The verb would be conjugated differently.
I suspect you know about capitalization of "sie/Sie" already, but I'll include it in case other readers aren't aware.
Sie essen - you (formal) eat -----> Sie is always capitalized
Sie essen - they eat -----> Sie is only capitalized at the start of a sentence
Sie isst - she eats -----> Sie is only capitalized at the start of a sentence
Hope that helps!
Because this particular form of "sie" is referring to more than one person, so it is plural. sie (small s) means SHE, Sie with a capital S means YOU in formal German direct conversation, and sie with a small s, again, can also mean THEY - plural. You know if it is the plural form because verb ends with 'en' - like in this case :)
I don't know what you mean by "You can't start a sentence with You", and I think we might both be misunderstanding each other. So I'll try again...
sie (small letter "s") = they or she
Sie (capital letter "s") = you (formal, singular or plural)
sie isst Tomaten = she eats tomatoes
sie essen Tomaten = they eat tomatoes
Sie essen Tomaten = you eat (formal, singular or plural) tomatoes
At the start of a sentence you need a capital letter, so if the sentence starts with "Sie" you would not be able to tell if "Sie" was you/they/she by the letter "s" alone. So, you look at the verb conjugation.
Sie isst Tomaten. = She eats tomatoes.
Sie essen Tomaten. = They eat tomatoes or You eat tomatoes.
For "Sie essen" at the start of a sentence you need context to tell if it is you (formal) or they. Almost all of the Duo sentences that start with "Sie" and have a verb conjugated ending in -en (like "Sie essen") accept both "You eat" and "They eat" because there is no way to tell without context. Does this help?
Much like "Wir essen", because theyre both plural.
That's a bit of a red herring, because ihr esst is also plural but does not end in -en.
Don't confuse people into thinking that there's "a plural ending for verbs" in German. Far too many learners already believe that.
"You (formal plural) are eating tomatoes" is also correct. It didn't accept my answer, however, and I can't "report" it because there are only three options listed to report (unlike some of the other languages I've studied at Duo). You can report (1) that the audio is bad, (2) the German is unnatural or incorrect, or (3) the "correct solution" is unnatural or incorrect. The correct solution Duo uses (they) is fine, it just happens to be one of two possible ways to translate "Sie essen Tomaten." When the pronoun is at the beginning of the sentence, it erases the capitalization distinction between "sie essen" and "Sie essen." Without more information to provide context, both translations should be counted as correct.
"They eat tomatoes" was rejected.
For a translation exercise? Are you sure you didn't have a listening exercise, perhaps, where you're supposed to "type what you hear" rather than translate?
Do you have a screenshot of that answer being rejected?
I thought german does not distinguish between "eat" and "are eating"?
That is correct.
You can look at the verb ending, which will almost always be -t when sie means "she" and -en when sie means "they".
For example, sie isst = she eats, sie essen = they eat. sie trinkt = she drinks, sie trinken = the drink.
The forms for "to be" are irregular: sie ist = she is, sie sind = they are.
They're eating tomatoes is the same thing as they are eating tomatoes.
Of course, and both are accepted answers for a translation exercise.
(If you have a screenshot showing either of those sentences being rejected, please upload it to a website somewhere - e.g. imgur - and tell us the URL to the image.)