Sales Tax Handling in Shopify POS Users on eBay

Sales Tax Handling

If you’re running both in-person sales via Shopify POS and online listings on eBay, you face dual sales tax obligations. This guide explains how to navigate economic nexus thresholds, marketplace facilitator laws, and state return filings to keep your business compliant and your customers happy.

Tax Code References

• State and Local Tax Deduction (IRC § 164): You may deduct sales taxes paid on business purchases as part of your state and local tax deduction, subject to the $10,000 SALT cap.

Ordinary & Necessary Business Expenses (IRC § 162): Sales tax software subscriptions and tax-compliance fees are deductible as business expenses.

Relevant Forms

• Form 1040, Schedule C: Report COGS and deductible expenses (including POS and tax-software fees).
• Form 1040, Schedule A: Claim your state and local sales taxes paid (up to the SALT cap).
• Form 1040-ES: Pay quarterly estimated taxes on net income.
• State Sales Tax Return: File in each nexus state (frequency & form vary by state).
• eBay Marketplace Facilitator Reports: eBay issues its own reports – compare these with your Shopify POS records.

Detailed Example

Scenario: Maya operates a boutique with Shopify POS in California and lists vintage jewelry on eBay nationwide. In 2025:

• In-Store Sales (CA): $120,000 (collected & remitted CA sales tax)
• eBay Sales: $80,000 (across NY, TX, FL)
• Marketplace Collections: eBay collects and remits tax in NY and TX under facilitator laws.
• COGS & Fees: $50,000 in inventory costs; $2,000 in POS subscription & tax-software fees

Tax Impact:

1. Economic Nexus (CA): Already registered for CA sales tax via Shopify POS.
2. Economic Nexus (NY, TX, FL): Sales into each state exceed thresholds; must register and file (eBay remits NY & TX, but Maya remits FL).
3. Deductible Expenses: Maya deducts $2,000 software fees on Schedule C (IRC § 162) and claims SALT deduction on Schedule A for state taxes paid (IRC § 164).

Step-by-Step Compliance Guide

1. Map Your Nexus Footprint
   • Combine in-store and online sales to determine if you exceed economic nexus thresholds in any state.
2. Register & Obtain Permits
   • For states where you owe tax but eBay does not remit, register for a sales tax permit through that state’s revenue department.
3. Configure Shopify POS & eBay
   • Enable tax-collection settings in Shopify POS; verify eBay’s marketplace-facilitator remittances.
4. Reconcile Collections & Remittances
   • Monthly, match Shopify POS reports with eBay facilitator reports; identify any gaps.
5. File Sales Tax Returns
   • Submit returns and remit any tax due in your own-remittance states (e.g., FL).
6. Track & Deduct Compliance Costs
   • Log software subscriptions, POS fees, and sales tax paid; deduct on Schedule C and Schedule A.
7. Pay Estimated Income Taxes
   • Use Form 1040-ES quarterly to cover your net income and avoid underpayment penalties.
8. Maintain Organized Records
   • Retain all sales reports, remittance confirmations, and permit registrations for at least four years.

Conclusion

By understanding your combined in-store and online nexus, leveraging marketplace facilitator remittances, and accurately reconciling collections, you’ll streamline your sales tax workflow and maintain full compliance across jurisdictions.

Call to Action

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Disclaimer

Anshul Goyal, CPA, EA, FCA, is a licensed Certified Public Accountant in the United States and an IRS-admitted Enrolled Agent. He represents clients in tax litigation and specializes in cross-border compliance. This blog is for informational purposes only and does not constitute tax advice. Consult a qualified professional for your specific situation.

About Our CPA

Anshul Goyal combines over a decade of U.S. and international tax expertise to help omni-channel retailers optimize their sales tax processes, minimize liabilities, and focus on growth.

Frequently Asked Questions

1. Does eBay’s facilitator collection cover all states?
No. eBay only covers states with facilitator laws; you must remit in others.

2. How do I know if my in-store sales count toward online nexus?
Combine total receipts – both channels determine economic nexus.

3. Can I deduct my POS subscription fees?
Yes – deduct under IRC § 162 as ordinary business expenses.

4. What if I miss a marketplace facilitator remittance?
Reconcile monthly and remit any shortfalls in your returns.

5. How long should I keep sales tax records?
Generally four years, but some states require longer.