eBay Taxes: An Overview Guide
eBay sellers generally need to pay most attention to the following taxes depending on their location:
For more detailed information on these, select the guides linked above. Here, we’ll cover some of the frequently asked questions about eBay taxes across the board.
It might be worth bookmarking this page for quick and easy reference later on!
We have divided these questions into General Queries, eBay Sales Tax Queries, eBay VAT Queries, eBay Income Tax Queries and Accountants and Other Tax Resources:
Table of Contents
Integrate eBay and your accounting software for accurate accounting
A2X auto-categorizes your eBay sales, fees, taxes, and more into accurate summaries that make reconciliation in your general ledger a breeze.
`Try A2X today
Also selling on Amazon, Walmart and/or Shopify? Check out our seller-specific guides below:
- How to Collect Amazon Sales Tax
- The Ultimate VAT Guide for Amazon Sellers in the UK and Europe
- Amazon & Shopify Tax Guide Series
- Walmart Sales Tax
1. General queries
1.1 What is the key information about tax that eBay sellers need to know?
The most important thing to know about tax as an eBay seller is that you will need to pay it, in some form or another.
How much you pay, and to whom, depends on numerous factors, but the tax rules that relate to you are relatively new, evolving, and increasingly stringent.
For this reason, you need to be on top of your obligations and have a good handle on what is expected. This includes sales tax in the US, VAT in the UK and Europe, GST in Australia and New Zealand, and don’t forget income tax.
1.2 Why is eBay charging tax now?
eBay charges buyers sales tax where it is required to by law.
After the landmark “Wayfair decision” case passed in the US, states were able to levy sales tax on ecommerce sellers. Up until then, retailers with bricks and mortar stores were at a disadvantage, and subject to certain taxes which ecommerce sellers were not.
Many states require marketplace facilitators like eBay to collect tax on behalf of sellers by law, but some do not. In cases where they do not, sellers may need to do this themselves.
Read this guide for everything you need to know about eBay sales tax.
1.3 What types of tax do eBay sellers have to pay?
eBay sellers may need to collect and remit sales tax on certain transactions.
This tax might also be called VAT or GST depending on the location of the sale. Every country, and state within the US, has its own rules and regulations about who pays this tax and how much.
In addition to this, eBay sellers may need to declare their revenue for income tax purposes. This also depends on how much they make.
1.4 Does eBay tax every sale and seller?
No.
eBay does not tax every sale and seller. eBay will only collect and remit sales tax on your behalf when it is required of them by law in the applicable state. In those cases, you don’t need to do anything.
If you have economic nexus in a state which does not require eBay to collect and remit sales tax on your behalf, you will need to do this yourself to be tax compliant.
Some buyers may have tax exemption certificates. In these cases, you do not need to collect tax. In all other cases where you have nexus, sales tax will need to be collected.
For more information about tax exemptions, see our sales tax guide.
1.5 How does eBay tax collection work?
Sales tax should be added onto a sale just before the buyer completes the transaction. It cannot be added after this time.
eBay may do this for you automatically when the buyer lives in a state that requires it to by law, but if it is not required by law, you may need to add this cost on yourself. You will need to keep track of how much sales tax you collect in order to remit the correct amount at the end of the tax year.
Integrating eBay Managed Payments with your accounting software and A2X can help you do this successfully.
1.6 Is there an eBay tax form?
There is no tax form specifically used for eBay tax returns.
When collecting and remitting sales tax, you will need to use the official paperwork for each applicable state. This counts both for sales tax and for income tax, if you need to declare your eBay revenue.
See our sales tax and income tax guides for links to official sites and more information about filing taxes. If you use an accountant or a tax app, these can also help you find and use the correct paperwork.
1.7 Where can I find an eBay tax return guide?
We have the following guides to help you track, collect and pay the correct amount of tax:
These guides, whilst written with eBay sellers top of mind, do discuss ecommerce in general and touch on what to do when your business spans multiple channels.
1.8 Where can I find an eBay tax calculator?
When it comes to US sales tax, the rate of tax you need to pay will likely be made up of state tax plus any local jurisdictional rates on top. For this reason, a calculator that figures it all out for you can be very handy.
Try this sales tax calculator from TaxJar.
1.9 Do I pay taxes on eBay fees?
No, you do not pay taxes on eBay fees.
The taxes you are liable for remitting are sales tax, which your buyers pay, and potentially income tax, which you pay if your revenue meets certain thresholds.
See our guides on sales tax, VAT, and income tax for more information.
1.10 What happens if I don’t pay my eBay tax?
If you don’t get audited, then nothing will happen.
If you do, however, you may be liable to pay back as many years’ worth of taxes as you were obligated to pay in the first place. If your company has evaded tax for a decade, you’ll have a pretty nasty bill.
This also depends on the tax jurisdiction that catches you. Enforcement has increased greatly in recent years with the new laws and regulations coming into play, so now is probably the worst time to ignore your tax obligations.
See our sales tax guide for more information.
1.11 Are all items on eBay taxed the same way?
Not necessarily. It all depends on where you are selling and the rules for that jurisdiction.
Your first step in figuring out your sales tax obligation is to establish your nexus states, so once you have those, you’ll need to find out their rules about tax. You can find more information in our guide here on sales tax, and this guide on types of goods/services that are taxable.
If you are dealing with VAT, find the EU’s official list here of goods and services which may be subject to reduced tax.
1.12 Are any eBay sales tax deductible?
Not for you, as a seller. Any tax you collect from buyers should merely ‘pass-through’ you to the relevant tax authority.
Tax deductions apply to expenses, and usually to expenses that help your business to function.
So, for that reason, you may be able to deduct tax from expenses related to selling on eBay. To do this, you will need to have registered for sales tax and kept records of what you have spent and where.
Check out this article for more information about tax-deductible business expenses.
1.13 Are eBay fees tax deductible?
Your eBay fees are required for your business to function, so you may be able to claim them back as a business expense.
You would need to declare your eBay business and income to do this, and have detailed records of fees associated with every sale you make.
It’s best to get professional advice from an accountant about how this relates to you.
1.14 Are eBay shipping costs tax-deductible?
The expense you incur as a seller to ship an item may be tax-deductible.
Every time you make a sale, you should record every expense that you incurred to enable that transaction. From your eBay fees to postage and bank fees, these may all be tax-deductible.
Consult an accountant for the best and most relevant advice to you.
1.15 Has COVID-19 affected tax for ecommerce sellers?
It’s unclear whether and how COVID-19 will affect ecommerce sellers in the long-term.
There have been numerous temporary tax changes made globally to give businesses some support to continue operating.
See a breakdown of the impact of COVID-19 on VAT in European countries.
See how the pandemic has accelerated the need for expansion of ecommerce, and how this may continue long into the future, and by extension, lead to changes in administration.
Whether these changes impact you depends on what you sell and where.
2. eBay sales tax queries
2.1 Do I need to pay sales tax on eBay?
As an eBay seller, you do not pay sales tax. If you have sufficient economic nexus in a location, you will need to collect and remit sales tax on your eBay sales. Each US state has different nexus thresholds as well as rates of sales tax, so whether you pay and how much will depend on where you live, store inventory, and do business.
Read our eBay sales tax guide for help.
2.2 Which US states require sales tax?
At the state level, all require sales tax except: New Hampshire, Oregon, Montana, Alaska and Delaware. But watch out! Some local jurisdictions within these states may require some sales tax.
For help figuring out where you need to pay sales tax, check out our eBay sales tax guide.
2.3 Why is eBay charging sales tax?
In some states, eBay, as a marketplace facilitator, is required to collect and remit sales tax by law. The tax is paid by the buyer when the seller has nexus in their state. If eBay has not collected sales tax in a state where you have nexus, you will need to do that yourself.
This comes after the landmark “Wayfair decision” case, which sought to stop ecommerce sellers evading tax laws.
Find out the history and why ecommerce sellers have been targeted here.
2.4 How does sales tax affect eBay sellers?
The laws around sales tax when selling online have changed dramatically in recent years. What this means for sellers is that as you grow, you will inevitably need to pay sales tax on your eBay sales.
How much you pay and to which state depends on your individual circumstances, but evading your tax obligations is riskier now than ever with states specifically targeting ecommerce sellers.
Find out your sales tax obligations and how to ensure you meet them here.
2.5 How much is eBay sales tax?
Every US state has different rules and rates for sales tax. First, you need to figure out where you have economic nexus. Once you know your applicable nexus state/s, you need to find out whether they decide the rate you pay based on your location (origin-based) or that of your buyers (destination-based).
You may also need to pay add-on rates to local tax jurisdictions, on top of the state rate.
For help with calculating your rate and a breakdown of all the states, read our guide here.
2.6 Does eBay collect sales tax for sellers?
Only in states where it is required to by law, and you meet a certain revenue threshold set by that state.
In the cases where eBay collects sales tax for you, you do not need to do anything. In the cases where eBay does not collect sales tax, and you have nexus in the state your buyer comes from, you will need to collect and remit the tax yourself.
2.7 In which states does eBay collect sales tax?
From January 1, 2020, eBay will be collecting sales tax on eligible transactions for buyers in the following states; Arizona, California, Colorado, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Nevada, North Dakota, South Carolina, Texas and Utah.
This is subject to change so please see the official state sites for the most up-to-date information - links can be found here under the section Sales Tax by US State.
2.8 Where can I find the most up-to-date information about eBay sales tax?
At A2X, we try to keep all our resources as up-to-date as possible. With regards to sales tax however, rules are still evolving and changing frequently, so the best place to verify any information you find online is the official sites for each state.
We have linked these in our table under Sales Tax by US State here.
2.9 How do I pay eBay sales tax?
You will need to register for sales tax in all the states or locations in which you have economic nexus - this is also true for VAT or GST if you sell overseas and meet those applicable thresholds.
Once you have registered, you should have access to the paperwork and deadlines that you will need to file your tax. You can do this all yourself, but you can also use tax automation apps, or better yet, consult an accountant.
2.10 Does eBay report sales to the IRS?
In a sense, yes. When your eBay revenue crosses a certain threshold and you are deemed eligible to pay income tax, eBay Managed Payments sends you a 1099-k form.
This form is filled in by eBay Managed Payments based on your revenue and should be checked by you against your own records. It then needs to be included when you file a tax return.
eBay Managed Payments is required by law to notify the IRS when this form is sent out, so indirectly, eBay makes them aware of your revenue hitting a certain amount.
For more information on income tax filing and criteria, check out our guide.
2.11 How do I avoid sales tax on eBay?
Not all sellers have to pay tax on their eBay sales, but most do.
In the states that require eBay to do this for you by law, then easy, you don’t have to lift a finger. eBay charges the buyer, holds onto the tax and remits it to the state for you.
In the states that do not require this of eBay, and you meet their nexus threshold, then you need to collect and remit the tax.
Ultimately, you are required to pay your taxes by law. Whether you comply with this law or not is up to you. Some sellers with economic nexus in numerous states strategize about where they risk not paying and where they comply, based on what the penalties would be.
We would strongly recommend consulting with an accountant for the best advice.
2.12 Where can I find an eBay seller tax guide for sales tax?
Our eBay Sales Tax Guide for sellers covers everything you need to know.
2.13 Does A2X help with eBay sales tax?
A2X helps you track how much sales tax you have collected in each of your transactions.
When you integrate eBay Managed Payments and your accounting software, you will see lump sums arrive in your accounts without too much detail about the fees taken or collected.
You would need to manually calculate the tax you took in order to remit the correct amounts. A2X does all this for you, so that you can file your returns or check your 1099-k paperwork in a fraction of the time.
3. eBay VAT queries
3.1 What is VAT?
VAT stands for “Value-Added Tax” and is similar to sales tax in the US and GST in Australia and New Zealand. It is a consumer tax added to products at each stage of their supply chain. As they gain “value”, a tax is paid by the next buyer.
For our guide on VAT for eBay sellers, click here.
3.2 How much is VAT?
The rate of VAT paid depends on what you sell and where you sell it.
As of June 2021, the EU member states no longer have their own tax nexus thresholds. They share the same threshold of €10,000 - excluding the UK, of course.
The rates may differ, however. And whose rate you pay also depends on various factors.
Use our VAT guide for eBay sellers for everything you need to know.
3.3 Is VAT different to sales and income tax?
VAT and sales tax are essentially the same thing with different names.
Income tax, however, is very different. Unlike VAT and sales tax, income tax is paid by you, the seller, based on how much money you make. This includes any other streams of income you might have from other jobs, businesses etc.
For our detailed guide on income tax as it relates to eBay sellers, click here.
3.4 Do all European countries charge VAT?
VAT is charged throughout the EU, but each country is responsible for setting its own rates and administering them.
The EU does set some parameters for rates, i.e. VAT cannot be less than 15%, and it also lists goods and services which qualify for reduced rates.
See our guide on VAT for eBay sellers to see how the countries compare and find links to their official sites.
3.5 Do all European countries charge the same rate of VAT?
No.
The EU has some parameters in place that members states need to adhere to, but within those, they can choose their own.
You can either register with and remit to each state individually, or you can use the One-Stop Shop (OSS) system for centralized VAT remittance to all the states with which you have nexus.
In our VAT guide for eBay sellers, we list all the rates for each country, their nexus thresholds as well as links to find the official authorities online.
3.6 How do I pay VAT?
You have a few options when it comes to paying VAT:
- You can file yourself with each individual state, which involves registering for a permit and meeting its individual tax filing frequency. You can use a tax app to help you do this, or your accountant.
- As of June 2021, you can use the One-Stop Shop (OSS) system, which is a centralized way of managing all the VAT you owe to European member states. You file once, and the system remits the relevant amounts to the states you owe on your behalf.
- If you are importing “low value” goods to the EU (less than €150), you can use the Import One-Stop Shop (IOSS) which fast-tracks the customs process and helps you remit VAT in one place.
Each of these options bring a host of pros and cons, which we cover in our VAT guide for eBay sellers.
Ultimately, if budget allows, we would always recommend that you seek the help of an accountant to manage your VAT returns for you.
3.7 Has Brexit affected VAT?
Yes it has.
The Low-Value Consignment Relief has been scrapped and the threshold for lower-value goods is now £135.
If a consignment (order from your customer) is worth less than £135, then businesses need to collect VAT at the point of sale (checkout).
For orders over £135 (excluding extra costs like shipping etc), VAT is paid at the point of import.
Find out more about eBay VAT for the UK in our dedicated guide.
For the most up-to-date information, use the HMRC website here.
3.8 How much can I sell on eBay without paying VAT?
All EU member states now have a threshold of €10,000. Once your business activity exceeds this amount, you’ll need to collect and remit VAT.
For a full breakdown of every country’s thresholds for both residents and distance sellers, check out our guide here.
3.9 Does A2X help with eBay VAT?
A2X helps you track how much VAT you have collected from your buyers so that you can meet your tax obligations with minimal headaches.
Without A2X, if you integrate your eBay Managed Payments with your accounting software, your bank deposits will be logged automatically but without the crucial details that you need as a seller.
You would have to manually calculate not just how much VAT you have collected, but potentially your eBay fees too, any shipping expenses and return reimbursements on top. A2X does all this for you.
4. eBay income tax queries
4.1 Do I have to report eBay income?
In general, you are required by law to report any and all income to the IRS (or local equivalent).
There are exemptions and thresholds you may have to meet in some cases in order to have to pay income tax, but you should include every revenue stream you have to be safely tax-compliant.
If you do not claim your income when you file your taxes and you meet the thresholds for eBay Managed Payments to send out a 1099-k form, it will have reported your eligibility to the IRS.
For more information about criteria for eBay income tax and how to file, check out our guide here.
4.2 How much is income tax?
Unlike with sales tax or VAT, the rate of income tax you pay increases as you earn more. The following rates have been set by the IRS in the US for 2021:
- 35% for incomes over $209,425 ($418,850 for married couples filing jointly).
- 32% for incomes over $164,925 ($329,850 for married couples filing jointly).
- 24% for incomes over $86,375 ($172,750 for married couples filing jointly)
- 22% for incomes over $40,525 ($81,050 for married couples filing jointly);
- 12% for incomes over $9,950 ($19,900 for married couples filing jointly).
- The lowest rate is 10% for incomes of single individuals with incomes of $9,950 or less ($19,900 for married couples filing jointly).
There are no limits on itemized deductions as eliminated by the Tax Cuts and Jobs Act.
4.3 How do I pay income tax on eBay sales?
You will need to include your eBay revenue as you file your individual income tax return. The files most sellers in the US need are IRS Form 1040, Schedule C and IRS Form 1099-k.
See our complete guide to income tax filing for eBay sellers and as always, consult an accountant for the most applicable information for you.
4.4 How do I claim tax deductions on eBay expenses?
Some of the expenses associated with running your eBay business may be tax deductible.
This might include the fees you had to pay eBay to sell, the shipping or inventory costs incurred, maybe even your computer and equipment.
In order to claim any deductions, you will need solid records of all your expenses as they relate to your business operations and the appropriate forms.
For more information about how to claim tax deductions and what is deductible, see our guide on eBay income tax here.
5. Accountants and other tax resources
5.1 Do I have to get an accountant or tax advisor for my eBay tax?
No.
You are perfectly entitled to handle all your tax collection and paperwork obligations yourself if you wish to. If however, you are unsure what you need to do or how, we would strongly recommend you consider using an accountant.
If you do wish to self-file, having a solid accounting software integrated with A2X such as QuickBooks Online or Xero, and a tax app will mean that you have the best tools to track how much tax you owe vs. how much tax you actually collected.
For more pros and cons of the different ways to file your tax, check out the section Ways to File Your Taxes in our eBay VAT guide.
5.2 How much do eBay accountants cost?
This depends on numerous factors which may include, but are not limited to: the services you are looking to outsource to the accountant; the size and scope of your business; where your business is located and trades; and more.
We have a directory of trusted accountants that will be able to help you nail tax and take your business to the next level, so reach out to them directly for their rates.
5.3 Are there any eBay tax resources I can use instead of an accountant?
There are tax apps which can help you automate your taxes.
Apps will never have the human touch that accountants have with years of agile experience and advice, but they are a good alternative to help you keep track.
They will alert you to changes in rates; ensure you are paying the correct amounts based on requirements in different locations; and help you file when the time comes. Ensure you have integrated your tax app with your accounting software and A2X to give you the strongest tax strategy.
5.4 Can I automate my eBay taxes?
Yes, you can. Tax apps allow you to track any/all of the following:
- Sales thresholds
- Tax liabilities
- Tax returns and filing
- Other charges to customers
If you have nexus in multiple states, tax apps can be incredibly useful to ensure that you meet your different obligations in each. By integrating a tax app with your eBay Managed Payments, accounting software like QuickBooks Online or Xero and A2X, you can stay on top of your taxes yourself.
5.5 Does my accounting software help with my eBay tax?
Not exactly. The main purpose of your accounting software is to give you an overview of your business finances.
Various providers may go into more detail on aspects like cash flow; payroll; invoices and inventory; whilst others may not. The collecting, recording and remittance of tax is all unique to you, and something you need to manage.
You can integrate A2X and a tax app to help you with this, or you can seek advice from an accountant about your best strategy.
5.6 Does A2X help with my eBay tax?
A2X helps you record the sales tax or VAT that you have collected within each transaction.
Without A2X, your deposits will be sent straight from eBay Managed Payments to your accounting software individually without this detail, so when it comes time to file, you’ll have a lot of manual calculation on your hands.
By using A2X, you’ll drastically reduce the time it takes you to file your taxes.
Starting strong with eBay
Here at A2X, we love to make ecommerce sellers’ lives easier. We create the most in-depth guides we can to help you start and succeed in your journey. If you have any additional requests or suggestions for the above, we’d love to hear them! Check out A2X for eBay & QuickBooks Online or Xero for more information and to get in touch.
Next in the series…
This blog is part of our eBay accounting hub. Next up, we look at some of the most common and critical accounting errors that sellers can make, and how to ensure you don’t go the same route.
Other resources
Integrate eBay and your accounting software for accurate accounting
A2X auto-categorizes your eBay sales, fees, taxes, and more into accurate summaries that make reconciliation in your general ledger a breeze.
`Try A2X today
