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Did PayPal AU just screw the pooch with Australian vendors?

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We just had an odd bug on an order today. It was paid via PayPal, however it charged no GST. I investigated and while I could see no problem with our site, I assumed it was more likely an error with our site than PayPal itself. Seems I was wrong.

On speaking to PayPal tech support I heard that it was a “known issue” and the lady quickly talked me through the right place to setup zone tax rates. This area initially had no variables, and hence it seems PayPal had been skipping charging customers any tax.

This raises some serious problems. 1) Vendors have likely been undercharging their customers, 2) the changes imply PayPal will now ignore any tax charges vendors pass it to charge customers, in favour of their own internal calculation of tax due. This could be problematic, as there are cases where some of a company’s products must be sold tax free, while others must not. How will PayPal correctly calculate this?