Attention California tax experts: Is eBay breaking the law?

I bought an XBox gift card for Benjamin on eBay. I saved some money doing it that way instead of directly through Microsoft. Pretty sure it was NOT a scam, and the gift card worked as expected.

My issue? Tax.

I was charged California sales tax.

This is ILLEGAL, as far as I know. See this publication, pages 13 and 14.

Basically, California says that tax should NOT be collected at the time of a gift card purchase, but instead collected when the gift card is USED for a purchase. So, for example, if I buy a $25 gift card to McDonalds, there's no tax on it. However, when I go to McDonalds to buy food with it, the tax is charged at that time, and is subtracted from the gift card value.

That's how it works here.

Well, eBay charged me tax on this gift card anyway.

Why? Because California passed a law in 2019 requiring sales tax to be paid on all online merchandise purchases, regardless of whether or not it's being sold in another state.

eBay, in a sloppy attempt to comply with this law, forgot about the gift card situation, and just blanket-charges tax on everything, not realizing that certain sales in California are NOT taxed.

From pages 13 and 14 of that link:

Quote:

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What types of sales are included under gross sales?
The law requires that you report any sale of tangible personal property, whether or not you have been paid
for the property. Normally, payment for your sales will be in the form of money (such as cash and charge
sales). However, there may be times when you will receive other forms of payment (such as exchanges of
property), and the fair market value of those payments must be reported.

Do not include receipts for the following sales under total sales:
• California Lottery sales (scratchers, lotto tickets, and so forth)
• Money order service charges
• Sales of gift certificates (see note on the next page)
• Electronic waste (also known as eWaste) fee charges

As mentioned in the previous chapter, you must report a sale for the tax reporting period in which it occurs,
even if you receive payment in a different period. For example, you may sell an item in June for $500 and
allow the customer to take possession of it immediately on credit. Since the customer took possession of the

Please note: Gift certificates. Although you do not include the sale of a gift certificate under your total sales,
you do report the sale that occurs when you accept the certificate for a taxable sale of merchandise or
property. The sale must be reported for the reporting period in which the certificate was redeemed.

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Am I wrong here? I can't imagine I am. I think eBay has been fucking California consumers since 2019 on this.

Here's a discussion of the matter on an eBay forum: https://community.ebay.com/t5/Archiv...qaq-p/30310756

Would love to see a class action suit over this. I despise illegally collected taxes, no matter how small the amount.

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Originally Posted by Dan Druff

Am I wrong here? I can't imagine I am.

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Some things are just too horrible even to imagine

expect a long phone call with customer service reps from mumbai or wherever the fuck it is.

a few years ago ebay ran promotions to sellers saying "sellers fees will be lifted or cut in half in you list by "x" day" under these promotions they only gave you 5-10 listings when they ran it. these fuckers only honored it to new listings, so u couldn't end a current auction and relist it. you had to re-create it as well.

here's the thing. there was no expiration date as to how long these auctions would last in the fine print of the offer. so when i eventually sold a high price item 2/3 years later i had to call them up to get my credit back. at that very moment it became a hassle because they didn't want to give it to me.

they wanted me to provide proof. so i had to get a screen shot of a very old email showing the offer, take screen shots of the listing when i listed it in the sellers history to verify the date range, which was a pain in the ass to navigate through.

once i did that certain reps still wanted to fuck me and not honor it. they eventually honored it saying some shit like thus is a one time courtesy thing.

they said they don't have access to see or verify many things....lol...or they just want people to give up or stop asking shit they're deserved.

ebay still runs a similar promotion but have now stated that the item must sell in "x" days or it's void.

ebay has been ripe for a competitor for a few years now.

https://www.cdtfa.ca.gov/formspubs/pub61.pdf

(i see the sales tax authority is no longer called the State Board of Equalization)

publication 61 covers sales tax exemptions -- see page 19

"SECURITIES—The sale of stocks, bonds, and other securities including memberships in limited liability
companies are not subject to sales or use taxes because they are not considered to be sales of tangible
personal property"

i would think a gift card is basically cash/money order/credit/or bond, & thus is covered by this exemption; certainly it is not personal property...and indeed, the final use of the card has not been established--you might use the credit to buy tax exempt items such as food or medicine or buy from a tax exempt vendor (charity)

however, a publication is not authoritative support that would prevail in a court case or an appeal with the tax authorities...the specific code section or case law is usually needed to assure you will prevail in the dispute...and indeed, there may be an exception within the code that permits sales tax on gift cards--research needed.

how much sales tax was charged? was it for the full value of the gift card (that is $100 times your local sales tax rate)? or was it only for some fraction of the gift card value ($1 nominal value of the plastic card times you local rate)

and btw--a google search would turn up plenty of advice on this topic -- i. e.; go back to the vendor & complain...Karen story incoming?

Fiverr does the same thing for services. I was charged state sales tax and I looked it up. Pretty sure I wasn't supposed to be charged. The weird thing is, how are they even audited to know this sales tax goes to the state?

Quote:

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Originally Posted by donkdowndonedied

Fiverr does the same thing for services. I was charged state sales tax and I looked it up. Pretty sure I wasn't supposed to be charged. The weird thing is, how are they even audited to know this sales tax goes to the state?

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sales tax laws are different for each of the states....for example: some tax repair labor, some don't--its complicated for out of state sellers to know the laws of the states they are operating in...nevertheless, if a company is licensed/registered to operate in a state, they are presumed to know and apply the law--if they have a single location within a state, they are said to have nexus and thus be subject to tax--if they operate in a state without proper authorization, they can not use that state's court to enforce their contracts, they don't exist per the state's laws.

thus out of state businesses with nexus are required to register and pay a franchise fee to operate within the state....and part of the registration is issuing of tax id numbers for income, employment and sales tax...once a license is issued, generally they the state will look for a return each quarter, and assign an auditor to visit if no return is received or if 3 or 4 years have expired since the last audit.

EBay sucks.

Buying cheapo services online also sucks. No reputable business should do this.

Short answer, it’s probably illegal, definitely shady, and if you got a million to take it up to SCOTUS, might win. Until then, you’re pretty much fucked.

Quote:

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Originally Posted by Walter Sobchak

EBay sucks.

Buying cheapo services online also sucks. No reputable business should do this.

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I agree, eBay does suck. However, occasionally they have a use.

I can go years without ever using them, but then sometimes I'll buy things a few times in a year, like in 2020 (partially due to corona).

Anyway I'm pretty sure this is just a matter of incompetence and failure to understand California law. Last night after my Ignition game broke, out of curiosity I chatted with eBay (obviously Philippines) and complained about this. At first the rep didn't understand, I asked for a supervisor, that person understood and looked into it. They came back with bullshit that "gaming subscriptions are taxable in California" which is of course BS. The excuse also doesn't explain the Home Depot gift card example in that link I posted.

They then defaulted to claiming that "California made us collect tax on all purchases in 2019", and they kept insisting I was wrong about the gift card thing. I was also told that tax applies to my purchase because "it's a subscription", which again is BS.

I can actually see how this happened. They hastily threw this "tax California" thing in October in order to be compliant, someone fucked up, and they are dismissing all the complaints as being from idiots who don't understand the new 2019 law. So nothing's getting done, and the few times a coherent complaint comes in which makes it clear it's just about gift cards, it probably gets lost in translation between Philippines and management.

Quote:

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Originally Posted by Jayjami

Short answer, it’s probably illegal, definitely shady, and if you got a million to take it up to SCOTUS, might win. Until then, you’re pretty much fucked.

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What about a class action?

This blog, dated July 2019, says California items and digital services are not taxable, which would cover the XBox Live 12-month subscription gift card I bought.

https://blog.taxjar.com/sales-tax-digital-products/

While eBay is claiming they are going by an "October 2019 law", they're referring to the necessity to collect tax on merchandise sold online regardless of where the seller is located, NOT to start charging tax on digital items.

BTW, that gift card was transferred to me electronically. I did not receive any physical item.

Quote:

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Originally Posted by Dan Druff

This blog, dated July 2019, says California items and digital services are not taxable, which would cover the XBox Live 12-month subscription gift card I bought.

https://blog.taxjar.com/sales-tax-digital-products/

While eBay is claiming they are going by an "October 2019 law", they're referring to the necessity to collect tax on merchandise sold online regardless of where the seller is located, NOT to start charging tax on digital items.

BTW, that gift card was transferred to me electronically. I did not receive any physical item.

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again, the blog is not authoritative support for your position...and in fact, the blog has link for California, and the link doesn't work!!! surprised? not me

as i recall, software & digital product, if custom made for the customer, is sales tax exempt under California law...but off the shelf software (such as a download version of Excel) is taxable...i don't have the sales tax code citation on that, so don't rely on my word.

Quote:

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Originally Posted by Dan Druff

This blog, dated July 2019, says California items and digital services are not taxable, which would cover the XBox Live 12-month subscription gift card I bought.

https://blog.taxjar.com/sales-tax-digital-products/

While eBay is claiming they are going by an "October 2019 law", they're referring to the necessity to collect tax on merchandise sold online regardless of where the seller is located, NOT to start charging tax on digital items.

BTW, that gift card was transferred to me electronically. I did not receive any physical item.

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Get the firm of Finklestein, Samochan and Boyd on this right away!

Quote:

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Originally Posted by GrenadaRoger

Quote:

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Originally Posted by Dan Druff

This blog, dated July 2019, says California items and digital services are not taxable, which would cover the XBox Live 12-month subscription gift card I bought.

https://blog.taxjar.com/sales-tax-digital-products/

While eBay is claiming they are going by an "October 2019 law", they're referring to the necessity to collect tax on merchandise sold online regardless of where the seller is located, NOT to start charging tax on digital items.

BTW, that gift card was transferred to me electronically. I did not receive any physical item.

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again, the blog is not authoritative support for your position...and in fact, the blog has link for California, and the link doesn't work!!! surprised? not me

as i recall, software & digital product, if custom made for the customer, is sales tax exempt under California law...but off the shelf software (such as a download version of Excel) is taxable...i don't have the sales tax code citation on that, so don't rely on my word.

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Here's some things which support my position:

1) You are never taxed when buying any kind of gift card in California supermarkets -- including ones for gaming services such as Minecraft

2) Xbox subscriptions are not off-the-shelf products being sold in a different format -- the entire product is online.

3) eBay is run by monkeys, especially nowadays

Here is the California Sales Tax Regulation

280.0580 Gift Certificates. A gift certificate purchased with cash by a customer from a retailer is evidence of an intangible right and therefore not subject to sales tax. The application by a donee of such a certificate to his charge account does not constitute "merchandise returned" because there is no sale of merchandise. 1/25/61.

https://www.cdtfa.ca.gov/lawguides/v...-0000-all.html (you will have to go down the page quite a way to find this code section)

this is considered law, it doesn't get any clearer than that, and note, and its been the law for over 50 years---the only thing different now is the method of delivery, over the internet as oppose to a piece of paper the brick and mortar retailer hands you.

okay Druff, call back to the retailer, send a letter with the documentation to the retailer...also, there should be some kind of taxpayer services within the Cal Dep of Tax & Fees that you can complain to, plus also send a copy to you local assembly man (nice election year ammunition) and your last resort is to get a media outlet on your side.




okay Druff, you manipulated my ego into doing your research for you...would you at least cut loose with a green rep for this?

the new law, AB147, requires calls for internet sellers making more than $500,000 per year in sales of PERSONAL TANGIBLE PROPERTY to collect use tax and pay it to California...no longer is an online retailer required to have a location within a state to have nexus (this as per US Supreme Court SouthDakota v Wayfair)...that is what EBAY is claiming gives them the authority to charge tax...

while the state of California told retailers like EBAY to collect tax, they did not tell retailers to apply sales tax laws incorrectly...if EBAY is going to do business in California, they have to apply the law right, and they have enough money to hire counsel and system programmers to get it right

the law did not redefine tangible personal property--nor did it change any of the taxable status of various items that are specifically included or exempted from sales tax (e g grocery food or prescription medicine)...the law requires the tax be collected and paid to California upon shipment of the personal tangible ...i can find no provision is that law that amends the applicable code section 6406 re what transactions/goods are taxable nor does it grant online retailers the right to tax gift cards

the key thing is PERSONAL TANGIBLE PROPERTY, and as per the annotations to the code (as in the prior post of mine) a gift certificate is not taxable because it is not considered personal tangible property for sales tax purposes.

btw, AB147 was sponsored by assemblymember Autumn Burke, District 62, https://a62.asmdc.org/, and senator Mike McGuire, Senate District 2, https://sd02.senate.ca.gov/. One hopes they would be interested in the abuse of California consumers enabled by the law they sponsored and their lack of follow up to see the law is applied as intended--their opponents in the fall election might be.

BTW, there was once a sales tax issue involving Donkdown and the hats.

Remember the Donkdown hats? I'm talking about the black ones from my days on the site (which we gave away for free), not the trucker ones Micon laughably sold for $27.

Well, if you recall, Donkdown originally had 4 owners -- me, Micon, and two other people.

One of the other two guys arranged for the purchase of the hats, and I appreciated the effort he put in. He paid for it, then e-mailed us a copy of the receipt. I noticed we were paying Florida sales tax. The hats were shipped to Micon in Nevada. The hat company was in Florida.

I explained that under no circumstances should we pay Florida sales tax -- which added up to like $60 given how many hats we bought. We got on a 4-way conference call about it.

Owner #1 disagreed. He said he knew the law very well, and that I was incorrect. He wouldn't budge when I insisted otherwise.

Owner #2 (the one who made the purchase for DD) said he wasn't sure if I was right or wrong, but stated that he would be "embarrassed" to contact the company and ask for the $60 back. He explained this was a small business in Florida, and that he didn't want to come off as a complainer or a cheapskate. He also voted to ignore it and just eat the $60.

I stated that I was 100% correct about this, explained where they could find the law online about the matter, and told them that we should very politely contact the business and inform them of this. I said that I doubted it was malicious -- just that the small company hadn't dealt with many out-of-state orders (it was a brick-and-mortal place in Florida), so they probably didn't understand how sales tax worked for out-of-state purchases.

Micon, after hearing all of he back-and-forth, came down on my side. He agreed that the sales tax was erroneous, and that a polite e-mail to the company would not be "embarrassing" in any way. He also agreed that $60 was enough to where we shouldn't just eat it.

We had an agreement that in the event of a 2-2 tie in voting, whichever way Micon voted would be the deciding factor, since he had the biggest piece of the site, so the decision was made.

Owner #2 reluctantly e-mailed the merchant. The merchant wasn't mad at all. In fact, they looked into it, admitted we were correct, and profusely apologized. They immediately credited back the $60 to Owner #2's card.

This incident was one of many reasons I decided I wasn't doing PFA unless I had 100% ownership of it.

LOL sales tax drama

This one has me a little perplexed on this one Druff.. Reason is because its not a typical gift card with a fixed value like a regular $25 gift card and such.. This is one tied to a fixed value product/service in this case a 12m XBox Live membership which if you purchased online without the card would be taxed online irregardless. I know because when I renew my PS+ every year its taxable and if I buy the card for the membership it is indeed taxable.. NOW.. If I buy just a fixed value card for Playstation Network such as $25-$50 or whatever it is NOT taxable because it is indeed a stored value card like a regular giftcard and should I use it to buy loot crates or whatever the hell Im buying like addons for an EA sports game or what not then yes PS charges taxes on the purchase and the WHOLE thing comes off the stored gift card balance.. A Membership card for something that has a finite fixed value of something specific (such as a 3 month-12month online membership) isnt the same thing. Your basically buying the membership same as you would with a credit/debit card but avoiding your card being put into Microsoft or Sonys network to potentially be used to buy stuff online you didnt authorize.. I know fair number of adults who have kids who work it that way.. The membership card is purchased either at a store or what not to keep the monetary info away from the direct store front of the gaming companies and also allow the kid(s) to buy gift cards to put online for purchases to avoid any unexpected charges to accounts.. Normally I see your point in this case Druff I dont think youve got a case man..

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Originally Posted by Dan Druff

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Originally Posted by Jayjami

Short answer, it’s probably illegal, definitely shady, and if you got a million to take it up to SCOTUS, might win. Until then, you’re pretty much fucked.

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What about a class action?

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That will cost you at least 10 million.

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Originally Posted by Ryback_feed_me_more

This one has me a little perplexed on this one Druff.. Reason is because its not a typical gift card with a fixed value like a regular $25 gift card and such.. This is one tied to a fixed value product/service in this case a 12m XBox Live membership which if you purchased online without the card would be taxed online irregardless. I know because when I renew my PS+ every year its taxable and if I buy the card for the membership it is indeed taxable.. NOW.. If I buy just a fixed value card for Playstation Network such as $25-$50 or whatever it is NOT taxable because it is indeed a stored value card like a regular giftcard and should I use it to buy loot crates or whatever the hell Im buying like addons for an EA sports game or what not then yes PS charges taxes on the purchase and the WHOLE thing comes off the stored gift card balance.. A Membership card for something that has a finite fixed value of something specific (such as a 3 month-12month online membership) isnt the same thing. Your basically buying the membership same as you would with a credit/debit card but avoiding your card being put into Microsoft or Sonys network to potentially be used to buy stuff online you didnt authorize.. I know fair number of adults who have kids who work it that way.. The membership card is purchased either at a store or what not to keep the monetary info away from the direct store front of the gaming companies and also allow the kid(s) to buy gift cards to put online for purchases to avoid any unexpected charges to accounts.. Normally I see your point in this case Druff I dont think youve got a case man..

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I'm afraid you're overthinking this.

I don't know what state you're in. California is very clear that they absolutely never charges sales tax for any kind of service, membership, or gift card.

There are sometimes other kinds of taxes (usually levied at the local level), but not sales tax.

This is to prevent both double-taxation and incorrect single taxation.

You're also incorrect that a 12 month Xbox membership would be taxed online. No, it wouldn't. I've bought it from Microsoft before, and it never has a single penny of tax.

It's almost 100% that I'm right about this. The only question is if there would be a viable class action remedy which an attorney would be willing to take on.

Brandon confirmed this is also happening in Nevada, and they have a similar law against it.

Also, notice Amazon is NOT charging the tax on the EXACT SAME ITEM (bolstering my belief that eBay is acting illegally):

BUMP

Confirmed I was correct.

eBay refunded the money.

The reason for it occurring was due to incompetence, and not anything sinister. The seller apparently made an error when selecting the category of what he was selling, so even though it clearly said "XBOX Gift Card", the system thought it was physical merchandise and not a gift card or subscription.

Or so eBay says.

However, even if this is true, that doesn't let eBay off the hook. The responsibility to collect tax properly is theirs, and they clearly aren't putting any effort into sanity checking these listings. There are several ways they could do this.

At the very least, they should make all of their customer service employees aware, and allow them to issue refunds when this mistake occurs. Instead, I had Philippines reps telling me that the tax was 100% legal, and that "subscriptions are taxable in California", which 100% isn't true.

glad you got your 79 cents back druff

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Originally Posted by dwai

glad you got your 79 cents back druff

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That's Jew gold Jerry, JEW GOLD

BUMP

A year later, it happened again, but this time I was smarter about it.

Rather than dealing with the monkeys at eBay support, I decided to just take matters into my own hands. I listed my shipping address in a state where there is no sales tax. Since the item wasn't being physically shipped, it didn't matter where I listed myself.

In fact, I did this exact same thing when purchasing a foreign-based VPN service. They also erroneously charge sales tax, so I simply listed my address as one in a state without it.

I recommend you do the same if you are purchasing a service online, and are erroneously charged tax. Sure beats arguing with Philippines customer service reps who don't know US law.