Does a business that arranges to sell clients' items on eBay owe Kansas sales tax on its fees, and on the items it ships to buyers?

Plain-English summary

A business that helps people sell their items on eBay asked about its Kansas sales tax duties. Its typical process: a client asks it to sell something; it photographs the item, writes a description, sets a reserve price, and lists it on eBay; when the reserve is met, eBay provides the buyer's name and address; the buyer sends a check; and the business ships the item once the check clears. It charges the client a fee for listing the item and pays eBay a fee for eBay's services. It asked whether either fee is taxable.

Not an "auctioneer" — a service provider. The Department looked at the Kansas auction laws. K.S.A. 58-1015(a) defines an "auctioneer" as "a person who conducts a public auction," and K.S.A. 58-1015(e) defines a "public auction" in terms of "selling of new goods, ware or merchandise to the highest bidder." The Department concluded the business is "acting to accommodate clients who wish to have their items sold over e-bay, rather than as a[n] 'auctioneer.'"

The fees are not taxable. "[N]either the fee you pay to e-bay nor the fee that your customer pays to you are subject to Kansas sales tax." The business "is considered to be providing a non-taxable service." As with any nontaxable service provider, "[y]ou must pay sales tax on everything you buy and use to provide such a service" — it is the consumer of its own supplies.

But it is a retailer of the goods it sells. Even though the service is nontaxable, the business "do[es] act as a retailer when [it] deliver[s] items to the buyer and accept[s] payment on behalf of [the] client." So "[t]he only other taxable event is the sale of the auctioned item if the item is shipped to a buyer at a Kansas address," where "Kansas sales tax should be remitted on the selling price." Items shipped "by mail or common carrier at addresses outside Kansas are exempt from Kansas tax because of the interstate commerce clause." The Department suggested addressing the possibility of an in-Kansas sale in the client contract.

Bottom line: running an eBay-selling service is a nontaxable service (tax paid on the operator's own supplies), but the operator is the retailer of the underlying goods and must collect Kansas sales tax when an item ships to a Kansas buyer; out-of-state shipments are exempt.

What this means for you

eBay/online-auction selling services

Your listing and handling fees are a nontaxable service, so you do not charge sales tax on them — but you must pay sales or use tax on the supplies and equipment you buy to run the business. Because you deliver goods and collect payment for clients, you are the retailer of those goods.

Collecting tax on the goods you ship

Collect and remit Kansas sales tax on the selling price whenever an auctioned item ships to a buyer at a Kansas address. Items you ship by mail or common carrier to out-of-state addresses are exempt as interstate commerce. Consider addressing an in-state sale in your contract with clients so the tax is accounted for.

Distinguishing a service from an auction

Arranging for a client's used items to be sold online is a service, not conducting a "public auction" of new goods under the Kansas auction statutes. But that classification does not relieve you of retailer duties on the goods themselves.

Common questions

Q: Are the fees for an eBay-selling service taxable in Kansas?
A: No. Neither the fee paid to eBay nor the fee the client pays the operator is subject to Kansas sales tax; it is a nontaxable service. The operator pays tax on the supplies it uses.

Q: Does the operator owe sales tax on the items it sells?
A: Yes, when an item ships to a buyer at a Kansas address. The operator acts as the retailer and must remit Kansas sales tax on the selling price.

Q: What about items shipped out of state?
A: Items shipped by mail or common carrier to addresses outside Kansas are exempt from Kansas tax under the interstate commerce clause.

Citations and references

• K.S.A. 58-1015(a) — defines "auctioneer" as a person who conducts a public auction; the Department used it to conclude the eBay-selling business is not an auctioneer.
• K.S.A. 58-1015(e) — defines "public auction" in terms of selling new goods to the highest bidder; supports treating the business as a service provider rather than an auctioneer.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-228

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

October 15, 1999

XXXX
XXXX
XXXX

RE: Your letter of September 20, 1999

Dear XXXX:

I have been asked to answer your letter that we received last month. You ask what sales tax duties attach to your business of arranging for items to be sold on e-bay, an on-line auction service.

The typical transaction works as follows: (1) a client contacts you about something they want to sell on e-bay; (2) you photograph the item, provide a description, set a reserve price, and send the information to e-bay for auction on the internet; (3) after a certain amount of time passes and the reserve is exceeded, e-bay notifies you and provides you with the name and address of the buyer; (4) the buyer then sends you a check for the item; and (5) you package the item and ship it to the buyer once the check clears. You charge the customer a fee for placing the item on e-bay for auction. You pay e-bay a fee for the services they provide. You ask if either fee is subject to Kansas sales or use tax.

Kansas does have laws that control public auctions. Based on these laws and your description of your services, it appears that you are acting to accommodate clients who wish to have their items sold over e-bay, rather than as a “auctioneer.” K.S.A. 58-1015(a) defines “auctioneer” as “a person who conducts a public auction, as herein defined.” K.S.A. 58-1015(e) defines “public auction” as “the offering for sale or selling of new goods, ware or merchandise to the highest bidder or offering for sale o selling of new goods, ware or merchandise at a high price and then offering the same at successive lower prices until a buyer is secured.” Rather than making auction sales yourself, you provide services that a client needs to place an item on e-bay for sale. While not an auctioneer, you do act as a retailer when you deliver items to the buyer and accept payment on behalf of your client.

Based on your description, neither the fee you pay to e-bay nor the fee that your customer pays to you are subject to Kansas sales tax. This means that you are considered to be providing a non-taxable service. You must pay sales tax on everything you buy and use to provide such a service. The only other taxable event is the sale of the auctioned item if the item is shipped to a buyer at a Kansas address. When such delivery is made, Kansas sales tax should be remitted on the selling price. I suggest that you provide for the contingency of the sale being made in Kansas in your contract with clients. Items that you ship to buyers by mail or common carrier at addresses outside Kansas are exempt from Kansas tax because of the interstate commerce clause.

I hope that this accurately characterizes your business and answers all of your questions. If not, please call me and we can discuss this matter further. I again apologize for the difficulties you experienced with our telephone system . The department has reviewed of telephone system and is taking steps to remedy the problem that you experienced.

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked by operation of law without further department action if there is a change in the controlling statutes, administrative regulations, revenue rulings or case law that materially effects this determination.

Sincerely,

Thomas E. Hatten

Attorney/Policy & Research

Date Composed: 11/01/1999 Date Modified: 10/11/2001

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