Does eBay include sales tax in the information it gives to the IRS on Form 1099K? eBay now touches all money paid by buyers now instead of PayPal, which used to handle payment processing on the eBay marketplace. And that means sellers need answers from eBay about the information it provides to the IRS on Form 1099-K.
Sellers have had questions for as long as eBay began issuing 1099Ks. This thread from the fall of 2020 shows how sellers received different answers about 1099Ks depending on who was speaking. (Every dollar eBay processes will show on eBay 1099Ks, said one seller replying to a seller’s question about sales tax inclusion in the form. Sales tax is not included in eBay 1099Ks, wrote another.)
Adding to the confusion have been remittance issues. States used to require sellers to collect the sales tax from buyers and remit the tax directly, then some states began to require online platforms to collect and remit the sales tax instead of sellers.
Questions about 1099Ks continue, especially with the attention on the new lower threshold that requires payment processors like eBay to issue 1099Ks for sellers who do a minimum of $600 in transactions for tax-year 2022.
Lo and behold, the topic of IRS Form 1099-Ks came up again during eBay’s weekly chat session on Wednesday: “why is Managed payments having so many problems still? You can’t get your 1099’s right. They aren’t even close to what my numbers should be,” a seller wrote.
Another seller responding raised a different issue, this one about whether eBay included all transactions in 2021 in the 1099K for 2021, or whether eBay included all transactions from payouts made in 2021.
An eBay moderator responded later in the thread with some clarification:
“I just wanted to clarify that we go off the date the buyer paid. It’s not the date of sale or the payout issued to the seller. I reached out to the Payments team to verify this once more, and they said per this help page here (the source of truth for the 1099-K form) it’s stated that we use the payment transactions within the calendar year.”
The page the moderator called the “source of truth” for 1099-Ks also included the following information about whether eBay includes sales tax on Form 1099Ks:
“Additionally, Form 1099-K does not include the sales tax when it is automatically collected and remitted by eBay.”
The complete section explains why the numbers may not seem accurate when sellers compare it to their own numbers:
“As Form 1099-K is an IRS information return, it includes the gross amount of all reportable payment transactions within a calendar year. This amount does not include any adjustments, for example, credits, discounts, fees, refunds, or any other adjustable amounts. This means that the gross amount on your Form 1099-K may not be the final reportable amount on your tax return.”
eBay also tackled the issue in a podcast with Manish Belsare, which you can access on this page.
Belsare took the opportunity to tell podcast listeners eBay is against the lower threshold for tax year 2022 and said, “You can also visit eBaymainstreet.com and learn how eBay is fighting burdensome legislation like this one on behalf of our sellers. You could voice your concern on that website and even send a letter to your member of Congress about it.”
We expect questions about Form 1099Ks to continue, especially as it now impacts low-volume sellers who may think of eBay as a hobby rather than a business.
ONE question ebay can’t answer is why they made available 1099K’s for 2020, they didn’t mail them but are down loadable. Can’t/won’t say if they will mail them or if they’ll be sent to the IRS, going on 3 weeks with out any supervisors being able to answer the question.
The best way to see what is going on with your 1099-K is to do some checking for yourself. Don’t take anyone’s word as to how it is calculated. Take one of your least busy months and see if the total for that month reported on your 1099-K matches your total in your personal accounting. It should be exactly the same to the penny if you and ebay are doing it the same way. If not, dig deeper to find out why.
Check the individual sales you had against the 1099-K Detail for that month (downloadable). Like if you chose February, did the first sale you had listed show up as the first in the detail? Did the last one you had show up as the last in the detail? If not, you are already misaligned with eBay. You should find out why. It probably pertains to when each of you counted the sale.
Picking random sales during the month, did they match up with the 1099 Detail? What did the 1099 value for that transaction include? Mine has product sales and shipping charges collected on eBay (not the amount of the shipping PAID for the label). That’s all I have for each item. No Sales Tax, no fees, no conversion costs, or any other numeric values. Just 2 parts.
The date when sales attach themselves to the 1099-K can be important. Especially suspect is when payments cross the end of one month and the beginning of the next. The same for the end of the year. If you had a large auction sale of several thousand dollars on Dec. 31, 2020 and counted it for 2020, and eBay counted it in 2021 because that was when it was paid, you might be counting that same big sale twice.
Get a firm grip on how the 1099 is constructed, and you will either feel more confident that it is correct, or at least have some data to argue.
I found that the 2020 1099-K amount exactly matched the gross amounts in 2020 payments captured in the accounting system by entering the gross amount, fees and the amount received for each payout. Unfortunately, eBay does not sum gross amounts or fees if multiple orders are rolled up into a payout. Also, postage fees are entered in the gross amount received column instead of a fee column. Business velocity picked up in 2021 making it almost impractical to calculate and enter rolled up payout amounts for each payout. Some payouts were changed to weekly to reduce the number of deposits in 2022. Will this cause a problem at the end of 2022? In 2021, eBay posted some payments and fees in Euros or British pounds. Are foreign site sales included in the 1099-K? While eBay claims that payments transaction downloads are the answer, they are not.
In addition to taking time to import and format in Excel, the amount of skill required to extract information from the data is likely beyond the capabilities of many sellers. Responses by eBay representatives including “payments specialists” on the phone and in community forums suggest that few, if any, have ever attempted to extract payments data and use it to prepare a Schedule C in a US income tax return.
The remittance issues of last year’s return were something we contacted eBay about NINE TIMES. NOT ONCE did we get a reply from them by phone, email or letter. We DID get a letter from our state Department of Revenue sales tax collection group asking where our usual remittance was.
When we called them we told them that eBay supposed to remit the sales tax for us, and they asked how much we’d collected, which we provided based on OUR records. We were told they may be investigating eBay, but we never heard anything after that.
We’d probably prefer to collect and remit our own sales tax to A) know it’s correct, B) ensure it’s on-time, and C) because there is no reason we should allow eBay to hold and use all that money for free just because our state only collected it annually now rather than quarterly.
We don’t trust eBay’s figures at all. Considering they can’t keep basic functions of their system running reliably (messaging, feedback, labels, losing listing photos or entire listings, etc.), we have little faith that they’ll be able to handle the mountain pf transaction data generated by millions of sellers. Of course, they’re losing sellers quite rapidly now.
We’ve rapidly scaled down online sales in favor of local auctions & flea markets [we now wholesale to other flea market vendors on a cash-only basis]…the leftists in government are nothing less than greedy Marxists.