Sales Tax Issues for eBay & Amazon Sellers

The Online Seller's News, July, 2011, Volume 11, No. 13

Tips, Tools, News and Resources for eBay, Amazon and independent Online Sellers ~ Published Twice Monthly since 1999
by: Skip McGrath

In This Issue:

Musings from eBay, Amazon, and beyond

1. Sales Tax Issues for eBay & Amazon Sellers
2. More Products and Services from IRCE
3. Niche of The Month – Selling Your Personal Services
4. The Real “Secret” To Success Selling Online
5. New Wholesale Sources for eBay & Amazon Sellers

"Price is what you pay. Value is what you get." ~ Warren Buffett

Musings from eBay and beyond

Blog Catalog is a blog for bloggers and occasionally their interview their bloggers to share their knowledge with other members.  I did the interview a couple of days ago and it was posted today. Click here to read the interview

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Our Amazon sales are still doing well. I was really amazed at the amount of sales we racked up over the holiday weekend. I had two eBay sales over the holiday weekend versus 11 on Amazon and we actually have fewer listings on Amazon than we have on eBay. Unlike eBay, which is typically slow over holiday weekends, Amazon was rocking!

If you want to see what I am selling on Amazon, here is a link to My Amazon Storefront.

Speaking of Amazon, later this week I am off to the Amazon Sellers’ Conference in Seattle where I will be meeting some new (and old) vendors who supply third-party services for Amazon sellers and will meet with Amazon execs and managers who put on sessions to help us learn how to sell more on Amazon.

Lets get started with this month’s articles:

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1. Sales Tax Issues for eBay & Amazon Sellers

This is an update of a blog post I did last week. I know a lot of you do not get my blog, so I thought I would write about it here too.

Amazon cancelled their affiliate program in California within hours of Governor Jerry Brown signing a law that would require Amazon to collect and pay California sales tax on any sales that came from affiliates located in California.  California is the sixth state to do so. (IL, RI, CO, AR & NC are the others).

Amazon promptly retaliated by canceling over 25,000 affiliates in California (California affiliates keep reading for a way to get around this).  So, not only will CA not be collecting the $200 million in sales tax they were hoping for, they will also lose the income tax that Amazon's California affiliates pay.  Way to go Governor Brown.   Your greed just cost the state some sorely needed tax revenue. And since Amazon has said they plan to open six more warehouses this year –I somehow doubt any one of them will locate in California.

This whole issue is somewhat confusing so let me try and explain.  Once you understand this you will realize just how stupid these laws are.

The issue revolves around what is called a  "Nexus."  In sales tax language, Nexus means you have a presence in a state for tax purposes.  The way sales tax works, if you are located in one state, and ship goods to another state, then you do not have to collect sales tax.  But if you sell and ship something to someone in your own state, then you must collect and pay sales tax on that transaction. So far --so good. I am located in Washington State, so I only collect and pay sales tax when I sell something to someone else in WA State.

But what if you are located in Colorado and you keep your goods in an Amazon warehouse in Arizona (This is done by many Amazon FBA Sellers).  Now you have a "Nexus" in Arizona.  So, in addition to collecting and paying sales tax on all in-state Colorado transactions, you also have to collect and pay sales tax on Arizona transactions when the buyer is located in Arizona.

Affiliates and Sales Taxes

So how does this affect affiliates?  Well, the new California law says that an Internet presence is the same as a physical presence.

Here is how the theory goes: Let's say you are an Amazon affiliate living in California. Someone in Virginia or Florida (or any other state), reads your blog, or a link you posted on Facebook. They click on the link (which is your affiliate link) to a product on Amazon and they buy the product.  Now, California says, since that affiliate is located in California, Amazon has to collect and pay sales tax to California on that sale, even thought Amazon is shipping from say, Washington State to Virginia.

It gets worse: Imagine you have a website selling cooking gadgets.  To get traffic you purchase ads from Google. Since Google is located in San Jose, CA, the state of California says you have a nexus there and you have to pay CA sales tax on all of your sales, no matter what state they are shipped to or from.  What if I am in Washington State and host my website with a company such as Hostsearch.com which is located in California? Does that give me a Nexus in California?  California thinks so.

I am waiting to see the impact on eBay sellers.  Will California say that since eBay is located in California that all eBay sellers have a Nexus in CA and we have to send the State of California sales tax on all of our sales? I am not sure. We will have to wait and see.

Now you see how crazy this can get.  If you are planning on shopping this weekend - here is a list of stores who are lobbying for these taxes because they feel they are at a disadvantage with online marketers.

• Wal-Mart

• Home Depot

• Loews

• Sears

There are quite a few others, but these are the big four.  Between them, they have spent hundreds of thousands of dollars lobbying politicians of both parties to impose sales taxes on all online sales.  And they aren't going to stop until every online business has to collect and pay sales tax on every sale they make to anyplace in the US.

How Affiliates in California (and the other affected states) can get around the law:

All you need for Amazon to reinstate your Amazon affiliate contract is a mailing address in another state.  Just go to MailLink in Nevada. For just $10 a month, they will give you a business address and collect and forward your mail. (You have to pay the postage on the mail they forward).  And, they accept PayPal.

There are companies like this all over the US. There are UPS stores in almost every state and they also offer this service, although they are a bit more expensive.

I like Nevada because the State is very business-friendly and it is unlikely they will ever institute a tax law as stupid as trying to collect sales tax on affiliate sales.

Just to be safe, you may want to look at setting up your account in a state that does not charge sales tax such as Oregon, Montana, Alaska, New Hampshire or Delaware. Once you have a mailing address in another state, the other thing you will want to do is set up a bank account in that state to receive your payments. Although, you can elect to have Amazon pay you via check.

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2. More Products and Services from IRCE

In the last issue I gave you links to some great products and services I uncovered at the Internet Retail Conference in San Diego. I couldn’t fit all of them into one issue so here are a few more.

TabJuice calls themselves “The Ultimate Social Commerce and Marketing Tool.” And that may be true as I haven’t found anyone who does what they do as well. TabJuice can turn your Facebook business page into an instant ecommerce site ready to sell anything. You can customize your Facebook store with your own logo, colors and design and upload your products. TabJuice charges $19.95 month and does not take any sales commissions. They are currently offering a free trial for a limited time. I am planning to try them out so look for my Facebook store sometime later this month.

iFeelGoods is a company that provides a service whereby you can use Facebook credits to get folks to sign up for your newsletter, product or service. You use Facebook credits to incentivize almost any action. iFeelGoods claims that you can improve your click-through rates anywhere from 2x to 5X with their service. That may be true, but I would worry about the quality of the click-through. People who take an action to earn something are often not that highly qualified as a prospect. Nevertheless I think this may be worth examining if you are an online merchant.

Shipworks is a very interesting company. I have known about them for a while and ran into them again at IRCE. Shipworks has software that integrates all your shipping carriers, FedEx, UPS and U.S.P.S. Their tools support viewing rates to see which is lowest for a given shipment, printing shipping labels from within Shipworks and for U.S.P.S., they integrate seamlessly with Stamps.com or Endicia.

In the last issue I mentioned Kole Imports who is one of the oldest and largest wholesale sources in the country. What I forgot to mention is that they also offer a drop ship program for wholesale quantity orders. They don’t drop ship individual items, but lets say you were selling a wholesale lot of say, pet grooming tools. Then they would drop ship that for you.

The Bureau of Internet Accessibility (BoIA) is a non-profit organization designed to help small internet retailers succeed online. Their service scans your website to determine if you have any Internet accessibility issues.

Going through their certification process will greatly improve your search engine results and if your site is more accessible you should also see more conversions. Membership is free and that includes one annual scan. Sign up for their Member program at $18 month and you get a monthly scan, publication to Google, Bing and Yahoo, unlimited on-demand scans, a compliance report and you can display the member seal.

Channel Advisor is no stranger to eBay sellers. They were one of the early pioneers of multi-channel selling. I can’t remember what year is was, but at an eBay Live, Channel Advisor had a premium spot on the showroom floor. It was too late for eBay to kick them out, so them moved them to a far corner of the show –well out of the high traffic lanes. Seems that eBay didn’t like a company that showed you how to also sell on Amazon and other channels.

Amazon was promoting their Product ADS Program. This is a PPC advertising program where you can advertise your website on Amazon. They are also making a great offer to associates (like me). If you recruit an advertiser through your affiliate link, Amazon will pay you $5 when they create an account, and $150 when someone makes a first click on one of their ads. Learn more at www.amazonservices.com/ads-associate.

Did you know that Vietnam is in the outsourcing game? Forty years ago they were trying to shoot down my helicopter, now they want to service my website business. The company is called Thue Ngoai.

MailersUSA sells a complete line of mailers for internet marketers. They had some really cool products and their prices were great. Best of all they offer free shipping on their supplies.

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3. Niche of The Month – Selling Your Personal Services

Do you have a skill that you can sell?

• Do you own a high-quality photo printer that you could print professional-quality photos for people?

• Are you an expert in Photoshop?

• Do you know how to use QuickBooks (remote bookkeeping)?

• Do you know how to make great screen capture videos?

• Can you write a resume?

• Can you write compelling sales copy?

• Can you build a website or design an eBay store?

• Do you know how to work Google AdWords or Yahoo/Bing PPC campaigns?

• Or maybe you know how to set up custom Facebook pages.

• Can you copyedit a book?

• Can you design logos, letterhead or business cards?

• Are you a quilter or expert embroider- could you design and produce personalized quilts or event quilts (weddings, anniversary, baby, etc.)?

• Are you an artist --could you paint a portrait from a photograph?

I think you get the point. Most of us have some type of learned skill that other people will pay for. This is a very partial list of skills that are highly saleable and many of them can earn as much as $50 hour.

If you look on eBay you will see thousands of listings by people with skills and services that other people will pay for. But what if you rack your brain and you don't have a saleable skill? Well if you know how to sell on eBay, you can represent people who do have those skills by placing eBay listings and eBay classified ads for them.

For example there are a lot of sellers on eBay who represent artists and craftspeople. It's not that these people couldn't learn how to sell on eBay themselves --it's just that there are a lot of people who don't want to bother, or maybe they don't have computer skills and have no desire to learn them. All of these folks are candidates for your business.

The other thing you can do is provide online marketing services for local businesses. Jim Cockrum has a fabulous membership site called Offline Biz. He offers both a free membership and a more in-depth paid membership. But his members are really making money. Most of them have little or no computer skills, yet Jim shows them how to make money offline by providing online services to local businesses. Check out Offline Biz. Try the free membership and I think you will quickly see the value of the paid membership. And the program I mentioned above Mobile Local Fusion is another way to provide a service to local businesses.

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4. The Real “Secret” To Success Selling Online

One of the most-asked questions I get is about learning the “real secrets” to success on eBay or online marketing in general. I always struggle with answering that because in truth I have always felt that there are no real secrets. The Internet is so transparent and fast changing that once someone figures out a new way to do something; it is impossible to hide and only stays a secret for a very short period of time.

But one day last week, it hit me. I thought: “What is the one trait that successful sellers possess and practice that separates them from everyone else who struggles?” The answer is Value. Every successful seller I know is a master at delivering value. It doesn’t matter if they are selling eBooks or dog kennels. Whether they are selling on eBay, Amazon, Etsy or from their own website. They have learned to always deliver more than the customer expects. They have mastered the “value proposition.”

So what is the “value proposition?” It is a business policy you create based on a review and analysis of the benefits, costs and value that you can deliver to your customers and prospective customers. If you want to reduce it to simple math, the formula would be Value = Benefits you can deliver – Cost.

What are some of the components of value?

• Cost (price) – this is the most basic statement of value. If you can sell an item for less than someone else then it’s easy to deliver value –but it may not be the most profitable.

• Service – Can you provide a service that others are not offering, for example, gift wrapping including a gift card and shipping directly to the recipient

• Shipping – Can you ship something faster or for lower cost or can you profitably offer free shipping?

• Uniqueness – Does your product or service do something or offer some benefit that others do not? Do you have a product that is in short supply that others cannot deliver?

• Trust – Can you or do you project a feeling of trust so that people feel safe buying from you?

• Refund/Return Policy – Do you offer a guarantee and a liberal return/exchange policy?

• Relationship – Are you an expert or specialist in what you are selling? People perceive value when they buy from a knowledgeable specialist.

• Communications – Is it easy for your customers to communicate with you? (My website features 3 ways to contact me; email, telephone and mailing address).

• Quality - Are your products superior quality to competitors? I sell the most expensive line of outdoor garden firepits on the market, but people pay for them because I convince them that the quality of my firepits are better and they will last longer.

• Customization – Is there any way to customize or personalize the products you are selling? People will pay to “have it your way.”

• Specific solution – Does your product solve a specific problem? There are a lot of weight loss products on the market, but does your product work for folks who are diabetics or who have high blood pressure? One of the products I sell is a line of ceramic chef’s knives with a handle that is comfortable for older folks with arthritis.

There are more components to value, but these are some of the major ones that come to mind. Give some thought to this while you review the products you are selling and how you are selling them. One of the easiest to implement is a liberal guarantee, refund/return policy. I offer a no-questions-asked money back guarantee on everything I sell on eBay and Amazon. My return rate is less than 1% and I get far more in sales and profits because I have that policy than I lose on any return.

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5. New Wholesale Sources for eBay & Amazon Sellers

In the last issue I told you about Genco Marketplace. What I failed to mention is that in the past, Genco has been known for selling large quantities of liquidation and return merchandise. I was speaking with a couple of folks from Genco last week and they told me that they are moving aggressively into smaller quantities (pallet load instead of the truck load) to target small to medium-sized eBay and Amazon sellers. Genco always has a good supply of name brand refurbished computers including laptops.

When the economy is slow, one area that is always strong is baby goods. Parents and grandparents will always find money to spend on their babies and grandbabies. Here are some suppliers of infant and toddler apparel and accessories:

Sharp Creations has a very unique product. They sell a line of Tooth Fairy pillows with little pockets in them for the tooth and the money the Tooth Fairly leaves behind. And --they will drop ship for online sellers.

ZoloWear makes baby slings, pouches, and carriers for hip parents.  Click on the link that says "Wholesale" to register and get wholesale pricing.

Cloud B sells a great link of very unique and pretty hot products in the infant market.

Mom Innovations is a distributor and dropshipper of dozens of baby products for the new mom.

Baby Emporio sells several unique baby items including a line of very nice fleece blankets.

Summer is in full swing and that means sports and outdoor goods are hot. Here are a few suppliers you will want to check out:

Another large wholesale surplus dealer is Fox Outdoor Products. In addition to surplus they also carry a wide range of outdoor products including tents, camping supplier, hiking boots and gear and much more.

PDI International carries a range of LED light products such as flashlights, camping lanterns, headlights and other LED products. Contact them through the web site for pricing.

Another similar company but with higher end products is Coast Cutlery. They sell knives and LED light products.

Shelter Distributors sells a nice line of binoculars, magnifiers, knives and other martial arts equipment.

3L International is an importer and wholesale distributor for airsoft and paint ball guns and supplies.

In the last issue I wrote about gourmet foods and got several emails from readers asking for wholesale suppliers. So here are a few I came up with:

Eating at home is the new "eating out." Since the recession started, restaurant business is down, but more folks are buying kitchen ware and gourmet foods.  Mrs. Aulds manufacturers a wide range of gourmet food items for resellers and will even private label her products for you.

Eden Organics is one of the largest suppliers of organic canned food sold in specialty shops.

McCutcheons Apple Products features a complete line of home style gourmet food products.

It used to be that the best caviar came from Russia and Iran, but American caviar has become a large industry and is now being served in some to the best restaurants in the world. Little Pearl Caviar is one of the leading suppliers of US made caviar. Email them through the website for wholesale information.

That’s it for now. See you again in a couple of weeks.

Skip McGrath
The Online Seller's News

P.S. If you missed the last issue, click here to read it.

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