atgPay: Internet Sales Tax

This article contains information about the collection and remittance of sales tax only for those purchases made online using atgPay. For information on taxes for payments methods outside of atgPay, see Taxes, Fees and Premiums.

This article contains the following sections:

• About Internet Sales Tax Laws
• When Taxes are Calculated
• How Taxes are Calculated
• Bidder Impact
• Sales Tax Refunds
• Tax Filing

About Internet Sales Tax Laws

Over the past couple of years, states have been introducing new tax laws affecting businesses that sell online, including auction houses. Previously, most sellers were required to collect sales tax only in states where they had a physical presence. This is called physical nexus. However, as more purchases continue to be made online, states have passed legislation to expand nexus beyond a physical presence in their state to include internet sales.

On June 21, 2018, the United States Supreme Court ruled in a 5-4 decision in South Dakota v. Wayfair, Inc., et al, that states can require out-of-state sellers to collect and remit sales tax on sales that reach a certain revenue and/or transaction threshold. Called economic nexus, this requirement has been incorporated into how most states determine taxable sales. While many states define economic nexus as $100,000 or 200 or more separate transactions, others have thresholds as high as $500,000, and these thresholds are changing regularly. Referred to as internet sales tax laws, these rules apply to anyone who sells online, regardless of the platform or website solution they’re using. Proxibid's atgPay tax services make it easier for sellers to comply with this legislation.

When Taxes are Calculated

atgPay uses enhanced tax calculation services for purchases made on Proxibid with payment collected through atgPay. Auction houses will not be charged any additional processing fees for this sales tax collection service, and no action is required on the auction house's part to collect taxes on purchases made via atgPay.

• Sales tax will be calculated, collected, and remitted on all purchases made on Proxibid with payment collected through atgPay, by buyers in the states below.
• Sales that are not made on Proxibid, with payment collected through atgPay, are not covered by our free tax services.
  • In order to remain compliant with the United States state and local tax regulations, you are responsible for calculating, collecting, and remitting the appropriate sales tax on all other sales.
• Purchases shipped to or picked up in states that do not impose sales tax will not be subject to tax.

How Taxes are Calculated

Sales tax rate varies and depends on each state and local regulation. Proxibid will automatically calculate and apply sales tax (state and local) based on:

1. The zip code in the bidder's shipping address
2. The categorization of the lot/item
3. The bidder's tax-exemption status

Sales tax is calculated based on the hammer price and any shipping and handling fees. Processing fees and buyer’s premium may also be taxable, depending on the state.

Since taxes are calculated automatically when using atgPay, auction companies will not be able to edit the tax rates on events using atgPay.

Tax Exempt Sales

Since taxes are automatically calculated based on the winning bidder's zip code, and potentially the type of item purchased, there is not a way to make an atgPay event tax exempt.

If all of the items sold in an event happen to be in tax-exempt categories or all of the winning bidders in an event happen to be tax exempt, or in a state that does not impose sales tax, then taxes would not be applied. In all other cases, taxes would be calculated automatically.

Lot Categorization

The auction house is responsible for properly categorizing lots. It is important that lots be categorized corrected as the lot's tax classification and, ultimately, the tax amount charged to the bidder, is based on that categorization. If a lot is not assigned to a category, the lot will default to being taxed.

When categorizing a lot, the auction house should select a Category, Subcategory, and any additional subcategories (if applicable).

If lots are not categorized, or are categorized incorrectly, the taxes applied may be incorrect.

For information on selecting lot categories, see Categorization & Metadata.

For information relating to categorizing vehicles, see atgPay: Vehicle Sales.

Bidder Impact

Proxibid will display information on invoices, during the checkout process, and in other relevant places to indicate to bidders when taxes are applicable. Purchases made in states that do not impose sales tax will not be subject to tax.

To ensure a positive bidder checkout experience, below is example phrasing to include in your auction terms and conditions:

Internet purchases from {{Auction House Name}} may be subject to sales tax. Please see the following for more details: atgPay: Sales Tax. If you are tax exempt, you can submit your tax exempt certificate to prevent the collection of tax.

Tax Exempt Bidders

Sales tax will not apply to purchases made by bidders with valid tax exemption certificates. If they have a valid tax exemption certificate, they can share it with Proxibid by clicking on the "Tax Exempt?" link during checkout to ensure purchases are not subject to tax.

Once a bidder’s tax-exempt status is verified, sales tax will be adjusted accordingly and the Proxibid Payment Operations team will re-send the invoice to the bidder.

• Auction houses should forward any bidder tax exemption certificates to payments@proxibid.com so that Proxibid can adjust taxes accordingly.

If a bidder has already paid their invoice, but should have been tax exempt, they should send their tax exemption certificate to payments@proxibid.com so that the Payment Operations team can adjust taxes and issue refunds accordingly.

Refunds to bidders for sales tax on items purchased via bank transfer (ACH) may take longer to process as funds must be disbursed to the auction house (which can take 5-7 business days) before they can be returned.

Sales Tax Refunds

Refunds of sales tax are issued in the form of a credit which can be used toward a future Proxibid bill. Sales tax refunds will be issued to the auction house's Payrix account by the 5th business day of the month following the return. The auction house will be notified via email once the refund has been processed.

Tax Filing

Please always refer to your tax adviser and specific state tax laws, regulations, and rulings.

Reporting

While we provide reports with bidder locations and sales tax breakdowns for all invoices paid via atgPay, we are unable to provide the same information on invoices paid outside of our platform. 

To determine how much sales tax was remitted by Proxibid, you can download a spreadsheet of your paid invoices. The amount indicated in the Sales Tax column is the amount remitted. 

You can find and download a .csv file of your transactions in atgPay by navigating to your Dashboard > Payments > Reporting.

State Sales Tax Returns

If you are required to file a sales tax return in qualifying states for your auction house, you do not need to report sales revenue collected through atgPay. All that is required of you for those states is to report that the sales were made through Proxibid with payment collected through atgPay.

You may be responsible for reporting and filing sales tax returns on sales generated outside of Proxibid and atgPay.

For filing purposes, please note:

• For filing purposes, you are often asked to identify bidder location, taxable income, sales tax collected, and taxable income. For invoices paid outside of atgPay, this will need to be manually calculated.
• Taxable income collected via atgPay is generally reported as non-taxable or exempt (verbiage varies depending on state).
• Some sellers may also be required to provide an additional form or notice regarding atgPay sales tax collection. You can find state by state certificates and notices here.