Internet Auctions

Today TaxMama hears from Lance in NY who asks, “If I host an Internet based auction site in New York State where individuals place item for sale and others bid on them, like an eBay service, would I be required to collect sales tax if I charge the users a listing fee and a small percentage of their sale amount if the item sells? I would not be selling a tangible item,
only providing the online auction service and collecting posting fees and/or a commission.”

Hi Lance,

The only thing that concerns me is the percentage of their sales. Does eBay do that, too? If so, do they charge sales tax?

Why don’t you pull up eBay’s contracts and vendor agreements and read how they handle this for vendors. I looked at Amazon’s agreements a while back and they do collect a percentage of sales in their vendor area. But they treat that as a service cost, not subject to sales tax.

A lot will depend on the state of NY’s definition of what is subject to sales tax. If services are exempt, you should be home free. Make sure that you define your fee as a service, not a product.

Be sure to check with the NY Dept of Finance. http://www.tax.state.ny.us/

With what you’re doing, you really should have a good local tax pro in your corner.

And remember, you can find answers to all kinds of questions about nexus and sales tax and all kinds of other tax issues, free. Where? Where else? At TaxMama.com

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