellow. You can mouse over the yellow exclamation point to see a quick breakdown of how much sales tax we think you should have collected vs. how much you did collect.

For a full breakdown by transaction, you can view your “detailed sales tax analysis” report.

From there, it’s up to you to decide whether you want to pay extra sales tax out of your own pocket. It will also show you if you collected too much sales tax.

EBay doesn’t make collecting sales easy for sellers who need to collect variable sales tax rates within a state. We hope this guide has helped to ease your mind a little when it comes to making eBay work for you.

For much more info on eBay sales tax, check our our eBay Sales Tax Guide, or start the conversation in the comments!

  • Jennifer Reid

    Thanks Mark for this post. I’ve just moved from Oregon to Florida and make a living selling on eBay. I’ve submitted the application for a tax cert #, but I was so very confused about sales tax, since I know different counties collect a different percentage.

    As an anxious person, I feel more confident about setting up the sales tax on eBay after reading this post.

    • We are very happy to help, Jennifer! I know moving from a state with no sales tax to a state with sales tax can be a shock. Please let us know if we can help you further! 🙂

  • Rob

    Im selling products for pick up only and have applied NYS tax in the listing. Problem is if someone purchases from say New Jersey it doesn’t factor in the tax. How can I apply tax to these listing regardless of where the item is being purchased from considering they are pick up only.

    • Hi Rob,

      This depends on your shopping cart. You should be able to set the point of sale or ship to location as your location in NY so that tax is always factored in. That does depend on if your shopping cart’s settings allow this, though. If you are selling through your own shopping cart or marketplace (not eBay, Shopify, etc.) and you’re looking for a better solution, I suggest SmartCalcs sales tax API from TaxJar. You can find out more about it here: http://www.taxjar.com/smartcalcs

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