Let me start off by saying that I am not qualified to give you tax advice. Some people believe because they are selling on the Internet, that they won’t have to collect and pay sales tax to their State of residence. Not so Kemosahbee. If you go to any major online site selling merchandise, they are all generally collect sales tax. At the time of this writing, you are generally only required to collect sales tax for the State in which you live if you are selling to someone from within your State, however, many States (most recently Kansas, following States such as Tennessee, Ohio, Illinois, California, Texas, Florida, and Maine) have been seeking legislation to require collection of sales tax or impose license fees from all sales occurring from within their State, regardless of the location of the buyer. The larger online retail sites are collecting and paying taxes to each State as they can see the writing on the wall. At some point in the future, we’ll likely all have to do the same thing.
While collecting & paying sales tax is not one of the more exciting things associated with your business, it is a necessity. The State expects you to properly collect the taxes associated with the sale of your products and report/pay them to the State (Generally every quarter. Consult your State’s reporting requirements to determine what the specific requirements of your State are) as required by the guidelines of the State in which you live.
Many people will try to get away with ignoring this requirement. To be safe, I suggest that as a minimum you collect, report and pay sales tax for the resident Sate of your business. Fortunately both eBay and PayPal make it easy for you to collect sales tax as you noticed in the eBay tutorial “How to Sell.”
If you haven’t set up the Sales Tax option, select the Change Link:
The screen will change to allow you to enter the State for which you want to collect Sales Tax from.
Using the drop down box, select your business’ State of residence so that you will collect Sales Tax from bidders from that State. Enter the Tax Rate for that State in the % box. You can decide if you want Sales Tax to be based on the base price of your auction’s winning bid (box unchecked) or on the base price plus shipping and handling (box checked).
eBay will also allow you to collect Sales Tax from multiple states. To do this, select the “Sales Tax Table” link and enter the sales tax rates for the States you want to collect Sales Tax for. Any successful bidders from those states will pay the rate specific to their state.
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