21 {{ upvoteCount | shortNum }}
21 {{ upvoteCount | shortNum }}

Paypal charging Taxes NOW?

by Anthony seoserviceagents
15 replies
Hi Warriors today i logged into Paypal to pay a invoice and i found out that they are now charging you tax for each invoice???
here is what i got today morning trying to pay the invoice.

DescriptionsAmount
Payment for Invoice #3050Payment for Invoice #3050
$950.00Item number: 3050Item price: $950.00Quantity: 1Item total $950.00Tax (12.360% in New York);$117.42

Is that now a new rule of Paypal or what the heck is going on? seems like we need to find another merchant processor if Paypal starts collecting taxes and sending your financial statements to the IRS.

thoughts?
#charging #paypal #taxes
  • Profile picture of the author japaneseinked
    i believe it's up to the merchant.
    Signature

    Some Sites Owned:
    www.bestgamesreviews.com
    www.japaneseinked.com

    {{ DiscussionBoard.errors[7643360].message }}
    • Profile picture of the author sonas
      That's more than likely the specific tax being charged and added by the company that issued the Invoice to you.
      {{ DiscussionBoard.errors[7643380].message }}
  • Profile picture of the author clickbanktemplate
    The tax is surely added by the merchant , when generating an invoice a merchant can add a percentage of tax , paypal doesnt charge anything apart from their transaction fees of 3% + 0.5 usd per transaction.
    {{ DiscussionBoard.errors[7643399].message }}
  • Profile picture of the author Aaron Doud
    If you are billing people in state (the state you are in) as far as I know Paypal will follow the rules for collecting taxes in that state.

    But I thought you had to set that up.

    Rather paypal collects taxes or not does not matter. If you are selling a good or service in your state (normally only within your state but check your sales tax laws) that requires you to collect sales tax you need to. If you don't collect the tax you will still owe it. I would rather collect it from my customers vs having to pay for it myself.

    Services is many (most? all?) states are not taxed for sales tax. But your best bet is to ask a tax lawyer what the rules are for you.

    As a buyer (which I believe you were in this case) it is the same. If you buy from companies in your state or who do business in your state (ie have a location) they are bound by state law to collect sales tax (based on the tax rate where their location is based not the location in the state where you are located). Now no matter what you buy online state law (I believe in all states with sales tax) say you have to pay sales tax rather or not they collected this. So if you live in NY but buy from CA you still owe NY sales tax.

    Now in the real world few people do this. But that is the law. And sooner or later payment processors like paypal will be forced to provide your records to the states. The loss of revenue is too great. So enjoy the tax free internet while you can because sooner or later it will be gone.
    Signature
    Aaron Doud - Sales & Success
    {{ DiscussionBoard.errors[7643411].message }}
    • Profile picture of the author Anthony seoserviceagents
      Thank you great answer now quote to that
      what if the company is overseas i still have to pay the sales tax? makes no sense to me as they would never pay it to the irs if they are located overseas


      As a buyer (which I believe you were in this case) it is the same. If you buy from companies in your state or who do business in your state (ie have a location) they are bound by state law to collect sales tax (based on the tax rate where their location is based not the location in the state where you are located). Now no matter what you buy online state law (I believe in all states with sales tax) say you have to pay sales tax rather or not they collected this. So if you live in NY but buy from CA you still owe NY sales tax.



      Originally Posted by Aaron Doud View Post

      If you are billing people in state (the state you are in) as far as I know Paypal will follow the rules for collecting taxes in that state.

      But I thought you had to set that up.

      Rather paypal collects taxes or not does not matter. If you are selling a good or service in your state (normally only within your state but check your sales tax laws) that requires you to collect sales tax you need to. If you don't collect the tax you will still owe it. I would rather collect it from my customers vs having to pay for it myself.

      Services is many (most? all?) states are not taxed for sales tax. But your best bet is to ask a tax lawyer what the rules are for you.

      As a buyer (which I believe you were in this case) it is the same. If you buy from companies in your state or who do business in your state (ie have a location) they are bound by state law to collect sales tax (based on the tax rate where their location is based not the location in the state where you are located). Now no matter what you buy online state law (I believe in all states with sales tax) say you have to pay sales tax rather or not they collected this. So if you live in NY but buy from CA you still owe NY sales tax.

      Now in the real world few people do this. But that is the law. And sooner or later payment processors like paypal will be forced to provide your records to the states. The loss of revenue is too great. So enjoy the tax free internet while you can because sooner or later it will be gone.
      Signature
      Local SEO / Organic SEO Services / Citation Services
      {{ DiscussionBoard.errors[7643482].message }}
      • Profile picture of the author Aaron Doud
        Originally Posted by Anthony seoserviceagents View Post

        Thank you great answer now quote to that
        what if the company is overseas i still have to pay the sales tax? makes no sense to me as they would never pay it to the irs if they are located overseas
        In most states and with most goods and services the answer to this is no. But certain states have laws that break this overall rules. An example I deal with first hand is the state of Indiana and taxes on RVs. Normally if you buy an RV out of state you don't pay any taxes till you get home and register it. But if you purchase out of state (say Illinois) from an Indiana dealership they have an out of state tax (3%). Now most states will let you reduce your tax owed to them by the amount you paid to Indiana but not all.

        Our dealership is in IA and we do not charge out of state buyers taxes. But since we are on the border with IL we collect taxes and handle registrations for IL customers. So IA and IL are considered "in state" purchases for us while all other states and foreign nations (Canada and etc) pay no taxes with us. They pay their normal taxes and fees when they register it in their home location.

        This is the reason that I always suggest you talk to a local tax lawyer. Spending $200 for a consultation is better than getting in trouble and owning some government thousands.
        Signature
        Aaron Doud - Sales & Success
        {{ DiscussionBoard.errors[7643943].message }}
    • Profile picture of the author Sys4
      Originally Posted by Aaron Doud View Post

      If you are billing people in state (the state you are in) as far as I know Paypal will follow the rules for collecting taxes in that state.

      But I thought you had to set that up.
      The first statement is incorrect. Your thought is correct.

      With over 11,000 taxing jurisdiction in the US alone, PayPal does not follow any rules for collecting taxes for your business. They do, however, provide YOU with the facilities for collecting taxes through their payment system.

      Correctly applying the tax rules for your location and those within your "nexus", falls on you and your accountant.

      And sooner or later payment processors like paypal will be forced to provide your records to the states. The loss of revenue is too great. So enjoy the tax free internet while you can because sooner or later it will be gone.
      It's already gone. A small unregistered business may get away with it for a while yet, but at some point the taxing entities will get their new collection processes in place and come looking for their pound of flesh.

      With the new US tax laws, many small internet businesses, and others, are going to be getting surprises in the next few months, in the form of local sales tax assessments/bills.

      PayPal is required to follow IRS reporting rules, which is a separate issue - until such time that the taxing entity/entities that require sales taxes from you get their hands on your PayPal 1099-K and want their cut. THEN... we're back to, you had better have collected the sales taxes that they're going to demand from you.

      PayPal will provide copies of Form 1099-K to certain states as required. The final list of states that require PayPal to file Form 1099-K will not be final until March 2013. If your city/county/state doesn't make this list, remember, states generally have the ability to obtain data from the IRS.

      FYI: Internal Revenue Code (IRC) Section 6050W states that all US payment processors, including PayPal, are required by the Internal Revenue Service (IRS) to provide information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal. PayPal is required to report gross payments received for sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year.
      Signature
      SYS4 - White Label Web Design
      {{ DiscussionBoard.errors[7644499].message }}
      • Profile picture of the author sandalwood
        Sales taxes are not collected by the federal agency called the IRS. Sales taxes are the province of each state. In your NY example, the merchant was collecting taxes for the NY taxing agencies.

        The IRS is mainly interested in income taxes although excise taxes come under its jurisdiction as well. In 2014, you will paying a penalty to the gov't through the IRS if you do not have health insurance. That is due to Obamacare.

        My point is the IRS is NOT a sales tax collector but it is the point for other taxes.
        Signature
        Get 30% or More Retirement Income If you are serious about your retirement, you'll love this product.

        The Money Ferret Finance Article Directory
        {{ DiscussionBoard.errors[7645015].message }}
        • Profile picture of the author Sys4
          Originally Posted by sandalwood View Post

          Sales taxes are not collected by the federal agency called the IRS. Sales taxes are the province of each state. In your NY example, the merchant was collecting taxes for the NY taxing agencies.

          The IRS is mainly interested in income taxes although excise taxes come under its jurisdiction as well. In 2014, you will paying a penalty to the gov't through the IRS if you do not have health insurance. That is due to Obamacare.

          My point is the IRS is NOT a sales tax collector but it is the point for other taxes.
          I'm guessing that it's my post that your post is referencing. What I can't guess is where you see the IRS mentioned as a sales tax collector in my post.

          The IRS was mentioned for two reasons in my post, neither reason had anything to do with the IRS collecting sales tax.

          The first, was to inform the reader that PayPal is required, under certain conditions, to report potential income to the IRS. AND indicated that this was a "separate issue" from that being discussed in the thread - until you factored in the second reason for which I mentioned the IRS...

          The second, was to inform the reader that states can request and receive this data about potential income from the IRS. The implication being that the local taxing entities can and will use this data to assess income and sales tax liabilities - and then collect.

          The only reason I posted at all, was to provide knowledge that I wasn't finding mentioned elsewhere in the thread. I ended by citing the specific IRS rule that separates my post from opinion.

          My hope, being, that once read, others would be able to make use of said knowledge and avoid running into avoidable issues.

          I'm kind of bummed by your confusion. I thought I did a rather nice job of articulating a complex and boring piece of... subject matter.
          Signature
          SYS4 - White Label Web Design
          {{ DiscussionBoard.errors[7645872].message }}
  • Profile picture of the author Chad Kimball
    yea that merchant would probably have to pay sales tax no matter what processor you used to pay them
    Signature
    Make Money Using Google Maps
    Click Below to Learn How-Free Videos

    {{ DiscussionBoard.errors[7643908].message }}
  • Profile picture of the author kellyyarnsbro
    It ain't a good sign and it ain't good if this one is true, i mean this taxes are hunting us and everything that we could think of.
    {{ DiscussionBoard.errors[7645000].message }}
  • Profile picture of the author SirThomas
    Originally Posted by Anthony seoserviceagents View Post

    Hi Warriors today i logged into Paypal to pay a invoice and i found out that they are now charging you tax for each invoice???
    here is what i got today morning trying to pay the invoice.

    DescriptionsAmount
    Payment for Invoice #3050Payment for Invoice #3050
    $950.00Item number: 3050Item price: $950.00Quantity: 1Item total $950.00Tax (12.360% in New York);$117.42

    Is that now a new rule of Paypal or what the heck is going on? seems like we need to find another merchant processor if Paypal starts collecting taxes and sending your financial statements to the IRS.

    thoughts?
    If PP collected any "sales tax" funds for you (meaning you ARE in possession of the "sales tax" funds), you will have to pass it on to your state. In most states, it's done monthly, quarterly or annually, depending on how your state classified your business (usually based on gross receipts - the more receipts, the more frequent schedule).

    The only problem you might have is that PP might not know which products/services are taxable and which are not. For example in Washington state, there is no sales tax on building/designing of websites, but there is on hosting, if you host locally for local businesses (if I remember correctly). Providing SEO service is not taxable, but selling a software that helps with SEO is.

    The best idea is to call your local agency and ask for help regarding every item you sell. They are very helpful.

    Thomas

    PS. If you haven't registered your business with your state yet, don't overestimate your gross receipts, because they will force you to report monthly, even if you don't actually make many sales yet... They will adjust your schedule the next year anyway.
    {{ DiscussionBoard.errors[7648150].message }}
  • Profile picture of the author TrumpiaTim
    Wait so is this tax automated now?
    Signature

    www.Trumpia.com

    Trumpia: The Most Completed SMS Text Messaging Software & API Solution.
    {{ DiscussionBoard.errors[7652850].message }}
    • Profile picture of the author Sys4
      Originally Posted by TrumpiaTim View Post

      Wait so is this tax automated now?
      No. PayPal does not automatically collect sales tax, but you can use PayPal to collect sales tax.
      Signature
      SYS4 - White Label Web Design
      {{ DiscussionBoard.errors[7653862].message }}
  • Profile picture of the author Chad Kimball
    You might have to set up a taxtable through Paypal but like Sirthomas said, the best thing would be to just contact your state revenue service or a local service within your county.
    Signature
    Make Money Using Google Maps
    Click Below to Learn How-Free Videos

    {{ DiscussionBoard.errors[7653842].message }}

Trending Topics