Supremes Voted That States Allowed To Require Internet Sellers To Collect Sales Tax

You're right, Clark. I have zero confidence ebay will be able to handle exempt sales properly, and I'd bet they'll have a plethora of mistakes related to tax code nuances (this item is taxable for this city but not in that city, etc.) And OF COURSE it will be the (real) seller who gets the negative due to ebay's incompetence, with no way to remove that.

I haven't read everything on this, but I'm curious as to whether ebay will submit sales tax on my behalf (i.e. under my SS #) or as " ebay" (one lump sum for all sales w/ ebay as the merchant).

If ebay is submitting on my behalf (under my SS#), then I have all sorts of questions and concerns...

Do I now need a business license for each of those states? Typically, if you're collecting/remitting sales taxes, you need some sort of license. In a sane world, I wouldn't need the license because I don't meet the threshold. But if ebay is collecting taxes that don't need to be collected then submitting under my name, I'll bet I do. More money, for no good reason.

...and what about in-state sales. I currently hold an Ohio business license and file periodic UST-1's with Ohio, showing in-state sales & sales tax collected/due. Now I'll have to omit my ebay sales because ebay is collecting that on my behalf??? I'd have to modify every Ohio customer's account (or invoice) because ebay would be collecting taxes on ebay purchases (I don't collect/remit), that same customer ordering from my website has a taxable sale (I do collect/remit). Right now, I generate a report that shows all my Ohio sales & tax collected/due, and it makes filling out the UST-1 very easy. That would change, negatively & unnecessarily.

...and who will be liable for errors under this new scenario? In the case of a sales tax audit, will each of those non-resident states go after me or ebay? Who will be responsible for legal expenses associated with any such audit, if it's ebay's incompetence that causes the error?

I'm probably one of the stamp sellers who's hung on the longest with all ebay's silliness (registered user Feb, 1996, still occasionally selling there). Something like this, improperly done (a very good bet) could finally drive me off for good.

Hi Ken,
Do you not face the same online taxation requirements from sales on your website?
Don

"Do you not face the same online taxation requirements from sales on your website?"

For Ohio, yes. For other states, no (I don't meet the filing thresholds for Washington, Pennsylvania or Oklahoma).

But if ebay does what they're planning to, I'll be forced to do extra work for Ohio. If ebay is collecting/remitting the Ohio sales tax for sales on ebay and I'm collecting/remitting the sales tax for all other Ohio sales, I now have to differentiate all those sales so I can report/remit the proper amounts with my UST-1. I don't currently do that, nor should I have to.

And if ebay files something under my social security # in Washington, Pennsylvania or Oklahoma, I'll bet you a nickel right now that I'm going to have to pay for some sort of license in those states, even though my sales there don't require me to have one.

I vehemently disagree that a state (where I have no representation) should be able to compel me to collect sales tax on their behalf. I will continue to write my representatives and ask them to formally codify a reasonable nexus law and correct what Wayfair improperly overturned.

srailkb: For all your questions, I would think it will be handled by ebay completely and you will just not be involved. ebay will be using companies like TaxJar and others to do a lot of the work.

This will probably be a lot like the GSP program except you can't opt out. The seller just won't be involved in the process at all and ebay will tack on the tax to the buyer's invoice. I'm sure this is one of the reason why ebay is going to an in house payment system like Ayden and doing away with PayPal in the near future. Yea, if the buyer has a fit over it, we the sellers will feel the brunt of anger.

I also really doubt any of use will be required to have any licenses for all the states. That would be absurd.

Battlestamps, that will still result in extra work on my part, as I'll have to differentiate the ebay sales with sales from my website, etc. for sales tax reporting purposes.

I agree though, that would be the "best" implementation of this bad idea ( ebay handles it all, WA doesn't get my SS# or even know that it was me who sold something to a WA resident). However, I'd rather focus on stopping the bad idea from being implemented at all, not on finding ways to mitigate how bad it is.

I think we're a day late and dollar short from stopping it as the Supreme Court already ruled in favor of the states. Yea, I doubt states would get our SS# and it would be lumped payments from ebay to the various tax jurisdictions. ebay would also be on the hook for any problems between ebay and the states. States would rather go after big fish anyway compared to small sellers. The worst thing I see is rising seller fees if ebay's costs increase.

Many of us will start to have to track sales locations and number of transactions. I use excel for all of my tracking, so it's just a little bit of careful formula writing to handle that, but maybe there are better options.

Ken - so far no sign that ebay intends to collect Ohio tax. I agree that for those of us who sell through multiple channels there will be a little more work to keep the streams separate for calculation purposes. Though if they get it right by county, perhaps most of our Ohio customers will be happy to avoid Cuyahoga tax and get their county of residence. :)

Until we have specifics on how ebay plans to implement this, the speculation train will run full speed down the tracks. We don't yet know how this will impact individual sellers from a compliance perspective. We have no guidance to work with other than ebay's vague implied "nothing for you guys to deal with; we got this"... which may or may not actually be true.

But you realize that every state will pass similar legislation as soon as they can, forcing out-of-state sellers to collect sales tax for them. That's a lot of money for the state coffers from unrepresented and unpaid labor. Where's my case before the Supreme Court; you know, the one that will allow me to compel others to work for free and send me the money?

I'm also anticipating that states will soon require out-of-state seller licensing - if we're required to collect sales tax, we should be required to follow the licensing guidelines too, no? That's even more free money for them!

So ebay will probably be collecting for Ohio and every other state before you know it. States would be stupid not to follow the lead. These three will be the first of many.




If our legislators hear from enough people that it's an important issue, they'll act. I'm simply asking them to pass legislation that codifies what everyone agreed & understood (for decades) to be fair & reasonable physical presence nexus requirements. No state should be permitted to compel my activity and payments without giving me representation. Without having a say in how other states' legislation is crafted and how onerous it is on my business, it is (IMO) clearly unconstitutional. This was a horrible decision by the Supreme Court.

And if someone thinks an "internet sales tax" is a better/fairer option, then by all means try to pass that at the federal level. I will lobby strongly against it, but at least I will have representation in the process and the ability to vote anyone out of office who doesn't share my views on the subject.

A comment in brief: Ken, why are you so worried? You probably can't be sued by Ohio to collect the tax. The physical nexus issue you raise was litigated 70 years ago.

Now, inside baseball:

Some significant facts of the South Dakota v. Wayfair decision have become lost in the preceding 7 pages of comments. In a way, they both explain why Ken's objections are so strong, and why those objections are probably misplaced because the question was really resolved by the Supreme Court in 1945. The South Dakota law that the Supreme Court endorsed covered businesses with more than $100K in sales or at least 200 transactions in South Dakota per year. There is an important reason for this. Without such a high threshold, a nonresident seller almost certainly lacks sufficient "minimum contacts" with the state and has not "purposely availed" itself of the benefits of transactions with that state, which are necessary for the state to sue the seller within the state to collect the tax. These rules come from International Shoe Co. v. Washington (1945) (holding that Washington could exercise personal jurisdiction over a nonresident corporation that had 11-13 salesmen in Washington, met with customers there and rented display space locally, to collect taxes), and World-Wide Volkswagen Corp. v. Woodson (1980) (holding that a New York VW dealer could not be sued in Oklahoma for injury caused by a car sold in New York and driven to Oklahoma where an accident happened, and applying a 5-part interest-balancing test for so deciding). As applied to the issues Ken has raised, International Shoe and WW Volkswagen impose important limits on the ability of states to collect taxes from small non-resident sellers, both in the name of the kind of fairness that Ken is concerned about, states' rights and the Constitution. Those sellers almost certainly do not satisfy those limits because those sellers do not have "minimum contacts" with the other state and can't be sued there to collect the taxes.

Any seller facing this issue should get legal advice on whether the WW Volkswagen test, applied to their particular volume of sales, indicates that the seller could be sued by another state to collect taxes that the state thinks it is owed. For sellers not in the category of Mystic, nystamps and others, the answer may well be no and there is nothing to worry about it. Moreover, almost all states will choose a high threshold like South Dakota's in order to avoid litigating the issue.

Thus, for most sellers who participate on this board, I think the concerns here are sound and fury over nothing. It may be perfectly reasonable and legally correct not to remit the tax because you can't be sued and, if you are, move to dismiss the case because the foreign state lacks personal jurisdiction over you.

(Anyone concerned about this issue should obtain independent legal advice from a qualified attorney. If this posting constituted legal advice, it would be followed by a bill.)

"Any seller facing this issue should get legal advice" which will cost you more than the taxes in question

As posted earlier ,paying a accountant to handle this or is it easier to post this -----"No business done with buyers from the State of Washington . Take your business elsewhere ."

And as more states adopt this type of legislation, is your "solution" going to be to sell to fewer and fewer states?

"I know we're losing money on every sale. We'll make it up in volume!"