OT:TaxMan Ebay

[Foofoogal]

http://www.theglobeandmail.com/servlet/story/LAC.20080429.REBAY29/TPStory/Business

I have been warning of this forever. I think only a matter of time before USA.
Earned income.

 

[Feraud]

That is fair.

 

[nobodyspecial]

I'm quite surprised this has yet to happen in the US. Eventually the ebay transactions will be reported to the IRS and sellers will received something like a 1099 for the amounts sold. There has got to be a lot of income not reported from ebay selling.

 

[scotrace]

Stay out of my bloody pockets, thanks.

 

[nobodyspecial]

Tax fraud is tax fraud, ebay or any other business. I'm sure the IRS is pushing for some inroads to ebay, but all these things just take time to make happen.

 

[Foofoogal]

I have 3 DBA's and a tax number. I think I report more than even necessary and a good accountant that will not disappear on me should the need arrive. I am in Texas and many people do not know that as a seller if you buy an item online and bring it into Texas from another state for personal use you have to pay tax on it. I am sure many states are the same. I pay tax on my grandbabies toys for Christmas just to be safe.
I believe you have to sell at least $600.00 a year though but not sure of that amount. Something like this. If you do sell this much on Ebay a year the state tax person told me you better have a tax number.
I have been warning because I think if anyone gets audited someone could possibly be paying alot of back taxes as well as late fees I would think from Ebay sales.
I have never understood really why ebay was able to have powersellers selling like hotcakes and not warning them. I guess it is not their responsibility in a way but I am sure many did not know the law.

 

[nobodyspecial]

Powersellers, given the dollars involved, understand they are running a business and that the business profits are taxable. I can't believe many of them are that naive, but perhaps a few are. There are a lot of myths substituing for truths floating around when it comes to taxation.

The situation you describe, of buying inter-state items via mail order and then paying sales tax on those items is called Use Tax. Use Tax is what you pay to your own state when the seller does not charge you sales tax on the original transaction. This does not necessarily need to be purchased from out of state, anytime a seller does not charge sales tax, but should have, you are technically liable for use tax to the state you live in. Most states have some form of this. Businesses need to track purchases and remit Use Tax when applicable.

 

[PrettySquareGal]

My understanding is that if you sell a personal item and do not make a profit on it, that is not taxable, online or off. If you go to a yard sale and buy an item for $1 and sell it for $5 on ebay, that's income.

Also see:

http://www.irs.gov/newsroom/article/0,,id=172833,00.html

 

[nobodyspecial]

You are correct. Ebay is treated like an electronic garage sale and that income is generally not taxable assuming you have sold your personal household goods. The IRS considers your basis in the items sold as what you received for the sale assuming you sold the item for less than what you paid.

For example, you buy a couch for $500 and sell this couch at a garge sale for $100. The $100 is not taxable to you, nor do you get to deduct the difference between what you paid and what you sold it for.

Now say you buy a couch for $100 and sell it at your garage sale for $500. The $400 gain is taxable income to you, reportable on Schedule C of your 1040 form.

Ebay is no different than this. You sell your personal used fedora on ebay and the income is not taxable, assuming the selling price is less than what you paid for it. You find a fedora at a thrift store and sell it on ebay and the profit is taxable, again on Schedule C.

My guess is many, especially small ebay sellers, have some of each type of transactions. That is, many sell some personal items and also a few items they picked up specifically to resell. Power sellers on the other hand would have to buying inventory specifically to resell and they clearly have a business.

 

[nobodyspecial]

I just took a glance at the IRS article. When you report the income you want to have it classified as a business rather than a hobby. The differences can be subtle, but the hobby rules are less advantages to the taxpayer than the business rules.


fftopic: By the way, I love your avatar.

 

[jamespowers]

Stay out of my bloody pockets, thanks.

Yours and mine both but you know the IRS will crawl up a skunk's butt to get 50 cents more out of you. :rage:

 

[Foofoogal]

Power sellers on the other hand would have to buying inventory specifically to resell and they clearly have a business.

I am not a powerseller but do sell on ebay as well as have 2 online stores in antique malls. I have been in as many as 5 venues and reported everything.

Do you think specifically that they will only narrow in on powersellers. That makes no sense to me.

http://www.window.state.tx.us/taxinfo/sales/faq_use.html

An out-of-state mail-order company or an Internet company may hold a Texas Sales and Use tax permit and collect Texas tax. If the out-of-state seller does not have a Texas permit or does not collect Texas use tax, the use tax is due and payable by the purchaser.

This sounds like every purchase to me.

 

[PrettySquareGal]

fftopic: By the way, I love your avatar.

Oh? Thank you.

 

[nobodyspecial]

I don't think the IRS will target only power sellers, my guess is that is where they will start. The larger the seller, the more money is involved. Eventually they will hit the smaller sellers as well.

Use Tax rules vary by state. In Minnesota there is no sales tax on clothing. So if I were to buy a shirt from LL Bean in Maine, there is no use tax. If I were to buy a backpack from LL Bean there would be use tax.

 

[Forgotten Man]

Stay out of my bloody pockets, thanks.

Yeah, those money grubbin' taxmen get enough already! In Canada ESPECIALLY! In fact, their taxes are about 48-50% when I was there a few years ago... can ya imagine half your pay check going to taxes? Yes, they all claim to have "free" health care... well brother, THEY PAY FOR IT!!! By way of taxes of course!

The IRS is an evil empire... in fact, it was started by the out break of WWII... and the tyranny hasn't stopped since! In fact, I saw a special about the IRS and how there really isn't any laws stating that one HAS to pay incom tax... it's all a racket!

 

[nobodyspecial]

The bit about the laws not allowing for taxes to be collected is an urban myth. That has been struck down in more than one court case.

 

[Dixon Cannon]

Stay out of my bloody pockets, thanks.

Well said Scotrace! And of course here in our Constitutional Republic it's within OUR power to keep it that way! Care to join me in that effort friends?!

-dixon cannon

 

[Dixon Cannon]

The bit about the laws not allowing for taxes to be collected is an urban myth. That has been struck down in more than one court case.

(Wanna bet!) Geez! I better go find some tax forms then, unless the last three decades have been just a good dream for me!

-dixon cannon

 

[Maj.Nick Danger]

As if I needed another reason to stay off the evil Greedbay,...

 

[Foofoogal]

(Wanna bet!) Geez! I better go find some tax forms then, unless the last three decades have been just a good dream for me!

I ain't really gonna ask and I really don't want to know but you may want to send a letter to Wesley Snipes in about 3 years about this. He is gonna be a wee bit busy for awhile plus a whole lot poorer. [huh]