The new rules from eBay for sellers means that they now need to provide their social security number (SSN).
This was announced in December 2021 but is still a surprise to many sellers when they get a notification that eBay needs their SSN.
This article explains why you may have to provide the details if you want to keep selling on the platform.
Why Does eBay Need Your SSN?
There are several reasons that eBay is now collecting social security numbers. I emphasize that the company is not doing this by choice or to annoy sellers.
The main reason is that when the company separated from PayPal and started to process payments, they were obliged to comply with federal legislation in the United States.
Background to the new policy
PayPal was owned by eBay up until 2015. It was PayPal that processed payments. If you were selling on eBay during that time, you had to provide your tax identification to PayPal.
In 2015, eBay spun off PayPal as a separate business. However, the companies were closely connected because PayPal still processed payments. But that has all changed.
The contract with PayPal has not been renewed. Instead, eBay announced in 2018 that they were switching to use Adyen, a smaller Dutch payment processer.
They have also switched to what they called “Managed Payments”. Instead of sending buyers to a separate platform (PayPal), the payment processing is now done on the eBay platform.
That is why eBay suddenly had to start collecting tax identification numbers.
IRS and tax compliance
Because eBay is now processing payments, they also have to comply with the Inland Revenue Service (IRS).
The platform is required by federal law to report sales transactions over a certain threshold for tax compliance.
If you want to know more about these federal regulations, the reference is Section 650W.
United States federal regulations on money laundering
The Patriot Act and the Bank Secrecy Act have extensive regulations on anti-money laundering.
There is strict reporting requirements around financial transactions over 10 thousand dollars. You may be thinking that your eBay sales are nowhere near that amount.
However, eBay is required to report any potentially suspicious transaction to the authorities.
Who Needs To Provide Their SSN?
If you only use eBay to buy goods and services, then you don’t need to provide your SSN to the company.
The new rules apply to sellers, however you may still escape the requirements.
U.S. sellers are required to provide an SSN when you earn more than six hundred dollars in a calendar year from your product sales.
Other types of identification numbers
I’ve been referring to SSN, but there are two other types of tax identification that eBay recognizes.
Some people don’t have an SSN, but they can provide an ITIN instead. An ITIN refers to an “Individual Tax Identification Number”.
The company will also accept an EIN, which is an Employer Identification Number. If you’re running a small business, you can register for an EIN online for free.
You can then provide the EIN instead of your personal SSN.
What Happens If You Don’t Give Your SSN Or Other Tax Identification?
You will find it very difficult to do business through eBay if you don’t comply with the request.
For a start, all pay-outs will be put on hold. In other words, you won’t be able to get your hands on the money you are owed from sales.
You should also expect that your store will be suspended. If that happens, then you will not be able to add further listings.
Some people report that they were able to continue selling in a limited fashion. However, they cannot access the earnings.
How Will You Know If eBay Needs Your SSN?
If you’re not sure whether eBay wants your SSN right now, then you should log into your eBay account.
If you have passed the sales threshold, you will see an alert stating that your SSN is required.
The company also sends you an email. I advise that you don’t click on links in emails from eBay as they could be fake. Instead, you should log into your account directly and check that the alert is there.
How Do You Verify Your SSN On The Platform?
You can upload a copy of an official document that has your SSN.
The easiest way is to take a scan of your social security card. You can also use the letter the IRS sent you assigning you the number.
Otherwise, any of these documents will be enough as long as they are dated within the last 12 months:
- 1099 form
- W2 issued by your employer
- pay stub showing your SSN
- tax document signed by a 3rd party preparer
What if you don’t have one of these documents?
Have you lost your social security card? You can apply online for a replacement.
Alternatively, visit your local Social Security Office and ask for a letter that verifies your number.
Why Are Some Users Reluctant To Provide Their SSN?
It’s understandable that some people are reluctant to hand over their SSN.
The main concern is that the SSNs will end up in the wrong hands. This could happen if there was a security breach in the company systems.
And unfortunately, eBay had a major data breach back in 2014.
However, the company continues to invest millions in its technical and security infrastructure. It’s possible that a data breach could happen again. But the same is true of any other financial organization that has your SSN.
What About PayPal Users Outside The United States?
A Canadian friend tells me that he doesn’t have to provide his social security number. Apparently, there are Canadian laws that restrict companies from demanding the details.
However, he did have to verify his identity using other documentation.
Another business owner based in Europe recently set up an eBay store. She told me that she had to provide documentation showing that her business was not within the U.S.
As she owns a small company, she had to upload document with her tax identification.