There are many things to consider when selling on Grailed. You need to take into account your shipping costs, the items you're selling, and sales tax regulations to avoid any potential tax implications.
Sales tax is an essential topic for both buyers and sellers. The buyer needs to know how much they will be paying in sales tax, and the seller needs to be aware of what information they need to provide. The addition of sales tax can be a bit shocking for buyers who were expecting to see lower prices on their purchases.
Additional fees are confusing for most buyers and can discourage them from making purchases. In order to prevent this from happening, sellers must be well aware of their state sales tax to provide the correct information to their buyers. This article will cover the basics of sales tax, how sales tax works for buyers, and how sellers can apply for sales tax exemptions.
What is a State Sales Tax
Sales tax is a consumption tax charged by a government to consumers who purchase goods or services. The main objective of imposing this tax on purchases is to generate state revenue and provide public project funding.
As of October 2021, Grailed is required to collect sales tax to the following U.S. States:
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- Washington, D.C.
- West Virginia
Sales taxes are typically calculated as a percentage, which means that if you spend $100 on an item, you will be taxed 4-8% for that purchase. These computations vary depending on your buyer's state and are automatically applied during checkout. Grailed collects and processes this on behalf of sellers to ensure all sales taxes are forwarded to the appropriate state government.
How Sales Tax affect Sellers
Unlike other marketplaces, Grailed sellers no longer have to manually collect and remit sales taxes from their buyers who live in a state requiring this tax. Grailed does all the work and will automatically calculate the tax based on the total sale amount, including the shipping fees.
Sales tax is not part of the Grailed selling fee but is a law required by certain states within the U.S. Grailed sellers do not need to adjust their prices as this tax is not part of the purchase price and is a required tax that buyers must pay on top of their purchases. Grailed is responsible for collecting these taxes, so sellers don’t need to do anything differently.
How Sales Tax Works for Buyers
While state tax doesn't affect sellers, it is a different story for buyers. If you are a seller who regularly buys on Grailed, you may have noticed sales tax added to your purchases. Some states now require the collection of sales tax on all purchases made from the internet, especially on marketplaces.
Grailed and many other marketplaces also started collecting sales tax, especially for buyers living in a state that requires it. Since sales taxes on marketplaces is relatively new, you don't need to worry about paying sales taxes on your past purchases. All of your past purchases will not be part of the regulation, and all your new purchases will have sales tax automatically applied during checkout.
How Does Sales Tax Work for Sellers Outside the U.S
Like sellers residing in the U.S., sellers living overseas or outside the U.S. don't need to do anything or adjust their prices accordingly to keep up with sales tax. Sales tax varies depending on the buyers' states, and sales tax is automatically computed and applied during checkout.
If you're a seller residing outside the U.S. and one of your buyers is living within the U.S. that requires sales tax, your buyer is responsible for paying the purchase price, shipping fees, and the added sales tax.
In comparison, if you're a seller based in the U.S., and someone buys an item from you outside the U.S., that buyer is not required to pay U.S. sales tax. Nevertheless, Grailed ensures that all its users are tax-compliant, even those users outside the U.S. Grailed provides timely updates for any changes in regulations to keep their users up to date.
How Sales Taxes Work for Payment Processors like PayPal and Stripe
Sales tax is automatically calculated and added for payments made on Paypal and Stripe. These payment processors include sales tax in your gross sales earnings, so the initial amount reflected in your account can appear higher than your actual earnings.
Aside from your buyer's payment for the purchase, the sales tax is also included in the initial earnings. Before the amount can be deposited to you, sales tax will be deducted and passed to Grailed, which the platform is required to remit to the relevant state government.
Why does it appear higher?
You might be wondering why these partner fees appear higher than your actual earnings. This is because these payment processors include the sales tax amount with Grailed’s fee. The platform does not profit from here, and Grailed’s fee structure is still the same.
How to Apply for Sales Exemption
Most sellers on Grailed are subject to sales tax. The only exception is if their state has granted the seller a sales tax exemption. In that case, they can apply for an exemption from a specific state or from all states and get it approved to avoid paying taxes when making transactions with buyers who live in those states.
If you already got your valid exemption certification, all you have to do is submit it to salestax@grailed with the following information:
- Full name
- Grailed username
- Email address registered with your Grailed account
- PDF file of your valid exemption certificate
After sending all the required forms and information, Grailed will review it, and you will receive a notification once your sales tax exemption has been granted.
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