Attention California tax experts: Is eBay breaking the law?

[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.

[GrenadaRoger]

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.

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.

[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.

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.

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

[Walter Sobchak]

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.

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

[GrenadaRoger]

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?

[GrenadaRoger]

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.

[Dan Druff]

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

[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..

[Dan Druff]

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..

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.