Tax Was Paid to the Seller, not eBay

[h.walden]

Hello

Last night I made a purchase under AU$1000 from a seller in Europe. He contacted me shortly after and asked what he was to do with the tax. I checked, and rather than the GST being levied seperately by eBay as it was in the past, it was paid to the seller. I noticed today, that this happened on a previous payment to a European seller just a week or so ago. In Novemeber last year, I bought from a US seller, and the GST was charge seperately through GSP.

I was under the impression that the tax was supposed to be taken by eBay and sent to the Austraoian Government. In an attempt to help out the seller, I contacted eBay, who told me to contact PayPal. I contacted PayPal, and they basically told that it was not my problem, and that the seller should know what to do with it. Clearly he doesn't, otherwsie why would he have asked me about it? I get the whole GST on low value item situation, and understand about registration for companies over $75K etc, but in this case, something feels wrong, or at least different.

The question is, has something changed with the way the GST is levied on low-value pruchases through eBay that I am not aware of? If I don't get an answer here (having failed with eBay and PayPal), my next step is to pose the question to the ATO.

[lyndal1838]

The process of collection of GST was changed recently.

Now the amount is paid to the seller and ebay will take it back and remit it to the ATO.

I don't know why the change....it just seems to be an extra step in the process of collecting and remitting the GST

[h.walden]

Do you mean through the eBay Invoice process? As a process, that makes no sense. Australians understand the issue, so even if they don't like it, they can make sense of it. Overseas sellers will not have a clue about Australian tax law, so it will just be a discussion that will had over and over again between seller and buyer.

Could you provide a link to where this change was announced?

[lyndal1838]

I cannot find the thread where another member posted the link but it was before early December last year.....twice during December I referred to it and said it had the potential to be a problem if sellers did not know about it.

[brerrabbit585]

Below is a copy of an email I received (as a seller) from ebay on 4th October.  One of the links in it should take you to the relevant policy.

User Agreement and Tax Policy Updates

Together with PayPal, we’re updating how we process and collect tax. From November 2019, we’re updating the eBay User Agreement and our Tax Policy to reflect this change.

This change affects transactions where we’re required to collect tax in the jurisdiction where the item is being delivered. That includes orders up to AU $1,000 imported to Australia, or exports to certain US states.

We’ll continue collecting any required tax from buyers.

You’ll see a change in the PayPal transaction details:

• You’ll receive payment for the gross order amount, including tax.
• Once settled, we’ll automatically deduct the tax amount for remittance.

You can see a record of tax collected from each order in the Seller Hub order details page, or by downloading an order report.

Next Steps

You don’t need to do anything. If you have any questions about tax or how this may affect you, we’d recommend you speak with a tax advisor.

Read our Updated eBay User Agreement >

Check Out our Updated Tax Policy >

As announced in our Spring Seller Update, we’re rolling out our new, simplified selling policies this week in the Help Hub.

Thanks for being a part of the eBay community.

The eBay Team

[countessalmirena]

This is a mess. In my view, the sellers should not be receiving that gross amount, since they are not the ones who are at any time in control of those funds, responsible for remitting those funds to the ATO, or receiving those funds for their own income purposes.

❝Treasury Laws Amendment (GST Low Value Goods) Act 2017

No. 77, 2017

Schedule 1—Extending GST to low value imported goods

New Tax System (Goods and Services Tax) Act 1999

[...]

Subdivision 84-C—Offshore supplies of low value goods

84‑73  What this Subdivision is about

Supplies of low value goods involving goods being brought to the indirect tax zone may be connected with the indirect tax zone.

An entity may be treated as the supplier of an offshore supply of low value goods, if the entity is the operator of an electronic distribution platform through which the supply is made, or the entity is a redeliverer of the goods.

The result is that the operator or redeliverer, instead of the supplier, counts the supplies towards its GST turnover and pays GST on the supplies.❞

The ATO has rearranged some of its pages (again). However, the GST and imported goods page is still hosted on the ATO website with the same link.

❝When you use an electronic distribution platform (EDP)

An EDP is a service (such as online marketplace) through which you can buy goods from various merchants.

GST on low value imported goods sold through an online marketplace is generally charged by the EDP operator, as they are deemed to be the supplier.

GST will be payable on the sale where the online marketplace is required to be registered (that is, they meet or exceed the A$75,000 GST registration threshold). This is the case even where the individual merchant may not meet or exceed the GST-registration threshold (that is, they are an individual not operating a business).❞

   — ATO / GST on low value imported goods / Information for consumers

(Rubrication mine. As per this, I do not see that the individual merchant selling through the online marketplace - eBay, in this case - should ever have in his/her possession any portion whatsoever of the GST on a low value imported good sold through that online marketplace. This is even when the GST portion is taken by eBay shortly thereafter. It is worth looking into. If I have time over the next two days, I'll be speaking with one of the relevant agents at the ATO to seek clarification. If anyone else wants to do so, quoting the relevant information, it can only help.)

The potential exists that the seller might appear to a reasonable person to be the one collecting the GST. This creates a false impression. The potential also exists that the seller's account will have visible funds that do not belong to the seller, which may cause confusion, poorly informed financial decisions, and a lack of clarity and transparency on the GST issue.

The GST collected on low value imported goods ought to flow in this way:

    ✅   Buyer ➨ Entity responsible for collecting the GST ➨ the ATO

More specifically for what we're discussing, it goes from the buyer to eBay to the ATO. There ought not to be a detour at any point. This does not appear to me to be an acceptable flow of the GST collected from low value imported goods purchased on eBay;

    🚫   Buyer ➨ Overseas merchant (registered OR not registered for GST) ➨ eBay ➨ the ATO

[davewil1964]

The only reason I can think of for this is that eBay are/will be charging selling fees on the GST; ie the total amount remitted to the seller. An extra 1% for doing their job.

Certainly worth checking with the ATO, as from what you've posted it is a direct breach of the law.

[brerrabbit585]

Maybe paypal got ebay to do it because they weren't getting paid any fees on the tax component.

On another legal point, I found it interesting that a federal court found trivago guilty of misleading customers and not making it clear that they were paid by the motels/hotels they were referring people to. In 66% (60%?) of cases they were found to be referring people to the hotels that paid them the most fees rather than the cheapest hotels.

The ACCC said they weren't charging them because it was a bit of a grey area. They're legally required to make it clear that they were being paid by the places they recommend and in the fine print on the site they did spell this out, but people wouldn't know it unless they read the fine print.

If sites like trivago are required to state that they're being paid by those they recommend, wouldn't ebay also have to make it clear that they're being paid for promoted ads/listings on the site? I don't know of anywhere that they do this - if it's there it'd be extremely hard for a buyer to find it. I doubt that merely having the word sponsored near the ads for promoted listings would fulfill their legal requirements.

[brerrabbit585]

GST on low value imported goods sold through an online marketplace is generally charged by the EDP operator, as they are deemed to be the supplier.

Ebay may have found a loophole with the word generally, and possibly also the word charged.  Charged is not the same as 'collected' and there's nothing in what you've posted to specify the process of how they collect it.  

It's worth someone checking with the ATO but I don't sell to overseas and rarely buy overseas so I'll leave it to others who have the time and inclination.

Maybe pp were charging ebay fees on the GST component when it was being split off as a separate payment and they decided to shift the fees to the sellers instead.  You'd think that paypal could afford to process that portion of the amount without charging fees on it but who knows?  I know ebay can't charge a fee for collecting the tax but paypal would most likely be allowed to charge a fee for processing the payments.  That begs the question of whether paypal charge ebay a fee when they move the tax component back to ebay under their current system. 

Whatever the ins and outs of it, I believe that the primary motivation would be so that ebay can charge the seller more fees.

[h.walden]

Thanks everyone for your input. As I stated up front, something doesn't feel right. Perhaps eBay and PayPal underestimated the honesty of proud Australians to investigate this, so I will be talking to the ATO (although from past experience, that will be a trial). Like most, I'd rather not pay tax, but if I do, I bloody well want that tax to end up in the right place...and I don't like having to deal with seller confusion on this matter.