Marketplace Mess: New Tax Rules For WA,TX Catch Some eBay Sellers Off Guard
eBay sellers in Washington and Texas express confusion and frustration as new laws go into effect assessing sales tax on certain marketplace selling and advertising fees.
Liz Morton
The Texas law, passed earlier this year, was extended to online marketplaces effective October 1, 2025 making "data processing services" officially taxable for sellers who are based in the state.
This tax on services is separate from the sales tax that collected from buyers and is instead imposed upon various fees that sellers pay to marketplaces for services.
Texas
Effective October 1, 2025, marketplace provider services may be included in taxable data processing services when they involve the computerized entry, retrieval, search, compilation, manipulation, or storage of data or information provided by the purchaser or the purchaser's designee.
For example, services provided by a marketplace provider to its marketplace seller that store product listings and photographs, maintain records of transactions, and compile analytics are taxable data processing services.
Importantly, Texas exempted payment processing fees, so marketplaces which charge for payment processing separately from sales commission that would mean only some of the fees would have tax applied - but for eBay sellers, the tax will be applied on the full amount of the Final Value Fee, since the current form of Managed Payments does not split payout processing out separately.
Also, Promoted Listings ad fees should not be taxed as the law exempts "banner advertisements, vertical advertisements or a link on an internet website owned by another person,"
Data processing services do not include:
- (i) Internet access service as defined by Tax Code, § 151.00394 (Internet access service);
- (ii) the transcription of medical dictation by a medical transcriptionist;
- (iii) the display of a classified advertisement, banner advertisement, vertical advertisement, or link on an Internet website owned by another person;...
And to make things even more confusing for sellers Texas provides a 20% exemption on the tax, so marketplaces will have to do a complicated calculation to apply the total state and local tax rate to 80% of the applicable fees.
From Tex. Admin. Code § 3.330:
Twenty percent of the total amount charged for data processing services is exempted from tax. If the data processing service is also taxable as another type of taxable service other than an information service, the twenty percent exemption does not apply.
Washington state has also passed legislation effective October 1 which taxes certain services and advertising, though apparently not the actual sales commission.
The 2025 Washington State Legislature passed Engrossed Substitute Senate Bill (ESSB) 5814, which added new business activities to the definition of retail sales.
As a result, businesses will be required to begin collecting sales tax on the following services starting Oct. 1, 2025:Advertising services.Live presentations.Information technology services.Custom website development services.Investigation, security, and armored car services.Temporary staffing services.Sales of custom software and customization of prewritten software.
ESSB 5814 also removes the following exclusions from the definition of digital automated services (DAS):Services involving primarily human effort.Live presentations.Advertising services.Data processing services.
Other marketplaces like Etsy, Poshmark, and Amazon proactively warned sellers about the upcoming tax changes, but some eBay sellers say they were left in the dark with no direct communication from the platform - only finding out about the change when they started noticing being charged tax on fees in their payment records this week.
One seller in Texas took to the eBay community trying to find answers since they were unaware of the change.
What is this new tax included in seller fees?
I sold clothing items on Oct 1st and 2nd that each had a 4 cent tax in addition to the final value fee.
I've never seen this before and it wasn't on the items I sold in the previous days, Sep 29 and 30.
I haven't seen anything a new tax on the seller news or this board. Does anyone know what this new tax is for? If it helps, the buyers each paid less than $10 each including selling price, shipping cost and sales tax. Buyers were in Pennsylvania and Arizona and I am in Texas if that makes a difference.
I calculate the final value fee as the price the buyer paid * 13.6% ebay selling fee + 30 cents (or 40 cents for items > $10). But now ebay added another 4 cent tax below the final value fee calculation. screenshot example:
Apparently eBay believed the vague existing language on their tax policy page was enough to cover these new taxes now being collected from some sellers.
Tax on eBay fees
Seller fees
- Depending on the seller's location, sales tax, Value Added Tax (VAT), Goods and Services Tax (GST), or similar consumption tax may apply to eBay selling fees.
- If eBay is required to collect such taxes in your jurisdiction, eBay will add the tax as a separate charge on your seller invoice or include the tax in our fees.
- Please ensure that your registration address is up to date, so that we know where you are based.
That section had typically been understood to refer to UK, EU, and other places with VAT and/or GST but there was nothing that specified country or location and the inclusion of "sales tax" could certainly cover TX, WA and anywhere else in the US that has already or is considering passing laws making some or all selling fees taxable.
And it appears since October 1st, eBay has quietly updated that page with a new bullet point which says:
- For details of US states and other jurisdictions where eBay is required to collect tax on selling fees, see our Taxes and import charges help page.
That leads to a new section on the Taxes and Import Charges help page which now includes a chart showing states where some seller fees may incur sales tax (including Store fees in South Dakota since 2024) - but that information was not displayed on this page as recently as last month.
Here's what it looked like on September 15th:
And what it looks like today - including advising that sellers in Hawaii may see taxes on some fees in November as well.
Per the chart:
Sellers in Texas will be charged tax on the following services:
- eBay Store subscription fees
- Portion of your final value fees*
- Insertion fees
Sellers in Washington will be charged tax on the following services:
- Listing upgrade fees (Feature Fees)
- Promoted listing fees
And starting November 1st, Sellers in Hawaii will be charged tax on the following services:
- Selling fees are subject to General Excise Tax (GET). Some fees are taxed based on the delivery address, and other fees are taxed based on the seller’s registration address. See your tax invoice for details.
Hopefully eBay will not just depend on these updates policies to get the word out - they could save sellers and their own customer service representatives a lot of headaches by sending out a detailed email to those registered in affected states explaining why tax is suddenly be charged on selling fees.
Of course these tax laws don't just apply to eBay - sellers are encouraged to check with all the marketplaces where they do business for details on how they're being applied as different fee structures may lead to different amounts being subject to the tax.
