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eBay Believes New California Sales Tax Law Will Not Affect eBay Sellers

July 5th, 2011 by Skip McGrath

California’s new sales tax law that drove Amazon to cancel their Affiliate Program has been very controversial.  The law, similar to those passed by Rhode Island, South Carolina, Arkansas, Illinois and Colorado are attempts to over-reach beyond normal sales tax practice in an attempt to collect more sales tax revenue.

Normal sales tax practice says that if you have a business located in a given state, then you must pay sales tax on transactions in that state.  But what California says if you have any presence in their state –including an internet presence of any kind, then you must collect and pay sales tax on all sales to California.  Here is where it gets tricky.

You may be located in Ohio, Oregon or Oklahoma, but since eBay is located in San Jose, CA, the State of California says you have a “presence,” or what is known as a nexus in California and therefore must collect and pay sales tax on any sales to someone in California.

However, there is an exception in the law that excludes all non-California retailers who sell less than $500,000 to California buyers in a year. In a story in Auctionbytes, eBay’s Legal department states that they believe this exempts most eBay sellers.  But we will have to see what the state says.

Comments

Comment from Keith Yockey
Time July 6, 2011 at 12:08 pm

Skip, I have read the BOE notice http://www.boe.ca.gov/news/pdf/l284.pdf
And have yet to have found the wording in the law that forces eBay sellers located outside of CA to collect CA Sales Tax. Unlike the affiliate law, where a company like Amazon pays commissions (and therefore, a website posting these ads is an ’employee’). While eBay, Craiglist, or Google adwords are paid advertising, they do not pay commissions on sales, but rather, collect them for clicks or merchandise sold not in CA.
To date, eBay, nor eBay Government Relations, nor eBay Main St. has responded to my queries as to how the CA law affects eBay sellers, other than suggest eBay sellers consult attorneys/cpa for more information.
I called CA BOE (# listed in above link) this AM and was surprised to find I was the first caller to ask about the law. I left my email addy and they will get back to me. I will post the results in my blog:
http://www.thedumbdog.com/blog
I have been actively following Internet Sales Tax issue for over 3 years now, and it seems few are interested in finding a simple answer to the problem. I offer those too in my blog.

Comment from Wayne O. Stanila
Time July 7, 2011 at 3:03 pm

Hi Skip,

Thanks for the updated info.

Guess we will just have to sit and wait for the smoke to clear and see how it all plays out.

Best,

Wayne O. Stanila

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