eBay sales tax in the US: who collects it, what you see and what you still do

Who collects eBay sales tax in the US?

For eBay sales tax in the US, the short answer is that eBay does the work. eBay's help page on taxes says that, based on applicable tax laws, it calculates, collects and remits sales tax on behalf of sellers for items shipped to customers in the states and territories it lists. No action is needed from you, eBay makes no charge for doing it, and it applies whether you are based in the US or outside it.

This happens because of marketplace facilitator laws. These are state laws that make a marketplace such as eBay, rather than each individual seller, responsible for collecting sales tax on sales it facilitates. They followed the US Supreme Court's ruling in South Dakota v. Wayfair in June 2018, which removed the rule that a retailer needed a physical presence in a state before that state could require it to collect sales tax.

eBay's list covers every state that has a statewide sales tax, plus the District of Columbia and Puerto Rico. Alaska has no state sales tax, but eBay says it collects in certain Alaska local jurisdictions that have adopted the Alaska Remote Seller Sales Tax Commission's uniform code. eBay also says sellers cannot opt out of selling into these places, or opt out of eBay collecting the tax.

What does the buyer and the seller see?

The buyer sees the sales tax added at checkout, worked out from the delivery address. The rate depends on the state and often the local area, which is why two buyers paying the same item price can pay different totals.

As the seller, you see the tax on the order, but it is not your money. eBay collects it with the payment and sends it to the state. It does not land in your payouts as income, and it should not be counted as sales in your own records. When you look at an order in Seller Hub, keep the item price, the postage the buyer paid and the tax collected by eBay apart in your mind and in your books.

Other fees eBay collects in some states

Sales tax is not the only charge eBay collects. Its taxes page lists state fees it collects on certain goods or deliveries, including mattress recycling fees, electronic waste recycling fees, battery recycling fees, tyre recycling fees and a retail delivery fee. If you sell in those categories, read the section for your products so the buyer's total does not surprise you.

Does eBay charge its fees on the sales tax?

Yes, and this is the part of eBay sales tax that affects your margin. eBay's US selling fees page says the final value fee is a percentage of the total amount of the sale, plus a per order fee. It defines the total amount of the sale as the item price, any handling charges, any shipping costs collected from the buyer (with some exceptions), sales tax and any other applicable fees.

So the tax is not your income, but it does raise the base your final value fee is worked out on. The per order fee on eBay.com is $0.30 for orders of $10.00 or less and $0.40 for orders over $10.00, according to the same page. The final value fee percentage depends on the category, so check the current rate for yours on eBay's US selling fees page rather than assuming one figure for every listing.

Worked example: what the tax does to your fee

Example: suppose you sell an item for $40.00 with free shipping to a buyer whose local sales tax rate is a hypothetical 8%. For the arithmetic only, assume a hypothetical final value fee rate of 13% (your real rate depends on your category).

The difference is $0.42 on this order. On one sale that is small. Across hundreds of orders a month, a pricing sheet that ignores tax in the fee base will show more profit than you really make. Price with a margin of safety for the highest tax rates you commonly sell into, or calculate the fee on the tax-inclusive total. Our guide to eBay fees and your listing price shows how to build fees into the price itself.

What sales tax jobs stay with the seller?

eBay collecting sales tax does not mean you have no tax work. Its taxes page says you are responsible for paying all fees and taxes associated with using eBay, and lists these as possible responsibilities:

• Charging sales tax on eBay sales in the US territories where eBay is not required to collect and remit, if you are required to charge it there.
• Paying income tax on eBay sales. Your profit is taxable income whether or not eBay collected sales tax on the orders.
• Paying tax on eBay fees, which applies in some states based on your registration address.
• Informing overseas buyers about import charges when you sell outside the US.

Sales tax table for other territories

For territories outside eBay's collection list where you are required to charge tax, eBay lets you set up a sales tax table. You enter a rate for each territory, choose whether to also charge tax on shipping and handling where the law requires it, and then tick the option on each listing to charge sales tax according to the table. eBay notes two traps: changes to the table do not reach live listings until you revise them, and you are responsible for sending that tax to the right authority yourself.

Tax on your eBay fees

Separately from sales tax on what buyers pay, some states tax the fees eBay charges you. eBay's page says this currently applies to sellers located in Hawaii, South Dakota, Texas and Washington, with the taxed fees varying by state (for example, store subscription fees in South Dakota, and promoted listing and listing upgrade fees in Washington). Any tax charged on your fees appears on your eBay tax invoice.

What about sales you make outside eBay?

eBay's collection covers sales made through eBay. If you also sell through your own website, at markets or on a platform that does not collect tax for you, your sales tax position on those sales is your own. Since the Wayfair ruling, states can set economic nexus rules based on sales into the state, so a seller with a large off-eBay business may need to register and collect in states where it has no premises.

Whether marketplace sales count towards those state thresholds differs from state to state. This is the point where a tax adviser earns their fee. eBay itself recommends that you consult a tax adviser on these requirements, and says it cannot give tax advice.

How do sales tax and Form 1099-K fit together?

They are two separate systems. Sales tax is a tax on the buyer's purchase, which eBay collects and pays to the state. Income tax is a tax on your profit, which you report to the IRS on your own return.

For income tax, the IRS says payment platforms and online marketplaces must file Form 1099-K when a seller's payments exceed $20,000 in more than 200 transactions. A platform may send a 1099-K below that threshold, and you must report your income whether or not you receive a form. The IRS guide to understanding Form 1099-K explains how to read the form, and our article on Form 1099-K for eBay sellers covers reporting it.

When you reconcile a 1099-K with your records, check what the gross amount includes on your form and adjust for any sales tax eBay collected, refunds and fees in your books, so you report your real income. A qualified accountant or the IRS can confirm the treatment for your own situation.

A sales tax checklist for US eBay sellers

Use this list once now, and again whenever your business changes.

1. Read eBay's taxes and import charges page and confirm the states and territories you ship to are on eBay's collection list.
2. If you ship to a territory that is not on the list, find out whether you must charge tax there, and set up a sales tax table if so.
3. Check your pricing sheet: is the final value fee worked out on a total that includes sales tax?
4. Look at your eBay tax invoice each month to see whether tax is being charged on your selling fees.
5. Keep sales tax out of your income figures, and keep records of item price, postage, fees and refunds per order.
6. If you sell outside eBay as well, ask a tax adviser about economic nexus in the states you sell into.
7. Keep your Form 1099-K with your records and reconcile it to your own figures before you file.

If you reprice listings automatically, the fee figure your formula uses needs the same care. Dropizon, for example, grosses eBay fees up into the listing price from the seller's own formula; whichever tool you use, set its fee rate to cover tax-inclusive totals so the profit it shows is the profit you keep.