As far as I know, Paypal has no legal or even formally self-elected responsibility to enforce that "donate" buttons are used only in the context of a registered charitable organization, or to play cop for the calculation, collection, and remittance of federal, state, local, or international taxes and tariffs, etc., etc. Paypal does not even have any way of determining what is taxable and at what rate--it is so thoroughly beyond their purview that I don't know why we're discussing it.
Paypal may or may not have any legal responsibility there, it makes no difference.
I think a lot of people overlook the underlying business model of Paypal. They're betting they can do a better job of fraud prevention than the entrenched credit card processing industry, and by doing so they can offer credit card facilities to more (read "higher risk") people.
What that means is that if you do _anything_ that might be even tangentially related to things that look like credit card fraud, you're opening yourself up to all the well documented risks of having them stop you withdrawing money from your account for 180 days.
If you're doing anything other than delivering physical goods to credit card billing addresses via 3rd party trackable shipping, you need to make sure you're fully aware of the risks you're choosing to expose yourself to using Paypal. If you're using Paypal for donations, preorders, digital goods, downloads, conferences, consulting - anything where you can't give them a FedEx tracking number (or equivalent), you're opening yourself up to a world of hurt in the dispute resolution process.
Surely I'm not the only one who looks at almost all of these Paypal "horror stories" and thinks "Yep, I could have told them they had that coming."?
As an aside, most of those laws were put in to use against the lower class people who were begging. They have recently (thankful) started to be applied in a non-discriminatory fashion (i.e. to rich kids aswell as drug addicted adults), and this is the consequence.
The sales tax issue is a red herring. Regretsy was (presumably) buying the toys at a rate that included sales tax, and if the operation was not-for-profit then there was no financial value added, and no need to charge the "donors" any additional sales tax.
The sales tax is a red herring. The issue is probably one of a computerized algorithm being tripped somewhere.
It gets really complex, in fact: the warranty replacement is only tax free if the warranty was a taxed line item during the original sale. If you make repairs to something, and you pass through the costs of the object to the person hiring you, you are generally considered to be a "retailer" and are responsible for collecting sales tax (which explains why you see wholesale discounts being given to large classes of professionals, from plumbers and carpenters to interior decorators).
That said, I am not claiming that the sales tax is the issue here: I'm claiming that this is a complex situation with a lot of intermingled laws and service terms, and that it is not at all clear that these people are running something that was entirely kosher and should de facto be supported.
People seem to have a thirst for PayPal's blood, and are totally ignoring (or, more favorably, simply not realizing due to lack of knowledge) that this was a somewhat sketchy, certainly risky (from a credit fraud perspective), and probably even illegal operation; and it makes no matter whether it involved feeding children or sick cats, or whether this is a computerized algorithm that flagged it or a person: the reason for the flagging, and for the blocks, actually makes a lot more sense when you examine the whole issue.
Walmart doesn't pay sales tax to their suppliers.
As for wanting Paypal's blood. No. I was a victim of similar freezes and for really convoluted reasons according to Paypal. I don't want their blood. I just don't want there to be any more victims.
Incorrect. I own an Estonian (an EU member) company that can sell stuff and offer services without VAT. VAT is actually optional until a certain revenue threshold.
(PS: the coolest one I've seen is that bound physical books often have much better tax rates than other goods, leading to hilarious situations where shipping someone a physical pamphlet that includes base64 might be much cheaper than selling them an expensive piece of software on CD. ;P)
Effectively the same I know...
For example, admission to a charitable event is VAT exempt in the UK, while goods sold at a charity shop are zero-rated.
http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services....
The most damning evidence against PP in my opinion is that they specifically stated (accordion to the author) that the same scheme was acceptable when raising money for a sick cat but not for needy kids. Unless the Regretsy folks were purchasing toys with a business account and skipping sales tax I don't understand the logic. The PP reps subsequent attitude seals the deal: eff PayPal. If he isn't authorized I dole out financial or legal advice regarding the use of the donation button or wrt raising money for needy kids he should just say that instead of being an obstinate jerk.
tldr: tax presumably was paid, PayPal rep is a scumbag, screw PayPal.
Only if you have a point of presence in the same state as the person you're transacting with. The US does not have a national sales tax; all sales taxes are collected by the states. Currently, transacting with a person in another state is considered interstate commerce and is therefore exempt from state sales taxes. There are efforts in Congress to change this, but, for now, you don't have to pay sales tax on a sale you make across state lines.
Regretsy is in the EU, not the US, but I don't believe that changes the point. In the EU, everything that is traded, whether it be a good or a service, is subject to a "value added tax". (Note: this applies to you even if you are not yourself living in the EU; if you sell products to EU customers online, you must collect and remit VAT if you are above their threshold.)
These taxes can be quite high: up to 25% of the receipt. You are only responsible for the "value added" (so you subtract your costs), but the way you subtract your costs is very similar to expense structure in the US: the cost you declare has to be to another VAT-registered organization, and you need to keep whatever receipts and documentation is required to defend the costs later.
I am simply having a very difficult time seeing how this specific setup was, in the eyes of the law, any different from Ikea selling chairs: they were selling products, and selling products is a highly regulated business with a large number of taxes that have to be considered. You cannot just throw up a website and willy-nilly throw money around.