Online selling has been a convenient source of income for many, be it full-time or part-time. When you are doing so through an online marketplace, many features make everything easy for you, especially as a seller.
For Depop, they collect sales tax on behalf of their sellers. If you are the type of seller who works out the taxes on your listings, you wouldn't have to do this anymore. Depop automatically does the work for you, and you can see this whenever there is an order confirmation. The process makes it highly efficient, so you can only focus on marketing your items and attending to customers' questions and concerns.
All About State Sales Tax
Certain US states have started collecting sales tax across online transactions in large marketplaces. This is no different from physical purchases, where the government charges the buyer a specific fee for every product, service, or item they will buy. The difference only lies with how everything is digital nowadays.
With over 30 million registered users worldwide, the process is simple and makes it easy for small businesses to have one less concern on their list. Taxes can be a complicated topic for some, so the Depop community prioritizes making everything understandable and simplified for buyers and sellers.
One thing to note for sellers is how the taxes vary per state you live in. This is why Depop emphasizes they have no control over the fees, nor do they profit from sales tax. They simply collect it on behalf of the sellers and transfer everything to the government.
Sellers don't need to do anything anymore, such as filing taxes manually, changing the way you set the price on your listings, and paying for the service. This is an automatic assistance Depop does. When you confirm a sale, the taxes based on your state are already calculated in the order total.
From Buyer's View
Sales tax is visible to the buyers on the checkout page. This is indicated on top of the item price. For instance, if they are buying your pair of jeans for $26, the applicable tax based on your location is $1.80. This means the original seller's total amounts to $27.80.
Take note that there are further deductions needed depending on the mode of payment of the buyer. Currently, there are PayPal and Depop payment fees to consider. These two play crucial roles in determining the final seller's total. From the buyer's end, they can save up for the cost, but of course, as a seller, this merits lower profit for you.
This is why, when setting up the price of your items, you should do research. This covers both looking up your item's original value, especially if they are branded, and comparing prices with fellow sellers within the same online marketplace or beyond.
Process of Deducting Sales Tax
There are different deductions and processes in determining the seller's total. It all relies on the mode of payment of your buyer.
Certain US states such as Florida, Kansas, Nevada, and Oklahoma introduced the sales tax later than the other states. In September 2021, the government started regulating online transactions there. But for Virginia and California, the sales tax was already implemented in November and December 2020, respectively.
This is why sellers are yet to be affected by this tax. If you are among them, here is what the process looks like for you.
If you sell a branded dress for $27, your seller total remains $27. But you need to deduct the PayPal fees of 2.9% of the item price + $0.30 such that the deduction is $1.083 (seller total is now $25.917). When you reduce it with the 10% Depop fee (of the item price), your seller total now amounts to $23.22 (rounded up).
Using the similar example above, a branded dress that is $27 with a state tax of $1.80 will come up with a total of $28.80 for sellers. Given the 2.9% Paypal fee + $0.30, the deduction is $1.03 (seller total is now $27.77). The latter is transferred to the seller's PayPal.
However, make sure to include the 10% Depop fee from the original item price before you deduct the tax. So, the $2.70 (Depop fee deduction) and the $1.80 (state tax) are both deducted from your PayPal. This makes it $23.27 as the final seller total.
With Depop Payments
This is similar to the process with PayPal. Except, the Depop fees (10% of the item prices before tax deduction) and the Depop Payment fees (2.9% of the total price including the tax + $0.30) are deducted first from the item price.
After such Depop reductions, the platform takes the buyer's original tax (e.g., $1.80) to send to the government. The final seller total is still $23.27.
Ways to Earn More
You may be thinking that with the implementation of state sales tax, you are no longer earning as much as before. After all, you have to consider the fees that Depop and PayPal deduct from your total item price.
This is why a good yet simple way to make sure you can still earn despite the mandatory deductions is to keep cross-posting your listings. While Depop is a go-to online marketplace, especially among millennials and Gen Z users for its modern, minimalist approach, you can also consider posting your items to other platforms such as Poshmark, Mercari, and eBay.
You may be wondering if you still have the time to do all this cross-listing. The concern is understandable, especially if online selling is only a part-time job or a side hustle. Thankfully, efficient apps like OneShop do this all for you.
All you need to do is subscribe to the service, select the most beneficial type for you, and make a draft for your listings. After that, you can leave it to OneShop to automatically cross-post your listings to other marketplaces. There is no need to worry about delisting a sold item as the app also does this for you.
Additionally, you can track your seller performance or analytics from the items you sell across your chosen platforms. Monitoring this helps you identify which of your listings are doing well and how you can further improve your performance as a seller. After all, your goal is to gain extensive exposure to potential buyers and close as many sales as you can–all with only a few clicks.