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Is it legal for paypal to charge a % of the sales tax portion

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Is it legal for paypal to charge a % of the sales tax portion

I don't understand why Paypal is taking a percentage of the sales tax that my customers are paying as required by their state? I agree that pypal is entitled to their fee based on the actual sale cost but not the sales tax too...or even shipping cost as well.  I sell, among others, through Reverb.cm(guitars) and their policy is to "add" state sales tax to the cost of my product in which the customer resides. But instead of with holding that tax and remitting it to the state where owed, they include it in my sale total (along with shipping cost I charge which is another issue I have with Paypal)...with out breaking the tax out of my total sale. The problem is that Paypal charges me their fee based on that whole number, which includes the customers sales tax, that ultimatly must be remitted to the state where it's owed. 2 problems here. One, the obvious over charging of fees as there should not be any fees taken from sales tax as that would leave the state owed the tax short. And then what...I have yo make up for it? Then I am being taxed in a way.  But the second issue is that then Reverb.com then takes the "tax" money presumably in my paypal account to remit it themselves to the states it's owed to.  Is this bizzarrow world? First, Reverb should just with hold the tax portion of the customers payment money so it never hits my paypal account. That would solve the main issue. But since they don't, I think Paypal is doing something wrong by taking a cut of state owed taxes earmarked for remittance to those states. I might even go so far as to call it theft or fraud to take governments tax money leaving the seller to dip into his own pocket to make up for the difference. Seriously, can I then claim all this extra expenses on my tax form at the end of the year? Can I say, well, since paypal took tax money owed to Arizona and now I'm short with the money to remit to them can I claim a loss of profit? Oh wait..in my case Reverb will be short when I don't have all the tax money they will try to bill me for from my paypal account then I will owe them after they have to dip into their pockets to make up the difference paypal took.  You see... Reverb.com owes the sales tax that they promised all the states to remit to them as the online sales venue people use. See how crazy wrong all this is? In the meantime do I have to sue Paypal for the percentage of tax money they took from my sales? Can I hold them liable for the state tax that is owed? The states will surely go after Reverb.com if they don't get their sales tax reverb agrees to collect. But Reverb is likely to after me...as if it's my fault Paypal is taking some of the sales tax money and pocketing it. Then ultimately I have to sue Paypal to get them to refund the tax money? Why is all this happening and why can't big business do the right and correct thing?

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Esteemed Advisor

Re: Is it legal for paypal to charge a % of the sales tax portion

@myblueheavenn 

 

You got it twisted. PayPal is entitled to the calculate the fee on the entire amount you are receiving per transaction for their service of moving the money which includes any item price, shipping/handling and sales tax. PayPal don't parse out the different category of expenses and not charge their fee on a certain thing. Don't get me wrong, I don't like like it either but its the cost of doing business. I've read discussions and the outcome has been to Increase your prices a little. lol Madness. Blame congress.

 

And don't Reverb get a lower rate for processing PayPal payments through their Reverb payments system? If you use the Reverb payment system the PayPal payments go to Reverb and the entire amount in item price and shipping/handing go to you, doesn't it, which you withdraw to your bank account? Or, is the amount shorted due to the PayPal fee. You can also set up PayPal account at Reverb so you receive the payments directly to your PayPal account. And perhaps Reverb bill you for the sales tax you collected monthly. A lot of people said what you said, for the marketplaces to split the payment but looks like they can't do it that way for some reason.

 

One person put it this way, I think it was in the eBay forums, that we sellers are not out of pocket really because all we do is charge the buyer in the end. I believe eBay was doing it that way but have stopped recently.


Kudos & Solved are greatly appreciated. 🙂

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Esteemed Advisor

Re: Is it legal for paypal to charge a % of the sales tax portion

@myblueheavenn 

 

You got it twisted. PayPal is entitled to the calculate the fee on the entire amount you are receiving per transaction for their service of moving the money which includes any item price, shipping/handling and sales tax. PayPal don't parse out the different category of expenses and not charge their fee on a certain thing. Don't get me wrong, I don't like like it either but its the cost of doing business. I've read discussions and the outcome has been to Increase your prices a little. lol Madness. Blame congress.

 

And don't Reverb get a lower rate for processing PayPal payments through their Reverb payments system? If you use the Reverb payment system the PayPal payments go to Reverb and the entire amount in item price and shipping/handing go to you, doesn't it, which you withdraw to your bank account? Or, is the amount shorted due to the PayPal fee. You can also set up PayPal account at Reverb so you receive the payments directly to your PayPal account. And perhaps Reverb bill you for the sales tax you collected monthly. A lot of people said what you said, for the marketplaces to split the payment but looks like they can't do it that way for some reason.

 

One person put it this way, I think it was in the eBay forums, that we sellers are not out of pocket really because all we do is charge the buyer in the end. I believe eBay was doing it that way but have stopped recently.


Kudos & Solved are greatly appreciated. 🙂

View solution in original post

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Re: Is it legal for paypal to charge a % of the sales tax portion

 Just because a corporation makes a rule or follows it's own self made business practice doesn't make it lawful. Paypal as been sued numerous times and forced to make changes. It happens all the time in the business world. And though government is often slow to remedy consumer issues I suspect when it finds that a business practice may be impeding small business owners from paying state tax owed they may be very interested. When a corporation creates a hardship such as can happen when it takes funds earmarked and owed to to the states as taxes...the states get very interested.  As for your business model of simply charging your customers more to make up for what paypal takes, that is a horribly flawed a short sided remedy. This is a small fish bowl we live it.  It's not just your customer who  takes it in the shorts. It's you too, when you go to buy your merchandise or materials you need to make or sell your product. Right? After all, sellers need to buy too and they will get stuck paying more when they too have to pay a higher price and then they raise their prices to make up for their shortage due to paypals fee practices.   That's how it all starts...and it snow balls...where does it end? How many times will you have to raise your prices cause every time you do paypal gets even more of the state tax money to pocket.  So you where you use to sell a widget for 10 bucks, the state tax was 70 cents and paypal takes their percentage of that. So you raise your price to 10.15 or what ever percentage paypal took. But now paypal takes their cut of 10.15 so now you have to raise your price again, according to you( just make the customer pay more...and more and more as you keep getting more and more taken by paypal.) mean while  the guy who sells you the material you need to make your widgets has the same problem...so he keeps raising his prices. It's called a vicious cycle. And it only take one big greed corporation to start the inflation.

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Re: Is it legal for paypal to charge a % of the sales tax portion

I'm with blueheaven on this one.

 

Sharpiemarker - I've seen your replies in another post on this same topic and, frankly, I think your thinking on this is what's twisted. This fee on tax being collected by PayPal is NOT some entitlement owed to PayPal as you state. They already collect a fee on the transaction, based upon the sale amount of the item. Sellers aren't even handling / seeing the tax. That money is going to directly to PayPal. We should not be getting charged a fee for that service. Your recommendations (on both posts) that sellers just need to pad that extra fee into their selling cost makes no sense either as that just increases the sales tax and then ultimately the PayPal fee in the long run... Sorry, but I don't see how that is an answer.

 

Also, I'm finding it quite odd that your posts - on the two that I've seen on this subject - have both been given as the "solution" yet there is not one kudo to your posts or signs of support. In another post, the OP said they did not give your answer as a solution, could not figure out who would have supported it and argued your points. Your reply was that an eBay moderator must have marked your answer as a solution...??? Seriously?

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Re: Is it legal for paypal to charge a % of the sales tax portion

Yet concerning FeeBay, how can you even charge anymore when you list an auction style where the winning buyer pays their winning bid? 
You can't.  And if you did, they ought to complain.  I surely would if I won and then all of a sudden the price was different. 
What PP is doing by charging a fee from a tax they impose based upon what the State claims is their cut is fraud.  Plain and simple.  

I liked it a lot more before they made a bad case into "law".  Judges aren't suppose to make laws. That's what Congress is supposed to do. 
One day...  maybe both those swamps will be drained and the real America will emerge. 

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Re: Is it legal for paypal to charge a % of the sales tax portion

MyBlueHaven - you are 100% correct.

Paypal advises that they collect fees on money sent to the Seller.

They do NOT send the tax money to the SELLER, they send it to the state where it is owed.

They will get their 'fees' when they remit the money to the state owed, and the state gives them a small % of that money to do the paperwork and comply with their laws.  

So, in this case, PP is charging us and then double dipping to get more money on the taxes.

I intend to take this to the AG in my state [FL] where I do my selling if there is no change in this confiscation of MY money.

I don't have a lot of funds affected at this point, but they are cheating the system.

 

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Re: Is it legal for paypal to charge a % of the sales tax portion

I am an attorney and I absolutely do not feel it is legal for them to charge a percentage on the sales tax. The tax is automatically remitted to the state and we as sellers should not be charged 3% of it because we are not receiving it. PP should be taking their percentage on the item + shipping, then deduct the sales tax. They are going to get hit with a class action on this and they should!

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Re: Is it legal for paypal to charge a % of the sales tax portion

Is there a way to escalate and make paypal executives "aware" of this practice.  This is worse than paypal not returning/crediting its cut when you issue a refund.  

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Re: Is it legal for paypal to charge a % of the sales tax portion

  I would imagine there`s enough sellers that have realized the Paypal fees on tax payments can accumulate very quickly if your doing large numbers on a seller site such as Reverb. If Reverb is already separating the tax and payouts if your using their Reverb Preferred payout, how hard would it be to do the same for Paypal payouts. This practice needs to be resolved and ended. It`s already time for a class action suit. This practice is costing small business owners millions of dollars, and am sure Paypal is not complaining about applying fees on tax.

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Re: Is it legal for paypal to charge a % of the sales tax portion

I am not an attorney, but I do believe that you are correct. 
I do not receive any extra onto a sale for PayPal to justify applying a fee from tax. 
I just did some calculations to see why my fees were what they were. 
They took the total of the item and shipping then applied a tax, as if I was receiving it, which I never do take any possession of. 
Then they charged their 2.9% plus $0.30 to come up with some purchase total. 
And then they subtract their fee and the tax, which they added, to finally give me what they deem I deserve. 

They are getting overpaid for absolutely nothing.  I call that fraud.