eBay Sales Tax – What You Need to Know in 2021

It might seem like one of the more established Internet companies out there, but eBay is still very much a part of the “new economy” phenomenon that dominates now and that started in the late 1990s.

Yet eBay is actually, like most Internet storefronts, still finding its way in the traditional economy and what that means is that things normally handled by a store in a brick-and-mortar transaction are actually the purview of others in the eBay ecosystem. 

What are we referring to exactly? When you are at a store, for example, the sales tax and any applicable regulations associated with that transaction are handled by the store as it is their responsibility; however, on eBay, paying sales tax and other regulatory requirements is actually the responsibility of the seller. It is not only their responsibility but it is required by eBay’s “Terms of Service.” 

So, if you saw a “sales tax” charge on your most recent eBay purchase, you are somewhat familiar with what we are talking about. If not, then we hope to shed some light on this topic for you and let you know the information you need as either a buyer or a seller on eBay in 2021. 

When Did eBay Start Charging Sales Tax?

First, we have to clarify that eBay is not collecting the sales tax themselves. eBay is not the seller of the item you purchase on their website. They provide the platform for the seller from which you buy your item.

It is somewhat confusing as eBay presents itself as any other storefront but is actually quite different in practice. And keep in mind that eBay has to do this by law.

If you’re thinking to yourself that this used to not be the case, you’re not incorrect but don’t confuse this with eBay suddenly doing something it should have “always done.” In fact, eBay just started collecting sales tax for sellers and enforcing those regulations in January of this past year. 

For years many Internet storefronts got away without paying any kind of sales tax whatsoever, greatly undermining a tax revenue stream for many states around the country and indeed the world.

To be sure, eBay fought this regulation for a long time but more out of a need to preserve its self-interests than in any nod to making life easier on sellers. Because, trust us, sellers that made big bucks on eBay in the past and didn’t pay sales tax to their respective jurisdictions faced legal headaches that are hard to imagine.

None of this is a new phenomenon, but eBay is particularly charging hard with implementing this regulation to avoid their own liability or perception of liability in certain areas. 

Why Does eBay Charge Sales Tax?

Most of this change seems quite confusing to people who have used eBay off and on for years or who are new to the platform.

Why is the platform suddenly implementing a sales tax regime?

The easiest and most logical answer is that the auction website is bringing itself into compliance with local laws regarding sales tax in an effort to be seen as operating fairly and without undermining local businesses. 

One major advantage that Internet firms had in the very early days of eCommerce is that things were largely unregulated. Because of this, people didn’t pay sales tax and other fees online when they purchased goods and services.

Cited as one of the many ways that the Internet and businesses online were undermining the brick-and-mortar economy, the push to bring regulation to the Internet space has moved forward pretty much unabated since eBay’s early days.

A major complaint of sellers on the platform is that the implementation of this change actually makes things more difficult for them in the long run. They say that the imposition of regulations like a sales tax makes selling on eBay more logistically complicated than it should be and it adds another layer of bureaucracy and paperwork to the whole process. 

These opponents argue that the magic and advantage eBay offers over traditional methods is that it removes barriers between the buyer and the seller, making transactions faster and easier than ever before. But these complaints tend to forget one major thing and that is the fact that sellers, then and now, were always required to comply with local laws and regulations when selling on eBay. 

The invention of the Internet and the advent of eBay and massive eCommerce operations like it did not and do not obviate a merchant’s obligations or responsibilities when it comes to complying with local laws of which paying sales tax is one of them.

The idea that eBay and other merchants on the Internet should somehow be exempt from the same regulations and restraints as brick-and-mortar retail is a huge reason why lawmakers and others have pushed to introduce these kinds of rules in the eCommerce space. 

We get it – red tape and bureaucracy does slow things down. It does add to the burden of paperwork and logistical proof that a seller has to undergo. But it has always been the law.

The idea that eBay is just now imposing some kind of restriction on buyers and sellers is incorrect. In fact, eBay is simply catching up with established law in rolling out infrastructure to support the collection and payment of sales tax in location jurisdictions. 

How to Retract a Bid on eBay

Now that you’re aware of the sales tax on eBay, that might make that item you’ve just bid on more expensive than you were thinking it was going to be. One thing that you need to understand is that a bid on an auction website is a promise to pay for that item should you win it in an open auction. Retracting your bid is possible but it also violates the whole spirit of the platform somewhat. 

Also, it helps to keep in mind that ignorance of the rules is not often protection from them. If you find yourself unable to retract a bid for an item that is going to be prohibitively expensive after sales tax is applied, then you could face an account strike or somehow otherwise have your activity limited on eBay’s platform. 

This is because you are breaking your promise to pay and/or you aren’t competent enough to use the platform. eBay expects its buyers and sellers to know what they are doing and, though it provides some recourse for when things “happen,” more often than not you could get stuck paying for the item if you value your reputation on that platform.

It also helps to keep in mind that you can’t always retract a bid. Sometimes you will need to contact the item’s seller and ask them to cancel your bid for you – something that is totally at their discretion by the way. 

Even so, there are some specific circumstances where you can easily cancel your bid. These include the seller changing the item’s description in a significant way, you’ve bid the incorrect amount, or you can’t reach the seller of the item in question. If there are 12 hours or more remaining on the item, you can retract your bids. If it is less than 12 hours remaining, you can retract your most recent bid within an hour of placing it on eBay. 

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