Understanding Sales Tax for eBay Dropshippers and How To Eliminate It
Sales tax is a key part of your eBay store. This guide explains how eBay collects sales tax for you. It also shows you how to buy items sales tax-free so you can keep more profit.
Running your business the best way means keeping your costs very low. For Amazon-to-eBay dropshippers, sales tax is a cost that can lower your profit. eBay makes this easy because they collect tax from buyers for you. However, you must still make sure you are not paying extra sales tax when you buy your items. By setting up your business correctly, you can stop paying sales tax on the items you source. This can save you 6% to 10% on every order you place depending on which state your in. I'm in NJ and it saves me 7% per order.
Automatic Collection: eBay calculates and collects sales tax from your buyers. This happens at checkout for almost every state. You do not need to do any math or add tax to your prices yourself.
Paying the State: The tax money goes straight to eBay. It does not go to your account. eBay then pays that money to the state government on your behalf. You can see these records and download your data at the eBay Sales Tax Reports page. This is good because the tax money never touches your bank account.
The best way to make more profit is to stop paying sales tax when you buy items from Amazon.
Resale Certificate: You need to get a resale certificate from your state tax office. This paper proves that you are a business. It shows you are buying items to sell them again on eBay. When you buy an item on amazon that has already been bought from you, the sales tax was collected on the sale you made, to pay sales tax on the amazon purchase would be paying double sales tax, which is unecessary.
SST or MTC: Depending on which state your in, you can fill out a blanket sales tax exemption form that provides you with a sales tax exemption in multiple states. See linked websites for more infotmation: MTC Form, SST Form.
Amazon Tax Program: Once you have your paper, join the Amazon Tax Exemption Program (ATEP). Upload your certificate to your Amazon business account. Once they approve it, you will not pay sales tax at checkout. This adds the tax money back into your pocket as extra profit.
Understanding sales tax helps you run a smarter business. By letting eBay handle buyer taxes and using Amazon's tax-free program, you keep your profits high. These steps help you grow your store and reach success faster.
For more help with taxes, see the official eBay Taxes and Import Charges page.
Disclaimer
Legal Note: This article is for educational purposes only. It does not count as tax or legal advice. You should talk to a tax professional about the rules in your specific state.