Providing a Tax Invoice for Paypal Payments

[toolman-online]

I dont use Paypal for listings of a high dollar value due to the high fees compared to my banks credit card merchant rate.

My discussion point is this and relates to providing a tax invoice to customers.

If I sell an item for $1100 ($1000 plus $100 GST) and the customer pay via Paypal I am likely to receive $1071.05 This amount has a GST component of $97.37

So when I issue a TAX invoice for $1100 on paper I have collected $100 GST but in reality it is only $1097.37 that I have been paid with a GST component of $97.37

Paypal do not issue me with a tax invoice for their fees so where is the $2.63 shortfall going ?

When I do my BAS I say that I collected $97.37

The customer is expecting a tax invoice that says he or she paid $100 GST.

Therefore when the buyer claims $100 as a GST credit meaning the Australian Government $2.63 out of pocket.

Do Paypal submit a BAS and pay GST and taxes ?

They should !

Does anyone want to comment ? 

[digital*ghost]

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@toolman-online wrote:

If I sell an item for $1100 ($1000 plus $100 GST) and the customer pay via Paypal I am likely to receive $1071.05 This amount has a GST component of $97.37

So when I issue a TAX invoice for $1100 on paper I have collected $100 GST but in reality it is only $1097.37 that I have been paid with a GST component of $97.37

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I'm not registered to collect GST, so my understanding of the entire process, requirements etc, is a bit limited, but I would think this is the area that's tripping things up, in that what you end up with vs what you paid in fees to various third parties doesn't affect the fact that the total GST charged and paid was $100 (otherwise, the eBay FVF on the GST portion of the sale amount would also have to be taken into account, reducing the 'collected' amount even more). 

In other words, the buyer pays $100 in GST, you collect $100 in GST, and the expenses incurred to collect the funds are just that - a business expense, ones which don't reduce the GST amount. 

[lyndal1838]

You are 100% correct Digi.

The seller has collected $100 GST which is declared on his BAS and the paypal fees are a business expense just like the ebay fees.

The buyer should get a Tax Invoice showing the $1100 payment contains a GST component of $100.

[toolman-online]

Thanks for your reply however i think you may be missing the point i was making

The buyer pays $1100 and expects a tax invoice for $1100

I receive $1097 and for the part that Paypal take i dont get a receipt and therefore cannot include that in my BAS.

My accountant works my BAS out on my bank deposits and declared cash.

Paypal take out their fees on the spot and do not issue a receipt.

If you are saying that I need to pay the GST for the Paypal component  as well could you please tell me why that is and why since it is a business expense that I dont get a tax invoice from Paypal ?

My view is it is a big loophole in the tax system and that Paypal are avoiding tax

Ebay fees are not taken out of the payment and are billed and invoiced at the end of the month so do not need to be discussed.

[photo-video-accessories-pty-ltd-australia]

Download your history from PayPal - this shows the Gross amount and the fee charged and the resulting nett amount. Your accountant will know what to do with this.

There is no GST involved in the PayPal transaction as you  are dealing with an offshore entity.

[toolman-online]

Thanks for your reply although it does not address the points I raised

PayPal Australia Pty Limited (ABN 93 111 195 389)

Downloading transaction records is not a tax invoice needed for completing a BAS

Paypal  is an Australian company and has an ABN but issues no invoices for their services

Are you saying that you pay the GST for them ?

[saarzi]

DG is correct...

Youre assuming Paypal collects GST. They dont. Papal Australia is GST free. They only provide a funds transfer service and no financial institution pays GST on those services.
You cannot get a tax invoice from someone who does not collect tax 🙂
Hence, downloading your Paypal history is exactly what you would do.

Also, do NOT try to claim on the GST if there is none.. it **bleep** off the ATO.

[saarzi]

* no financial institution in Australia charges GST on funds transfer services. Paypal is considered a financial institution.

[saarzi]

i hope that makes sense... sorry i was trying to reply to something in a simple straight forward manner, while on my phone.. while in bed.. with my dog sleeping across me... then realised I couldnt edit it, and went back to sleep Lol

You cannot get a tax invoice from Paypal, they dont collect GST on their services (and are not required to by law).  

Just because a company has an Australian ABN doesnt automatically mean they pay or collect tax. Certain services from financial institutions are one of those exemptions.

So paypal fees are a business expense... you just cant claim the GST, because there is none.  If you try to, its called double dipping, its illegal, and you could go to jail, let alone be fined etc.  

If your accountant is telling you you need to get a tax invoice from Paypal, you need to get a NEW accountant right now!

[toolman-online]

Thanks everyoner for their wild guesses and assumptions

Given that many of you dont have to complete a quarterly  BAS here is a question to ponder anyway

You sell something for $1100 and receive $1070 from Paypal

Assuming it is old stock and you have no GST credits (some of you wont know what there are)

How much GST do you remit to the tax office ?  $100 or  $97.27 ?