posted on October 2, 2000 10:01:59 AM
I just had a person email me, saying he saw my auction but when he came to the line about sales tax for KY residents, he withheld his bid. I wrote back explaining that I file a quarterly return with the state and I am required to collect sales tax. I see the same line in other auctions and was wondering if anybody else lost bidders due to this. I guess another question is how many people collect the tax? Thoughts on the issue (other than complaints about the Demoncrats having the hand in our pockets)?
posted on October 2, 2000 10:14:28 AM
Not all eBay seller's charge sales tax even if from the same state. And if I see that there is sales tax added, I too will avoid the auction. Other sellers will more than likely have the item. If it is a truly unique one of a kind piece well gotta pay, but that would be the only way.
Ain't Life Grand...
posted on October 2, 2000 10:18:22 AM
Twelvepole,
I agree with you. I avoid buying from sellers in my home state for just that reason.
It doesn't bother me if buyers from my state choose not to bid on my items because of the tax. That's a decision the buyer has to make. I don't have a choice. I collect sales tax because I have to.
posted on October 2, 2000 10:23:22 AM
I guess on some sales, I could eat the sales tax, but by the time you figure 6%tax+paypal fees+ebay fees, the percent of profit starts to go down. On this small item, all the fees add up to .50 on a 3.00 item. It would not make or break me, but does not help the bottom line.
edited because I may be able to spell, but typing is something else.
[ edited by scrabblegod on Oct 2, 2000 10:27 AM ]
posted on October 2, 2000 10:55:21 AM
We have a similar situation now. Almost a month ago a guy won our auction and paid, minus the tax. He refuses to pay the balance due. It isn't much but it was spelled out clearly in the auction. We haven't decided yet to just eat it or neg him.
We agree with Scrabblegod - if you eat it than that little bit added on to all the other slices and cuts here and there really lowers the margins.
The only alternative we can think of is to say "No bids from State(s) XYZ" but then who wants to limit your audience?
posted on October 2, 2000 11:13:17 AM
I live in Canada and by law must charge 7% to all Canadian buyers. I eat the tax at my end.
Why? Because I believe the extra bids I receive pays off in the end. I'm sure my items receive more bids than Can sellers who charge the 7%, but most times the Canuck bidders don't win, they only help raise the final price.
posted on October 2, 2000 11:24:04 AM
Buyer behavior is an interesting subject.
I'm curious why people would automatically avoid an item entirely due to sales tax. Why not just bid 5% less? I guess in some cases the minimum bid is exactly equal to the absolute amount you were willing to pay, but this is the exception rather than the rule. Given that ebay prices vary by +/- 25%, after going to the trouble of finding an item I wanted, I'd be tempted to merely bid on the low side and figure in the higher costs of sales tax..just as if the seller were charging more for shipping. I have a total amount I am willing to spend, so the bid equals that amount minus shipping and tax. Unlike the "rip off shipping cost" sellers, that I avoid on philosophical grounds, collecting sales tax is a state law kind of thing, so i wouldn't hold it against someone on that basis.
Heck, at least buyers know the exact amount of this extra cost, unlike the always vague "buyers pay shipping"...
posted on October 2, 2000 11:26:17 AM
I don't collect sales tax, but I do pay it out of my own pocket. Last year I had about $800 in sales to my home state of Michigan. With a 6% tax rate that works out to $48. There is a discount of 2/3 (maximum of $72 or $6 a month if you weren't in business for the whole year.) for paying early. So, I just make sure that I pay early and that drops my tax due to $16. So, at this point, it's not worth collecting the tax. I figure the additional record keeping, recalculating invoices when I find that my buyer is from Michigan, and chasing down those nickels and dimes that people forget to send for tax just isn't worth it at this time.
I do think collecting sales tax does chase away bidders. My Michigan sales are unusually low compared to my total sales. So, even though I don't collect the tax, I guess Michigan bidders see Michigan in the auction listing location and pass it by figuring that I will charge them sales tax.
posted on October 2, 2000 11:26:20 AM
Maybe some buyers feel that the seller isn't reporting the sales tax, just using it as an excuse to collect more money. Definitely NOT a good idea.
posted on October 2, 2000 11:36:48 AM
A seller could prevent this by offering their Tax ID number if requested. Anyone with a vendor's license in Ohio must pay quarterly sales tax. If I wanted an item badly enough, the sales tax wouldn't prevent me from bidding, but I can understand wanting to be sure it was actually being paid to the state and not just padding the seller's pocket.
posted on October 2, 2000 11:41:55 AM
It would be interesting to see how many sellers advertise, in writing, that they collect sales tax and then fail to pay it, thereby committing fraud and giving the state all the evidence it needs to send them to prison. I'll bet its a pretty small number of sellers...but who knows, maybe i'll be surprised.
posted on October 2, 2000 12:38:36 PM
Captain ..... I'm not sure about US tax laws & how buyers in general perceive them, but in Canada the mere mention of the words "7% Goods & Services Tax" sends most buyers in reverse. It was a much hated tax when it was introduced, and still leaves a very bad taste in most Canadians mouths.
I know a number of Canadian consumers that avoid Can ebay sellers that charge GST. They simply don't want to deal with anyone that adds to the Govt's coffer. Of course they also don't understand that many of us that don't charge it, still have to pay it to the Gov.
Even with the amount of high bidders I have from Canada, the Gov still ends up paying me every quarter.
I won't get you all worked up by calling this a "win-win" situation, but I'm tempted.
posted on October 2, 2000 12:52:36 PM
I don't bother to collect it either-so far it has been less than $40. I also try not to attract home state bidders by ending my auctions during "prime time" in a different time zone and not listing regionally. When I remit the tax, I calculate it based on an extrapolation of the sale price. If something sells for $20, I don't pay tax on $20, I figure the tax on $18.48 (8.25% tax rate) to equal the total I received from the buyer. And I figure my taxable profit based on a $18.48 sales price.
posted on October 2, 2000 01:03:36 PM
Buyers should realize that sellers who mention sales tax in the auction description are honest. It's the other guys they should worry about. I recently got negative feedback from a buyer because the sales tax wasn't mentioned in the ad. (It is mentioned in all ads now.) She refused to send payment. The tax came to eighty-nine cents. The lady's argument was, "How do I know you're a business?" Gee, the 3000+ feedback might be a tip-off! She was a total b**** and sent several really nasty emails.
posted on October 2, 2000 01:09:37 PM
Just because you have 3000+ feedback doesn't mean you're a business and the lady was right, not mentioned in the ad, don't pay it.
I understand that if you're a "business" and need to collect, but doesn't mean I need to bid on your auction either. I definately wouldn't pay any sales tax if not mentioned in the ad.
I have absolutely no doubt that "taxes" drive some people crazy, changes their behavior in irrational ways, etc. I agree with you, that eating the tax is probably a "win win"
My comment was just that its either irrational, or at least philosophical/political, but certainly not logical, to avoid sellers *purely* due to them charging sales tax, when (from a business perspective) merely reducing the bid amount neutralizes that factor, just as it does for a seller who charges higher shipping amount.
PS - Buyers who won't deal with sellers who explicitly mention tax because it "supports the government" but will deal with sellers who choose not to mention it are also, of course, irrational, since in either case, the government gets the $, whether from the buyer or seller. Buy hey, its the wonderful spectrum of people that makes life interesting.
PPS - I won't get "all worked up" unless you start spouting your accounting nonsense again!
[ edited by captainkirk on Oct 2, 2000 01:59 PM ]
posted on October 2, 2000 02:38:58 PM
If you are a power seller it might be a good idea to collect and file taxes (state and fed). If you don't collect be prepared to pay. Whether it is fact or rumor it would be easy for eBay to do their governmental duty and match up in-state sales and sellers by address for the now tax deprived state governments.
posted on October 2, 2000 02:46:49 PM...for the now tax deprived state governments.
Would those be the state governments who, in many parts of the country, are reporting budget surplusses, and are trying to figure out how to spend the "extra" money?
posted on October 2, 2000 03:13:07 PM
I can understand bidders avoiding in-state purchases, especially for higher-priced items. However, when purchasing in-state from a powerseller with a high feedback rating, sales tax is a given. It shouldn't need to be explicitly stated in the ad. The particular auction I mentioned didn't state sales tax, though at that time most of my auctions did. That one slipped through the cracks. I now state sales tax in all auctions just to avoid this kind of problem. I personally feel refusing to pay sales tax is just another scam. It doesn't take an Einstein to figure out that a seller with 3000+ feedback is indeed doing business.
Below is an email I received from the customer. Prior to sending this email, she stated that there was no sales tax due on items purchased at auction:
"By the way jack ***, You said you mentioned in your ad that you live in California. Well you better look again numb nuts. Your bound to keep getting that negative feedback as long as you don't straighten up your act jack ***! Just because you have over 3,000 in the feedback rating you think you can extort money, huh? This 78 year old woman would love to come up there and shove her foot up your ***! Get it together *********!"
Not only was this customer scamming, but she was abusive as well. She got the feedback she deserved. Twelvepole, believe me I don't need bidders like this. Do you think this is appropriate behavior over $.89 sales tax? If so, you are welcome to her.
posted on October 2, 2000 03:20:22 PM
While we're on taxes! What is the internet tax moratorium that the news media is always talking about? What taxes are covered under this moratorium? I think that it goes until 2002 and they are trying to extend it. Is anyone familiar with the moratorium? Thanks!
posted on October 2, 2000 03:51:00 PM
Power seller or not, sales tax is due on items bought from a seller in the buyer's home state (if that state has a sales tax).
A seller can choose to lower their profits by not collecting the sales tax directly from the customer but instead build it into the sales price...but one way or another, the state wants it's cut.
I list in the auction that California residents MUST pay sales tax...and repeat it in the end of auction notice. But the typical in state buyer conveniently ignores that part of the TOS. I would estimate 90% of my in state buyers do not include sales tax. The $400+ I sent to Sacramento last year could have been in my pocket if the buyers had only paid the taxes they know they are supposed to.
Also..I don't think stating in the auction that tax is charged in any way reduces the number of bids from in-state buyers.
posted on October 2, 2000 05:43:59 PM
"Thoughts on the issue (other than complaints about the Demoncrats having the hand in our pockets)?"
=======
Well, my first thought is that the current administration in Washington has absolutely nothing to do with state sales taxes.
My second thought is that I collect 'em and I pay 'em...although given how few sales I make in my native state, I'm thinking about just paying them without collecting from buyers. I haven't noticed any dimunition in bids since I started stating my sales tax policy in my TOS, but then I haven't had any nasty emails about it, either.
