Understanding Sales Tax on GearTrader
As a marketplace facilitator, GearTrader is legally required to comply with U.S. state tax laws. This article explains why sales tax is collected, how it is calculated, and how it impacts both buyers and sellers on our platform.
Why Does GearTrader Collect Sales Tax?
GearTrader collects sales tax as mandated by U.S. law. This requirement stems from the 2018 U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., which established that states can require out-of-state sellers to collect and remit sales tax on transactions made within their state. This ruling significantly impacted online marketplaces, making compliance a legal obligation for platforms like GearTrader.
How Is Sales Tax Calculated?
Sales tax is dynamically calculated at checkout based on the buyer’s shipping address and the applicable tax rate in their state. This calculation includes:
- Item Price: The base cost of the product.
- Shipping Costs: In many states, shipping charges are taxable, and this is factored into the total.
- Applicable Tax Rates: Rates vary by state, and in some cases, by city or county.
GearTrader uses Stripe’s robust tax-compliance tools to ensure accurate calculations. Stripe’s system dynamically applies the correct tax rate based on local regulations, ensuring compliance across all U.S. states that require sales tax collection.
For additional reading: Stripe’s Tax Documentation
How Does Sales Tax Affect Buyers?
For buyers, sales tax is automatically added at checkout. The tax amount will be clearly displayed in the order summary before you complete your purchase. This ensures transparency so you know exactly what you're paying.
How Does Sales Tax Affect Sellers?
For sellers, the good news is that sales tax does not impact your payout. GearTrader collects and remits sales tax on your behalf, meaning you don’t need to worry about managing or reporting these taxes yourself. The only fees deducted from your sales are GearTrader’s platform fees and Stripe’s payment processing fees.
Do Sellers Receive a 1099-K Form?
Yes, if your annual sales on GearTrader exceed $600 in gross sales in a calendar year, you will receive a 1099-K form from Stripe. This form is issued to help you report your income for tax purposes, as required by the IRS.
For more details: IRS 1099-K Form Information
Frequently Asked Questions
Do all states require sales tax collection?
Not all states require sales tax collection for online marketplaces, but GearTrader complies with all applicable state laws where collection is mandated.
Is sales tax calculated on shipping costs?
In many states, sales tax applies to both the item price and shipping. Stripe ensures accurate calculations based on local tax laws.
Will I need to remit sales tax myself?
No, GearTrader handles sales tax collection and remittance for all transactions on the platform.