Whatnot To Charge Sellers Tax On Commission & Payment Fees In Some States
Whatnot is advising sellers they may see changes to their fees beginning December 2, 2024 as taxes will be assessed on Commission and Payment processing fees in some locations to comply with state laws.
The email notice reads, in part:
In accordance with state tax law, Whatnot will be required to start collecting sales tax on Whatnot’s Commissions and Payment Processing Fee in the following states beginning December 2nd:
Commission: District of Columbia, Hawaii, New Mexico, and West Virginia.
Payment Processing Fee: Connecticut (special 1% rate), Hawaii, New Mexico, Ohio, South Dakota, Texas (standard rate reduced by 20%) and West Virginia.
These taxes will be automatically deducted from order earnings and remitted to the respective state authority by Whatnot. You’ll be able to see the taxes you have been charged on the order receipt and your annual seller statement. Whatnot is obligated to charge this tax per the applicable state law.
Please keep in mind: sales tax rates vary by city and state. For more information on your specific tax rate, please visit your state tax authority website. Sales tax exemptions for the purchase of items for resale, and other specific exemptions, do not apply to taxes charged on Whatnot Fees.
Whatnot also provided the following example of how this new policy would impact a seller located in Houston, Texas who sells an item for $100 including buyer shipping and taxes:
- Order total (subtotal + shipping + buyer tax): $100.00
- Total Payment Processing fee (2.9% + .30c): $3.20
- Houston sales tax rate (8.25%) reduced by 20%: 6.6%
- Total sales tax on payment processing fee: $0.21
The full help and policy page explaining the update also shows that taxes may apply to Show Promotion and Boost fees for sellers in Hawaii, New Mexico, and South Dakota.
It appears that Whatnot may simply be catching up with other platforms in applying tax on seller fees in some states, not that there are new laws suddenly in play.
This article from 2021 shows some of these states have considered payment processing fees and other "data processing services" as taxable for years.
Jeff Glickman
On the commission side, Amazon has been charging taxes on referral fees to most of those states for several years.
eBay doesn't give a list of states, but does give a generic statement that sales tax might apply to fees and points sellers to their tax invoice report in Seller Hub, which does have columns that would show any tax charges on fees if your state requires it.
Neither eBay nor Amazon have similar sections about tax on payment processing fees, but that's likely because they do not charge processing fees separately from commissions, so it would not apply.
Etsy also has some general statements about taxes on fees, though they also do not break out which states specifically may be impacted - and since they were 2 years late implementing the Colorado Retail Delivery fee and have still not added the Minnesota Road Improvement fee, I wouldn't be surprised if they are not exactly up to date on requirements for collecting tax on commission and/or payment processing fees as well.
Liz Morton
I'm not a lawyer or tax/financial expert, but it's also possible Whatnot may be treated slightly differently by some states due to the fact their offering is primarily geared toward live stream selling which could conceivably be viewed as a different type of advertisement or digital service than the static item page Buy It Now or Auction selling format of other online marketplaces, depending on how state laws are written, interpreted, and enforced.
Either way, it highlights the growing complexities of compliance for online sellers and why it's so important to stay up to date on policy changes so you can make pricing and bookkeeping adjustments if needed to account for additional costs of doing business.
Thanks to Ryan at Galaxy CDS Rocks and Flips Reseller Talk Podcast for the heads up on this Whatnot change and if you are a seller in these states, let me know in the comments below if you are being charged taxes on fees from other marketplaces too!
