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Thread: Attention California tax experts: Is eBay breaking the law?

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  1. #1
    Owner Dan Druff's Avatar
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    Mar 2012
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    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:

    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.

    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:

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

  2. #2
    Quote Originally Posted by Dan Druff View Post
    Am I wrong here? I can't imagine I am.
    Some things are just too horrible even to imagine
    Signature has been deleted by Dan Druff for not following proper font regulations (Sons of bitches)

  3. #3
    Diamond mulva's Avatar
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    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 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.
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  4. #4

    (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?

      Dan Druff:
    Last edited by GrenadaRoger; 06-27-2020 at 08:36 AM.
    (long before there was a PFA i had my Grenade & Crossbones avatar at DD)

  5. #5
    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?

  6. #6
    Quote Originally Posted by donkdowndonedied View Post
    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?
    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.
    (long before there was a PFA i had my Grenade & Crossbones avatar at DD)

  7. #7
    EBay sucks.

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