There’s been much talk recently both in the UK and in the US regarding eBay, PayPal and the tax man. The big issue is should eBay and PayPal hand across sales data and seller’s details to the authorities to ensure that any taxes due are paid.
In the UK the issue was sparked by the story in the Daily Mirror of a seller who is allegedly not paying VAT, even though they are well above the VAT threshold. It’s been suggested that it’s down to eBay to ensure that sellers are registered as businesses, are registered for VAT if their sales exceed the VAT threshold, and that it would create a level playing field for all ensuring no one is disadvantaged by being forced to compete with sellers who aren’t paying their dues.
Taking a contrasting view in the US sellers are outraged that PayPal are to be forced by new legislation to hand over sales data for any merchant who’s transactions exceed $20,000 and 200 transactions to the IRS, the US equilalent of HMRC.
Many US sellers have been concerned that PayPal would hand over data for merchants trading under those limits, and again worry about the requirement to enter their tax details into PayPal.
Whilst in the UK sellers are clamouring for more openness and transparancy between the tax authorities and eBay and calling for eBay to make sellers demonstrate that they’re registered for tax in the US the reverse appears to be true with sellers wanting to avoid paperwork.
It’s fairly well known that a spider called Xenon has been available to the tax authorities for years. Xenon can crawl sites like eBay and collate transactions and tie user ids together when they’re owned by the same person. Also data is readily available from research companies such as Terapeak so trading on eBay is very transparent and it’s practically impossible to hide once an investigation into your affairs begins.
If the tax authorities suspect that you’re underpaying or avoiding tax once they start digging they’ll very quickly establish what taxes were due from eBay and PayPal records. It should be noted that eBay have *always* fully cooperated with tax authorities when information is requested on a specific individuals activity on the site.
So what do you think? Should eBay be proactively responsible for ensuring sellers on their site are paying relevant taxes? Where should the lines be drawn? It’s easy to say if you turn over more than £70k per year you should be registered for VAT, but equally many sellers have other income or even multiple eBay accounts so should reporting limits be lower? Would it be better for PayPal to ensure registration with the tax man?
At the end of the day all companies should be paying any tax due in which ever countries they reside or trade in. But who’s responsibility is it to ensure that they do, the trader themselves, the marketplaces they trade on (and does that carry through to ISPs hosting ecommerce websites?), or is it ultimately the responsibility of the tax authorities to ensure all taxes due are collected?