taxes on ebay profits? [Archive] - The DIS Discussion Forums

DMRick

07-16-2003, 03:42 PM

You are better off getting your advice from a tax professional such as an honest accountant than to take what we might say as the absolute truth. That said, in reality, you owe income tax (and maybe sales tax if sold within your state) on every dollar you earn (combined with your "real" income you generally go over the amount you don't owe on).

If you buy at garage sale, keep good records, and fill out a schedule c so you can subtract your costs.

If you are selling out of your closet, you really should have a receipt, so you won't owe taxes (no profit, no taxes). No reciept? You prob owe taxes on the total.

There are lots of deductions..your eBay and Paypal fees, your gas, etc, but you can only take them if you fill out a schedule C.

That's really the nitty gritty..but what most people do, is a whole 'nother story. This is what the IRS says.

Lewisc

07-16-2003, 04:09 PM

Originally posted by DMRick
You are better off getting your advice from a tax professional such as an honest accountant than to take what we might say as the absolute truth. That said, in reality, you owe income tax (and maybe sales tax if sold within your state) on every dollar you earn (combined with your "real" income you generally go over the amount you don't owe on).

I never thought about sales tax good point.

If we sell our resort mugs on E-Bay (going price seems to be 2 for $8-$10) do we have to reduce our cost basis by the amount of free drinks we got?:D

GAIL HAYDEN

07-16-2003, 05:06 PM

Originally posted by Lewisc
I never thought about sales tax good point.

If we sell our resort mugs on E-Bay (going price seems to be 2 for $8-$10) do we have to reduce our cost basis by the amount of free drinks we got?:D

LOL, don't sell the mugs, give them to me!!!! ;)

I think the issue of tax on ebay is almost like the casinos, don't ask, don't tell. since they have a privacy policy in force on ebay, I doubt it is going to be reported to anyone. If you don't charge sales tax to the buyer, why should you report it?

DMRick

07-16-2003, 05:45 PM

since they have a privacy policy in force on ebay,

This is incorrect information. The IRS is welcome to all and any of eBay's records. eBay is only a venue to sell or buy, and they give info freely to the IRS or your state tax department (including Vero people). Sometimes, the report may be set off by a jealous neighbor or an ex mother in law. It's always better not to mess with the government.

I think when someone asks a question like this, which could affect their lives, it's important to give correct info.
In NYS it is a law (not a rule..but a law) that you must collect and pay sales tax if you ship within the state.

*****************
Here is some info direct from eBay:

Tax policy
Generally speaking, there are taxes on anything you sell on eBay from antiques to zebra figurines. As a seller, you should be concerned about two main tax areas: income and sales tax. There are a number of different factors that determine your total tax on sales. Because of this, eBay recommends that you contact a tax consultant. This type of expert is most qualified to advise you about your sales on eBay. Some of your questions might also be answered by using the IRS website at http://www.irs.gov
*******************

Here is eBay's privacy policy..you'll note that the government is specifically mentioned as someone they will give info to, including your selling habits. They also say they may give info to more than what they have listed. I know for a fact, they aren't shy about giving out info (not for myself, but for another).

http://pages.ebay.com/help/community/png-priv.html

GAIL HAYDEN

07-16-2003, 08:58 PM

Originally posted by DMRick
This is incorrect information. The IRS is welcome to all and any of eBay's records. eBay is only a venue to sell or buy, and they give info freely to the IRS or your state tax department (including Vero people). Sometimes, the report may be set off by a jealous neighbor or an ex mother in law. It's always better not to mess with the government.

I think when someone asks a question like this, which could affect their lives, it's important to give correct info.
In NYS it is a law (not a rule..but a law) that you must collect and pay sales tax if you ship within the state.

*****************
Here is some info direct from eBay:

Tax policy
Generally speaking, there are taxes on anything you sell on eBay from antiques to zebra figurines. As a seller, you should be concerned about two main tax areas: income and sales tax. There are a number of different factors that determine your total tax on sales. Because of this, eBay recommends that you contact a tax consultant. This type of expert is most qualified to advise you about your sales on eBay. Some of your questions might also be answered by using the IRS website at http://www.irs.gov
*******************

Here is eBay's privacy policy..you'll note that the government is specifically mentioned as someone they will give info to, including your selling habits. They also say they may give info to more than what they have listed. I know for a fact, they aren't shy about giving out info (not for myself, but for another).

http://pages.ebay.com/help/community/png-priv.html

Thanks Rick. Now we know why I only buy on ebay. :)

And, I do stand corrected, it is important to know the rules and the law. In CT if I purchase something from out of state and it is not taxed, I am liable for sales/use tax on the item.

BTW, where in Upstate are you? My daughter lives near Utica.

DMRick

07-16-2003, 09:07 PM

BTW, where in Upstate are you? My daughter lives near Utica.

I'm East of Utica..closer to Albany.

I don't mind paying my taxes from eBay...I like making money : )

Even paying the taxes, the money is far better than a garage sale profit. We're having one of those this weekend, since my dear son moved out of the country, and his stuff is takiing over my front porch. Too big to bother on eBay.

GAIL HAYDEN

07-16-2003, 10:20 PM

Originally posted by DMRick
I'm East of Utica..closer to Albany.

I don't mind paying my taxes from eBay...I like making money : )

Even paying the taxes, the money is far better than a garage sale profit. We're having one of those this weekend, since my dear son moved out of the country, and his stuff is takiing over my front porch. Too big to bother on eBay.

My son is very successful on ebay, me, I simply don't have the desire ( I guess) to bother with it. My oldest daughter, who lives in W. Winfield, NY, does very well there also.

annsteere

07-17-2003, 08:47 AM

So, here's my next question: do we owe taxes on garage sale proceeds?

I don't want to pay any taxes I can legally avoid, but I don't want to cheat either.

I don't have a large half.com business. I'm just selling books, nothing auctioned on ebay. Some I buy to read and then sell. (more like an electronic garage sale than a true business). But, over the course of this year it has been adding up.

Since the rule on taxes is that you can round off to the nearest dollar, can I omit books that sell for 75 cents and then have half.com's profit taken out?

GAIL HAYDEN

07-17-2003, 01:32 PM

Originally posted by annsteere
So, here's my next question: do we owe taxes on garage sale proceeds?

I don't want to pay any taxes I can legally avoid, but I don't want to cheat either.

I don't have a large half.com business. I'm just selling books, nothing auctioned on ebay. Some I buy to read and then sell. (more like an electronic garage sale than a true business). But, over the course of this year it has been adding up.

Since the rule on taxes is that you can round off to the nearest dollar, can I omit books that sell for 75 cents and then have half.com's profit taken out?

The IRS has a free number to call with all these questions, and IMHO, they would give you the correct answers. The web should provide the numbers or even, perhaps, the answers.
www.IRS.gov

cindala

07-17-2003, 08:17 PM

Does Ebay actually send out a 1099 form showing the amount of money you made on their site?

:sunny::bounce: :Pinkbounc :bounce: :Pinkbounc :bounce: :sunny:

disneychrista

07-17-2003, 08:57 PM

**This is not tax advice just my opinon**

I think it (should) depend on whether you are using ebay to sell your junk or using ebay as a business. Those that sell thousands of dollars worth of merchandise should collect sales tax and pay income taxes on their profits. Those who are only selling off their junk and making (maybe) a couple hundered dollars, shouldnt need to pay tax on it (didn't I pay the tax when I purchase it to begin with?)

Mrs. Snowgod

07-17-2003, 09:20 PM

Does Ebay actually send out a 1099 form showing the amount of money you made on their site?

I sold last year and did not receive a 1099. Given that they give info freely to the IRS as requested, I would surmise that my experience was typical and the plain answer is "no", since a 1099 would also be copied to the IRS.

DMRick

07-17-2003, 09:26 PM

So, here's my next question: do we owe taxes on garage sale proceeds?

You most likely do, if you are looking for the "legal" answer. You prob won't be asked to pay it if you have an occasional garage sale, becasue the IRS usually assumes you are reselling your own items, and for less than you paid. Can they insist on income taxes? Yes. Have they gotten income taxes out of someone holding a garage sale? Yes.

I think it (should) depend on whether you are using ebay to sell your junk or using ebay as a business.

That would be nice..but it's not the way the government thinks. If you are selling occasional junk, will they come after you? See above. Lots of people think it should depend on if it's a business..but in this country, it just isn't that way...and think about it...just on the ebay thread here..how many are buying just to resell? Lots..after all, you just have so much in your closet. Most all of the people posting on the eBay thread have a business, if they want to call it that or not. Believe me, if you fill out a schedule C properly, the average Joe, isn't going to owe a lot of taxes if all they are selling are garage sale type items on eBay, by the time you take off your deductibles and expenses. and fees...but you have to fill out that schedule C to get those deductions.

shouldnt need to pay tax on it (didn't I pay the tax when I purchase it to begin with?)

You prob paid sales tax (not income tax) when you bought it..but in this fine country the same item can be taxed over and over, and in most states, when you sell something within your state, you are suppose to collect and then pay to your state, sales tax. If you sell something on eBay, and want to claim the costs so that you can figure out your profits, you need to fill out a schedule C. When you fill out a schedule C, you can put down what your receipt shows you paid for the item, and since you paid tax, on the Schedule C, you'll get to take that off your profit. So you won't pay income taxes on it. If you don't fill out a schedule C, you have no way of taking off your costs.

Remember..the OP was asking what the correct way was..if she would owe taxes. The "legal" answer is yes.

This answer is not meant to take the place of your own local tax preparer or accountant.

DMRick

07-17-2003, 09:28 PM

Does Ebay actually send out a 1099 form showing the amount of money you made on their site?

No, you are not doing work for eBay..you are most likely "self employed" and working only for yourself. eBay is just a venue, like your local want/sale ads in your local newspaper.

disneychrista

07-17-2003, 09:30 PM

DMRick - thanks but as I stated, I was only giving my opinion.

Okay, I pay income taxes on my earnings, I buy books, clothes, etc. I read the books, kids grow out of the clothes, I sell them on ebay, at a loss. So technically, I paid income taxes and sales taxes. ;) :p

DMRick

07-17-2003, 10:13 PM

So technically, I paid income taxes and sales taxes.

actually, only in your mind you paid income taxes and sales tax : )

....that darn government needs proof in the way of receipts (from when you bought the items) and then figures/deductions put down on a schedule C...otherwise they assume you bought them at another persons garage sale for a penny, sold them on eBay and made a profit. Without receipts and that schedule C, you would need to put your income on eBay under misc income and pay income tax on the total.

Sales tax is only collected (at this time) if you sell to someone within your state. People who sell (actually resell) should have a tax certificate and pay their state the tax they have collected.

But how you stated it is prob how most people feel. I just can't tell you that you would never get caught or charged..since I just don't know. Would the IRS consider it fraud? I could give my opinion, but I'd rather not, in case I'm wrong. You have to do what you are comfortable with...I can only tell you what I would tell my tax client..and I would tell them to claim it.

disneychrista

07-17-2003, 11:37 PM

Originally posted by DMRick
actually, only in your mind you paid income taxes and sales tax : )
Yes you are right about this. In my mind the government is not owed anything from the re-sale of my junk. But again, this is only my opinion, not what the "law" or "tax code" says.

I could give my opinion, but I'd rather not, in case I'm wrong.
Well IMO, an opinion can not be wrong, because it is only an opinion. :p

GAIL HAYDEN

07-18-2003, 12:28 AM

Originally posted by DMRick
actually, only in your mind you paid income taxes and sales tax : )

....that darn government needs proof in the way of receipts (from when you bought the items) and then figures/deductions put down on a schedule C...otherwise they assume you bought them at another persons garage sale for a penny, sold them on eBay and made a profit. Without receipts and that schedule C, you would need to put your income on eBay under misc income and pay income tax on the total.

Sales tax is only collected (at this time) if you sell to someone within your state. People who sell (actually resell) should have a tax certificate and pay their state the tax they have collected.

But how you stated it is prob how most people feel. I just can't tell you that you would never get caught or charged..since I just don't know. Would the IRS consider it fraud? I could give my opinion, but I'd rather not, in case I'm wrong. You have to do what you are comfortable with...I can only tell you what I would tell my tax client..and I would tell them to claim it.

Rick, Rick, Rick, what a torrent you have unleashed!!!! :)

annsteere

07-18-2003, 07:01 AM

THANK YOU for the accurate information.

As you all say, you can do as you wish.

I'd rolled over at 2 am and had a. brain flash "I bet I owe taxes!" My intent is to pay every dime I owe and not a nickel more. Rick and others helped me figure out what that is.

(Too bad about that garage sale 5 years ago, guess I accidentally got away with something there)

Original poster.

DMRick

07-18-2003, 07:09 AM

Well IMO, an opinion can not be wrong, because it is only an opinion.

I know..except that sometimes when someone reads an opinion, they see it as the way something is (they don't see the "opinion" part, and I wouldn't want to steer anyone wrong : )

As I said, I think most people's opinion match yours...now if only we could get the IRS to see reason!

(Too bad about that garage sale 5 years ago, guess I accidentally got away with something there)

LOL..if the last garage sale you had was 5 years ago, then I'm betting all you sold was stuff from your closet..and I'm sure you had all your receipts to prove you sold at a loss!

What gets me, is when the IRS (big meany's!) close down lemonade stands. I saw on the AOL header they did just that again last week. We had a little kid charged with not paying taxes on income from his worm (for fishing) stand several years ago...boy did that make people mad, until they finally backed down. THe kid would have actually owed tax, because they had so much interest income from a savings account.

C.Ann

07-18-2003, 10:24 AM

This is an interesting - although confusing thread..

Think about it.. A person such as myself - who is doing a sweep of their house to unload accumulated items from the past 35 years - is obviously not going to have receipts for those items unless it was purchased quite recently.. And if a person is selling items that THEY purchased in a garage sale years ago - used for several years - and no longer want - then again, there isn't going to be any receipt available to prove original value..

So - I guess my question is this.. Let's say I purchased an item in a garage sale 5 years ago for 50 cents.. I'm done with it now - or no longer interested in it - so I put it up on eBay for $3.00.. Several people bid on it and it ends up selling for $6.00.. (Are you following me here?) When filing taxes (remember - there's no receipt available) the "profit" would then be the difference between the listing price and the actual sale - correct?

And how could you claim deductions and expenses if you have no receipts for the items you're selling?

Trying to get this right because I for one, do not want to mess with the IRS.. They are mean, mean, MEAN!!!! :eek:

Mrs. Snowgod

07-18-2003, 10:46 AM

My experience for 2002 tax year, using H&R Block:

Profit would be the difference between your price as documented by a receipt/invoice, etc. and your selling price. So, C.Ann, unfortunately your 6.00 high bid on your yard sale item with no receipt is technically a 6.00 profit.

Expenses would include:
ebay fees
PayPal fees
Stamps.com monthly fee (if you use it)
your shipping/packing materials
postage you pay over and above what a customer paid if miscalculated (and if you overcharge for postage, that should be added to your profit)
mileage to & from the post office, as long as you have documented it well and can also give detail on your personal use of your car, too.
Ask your tax advisor about deducting a portion of your computer, your digital camera, printer, ink cartridges, paper, etc. Too complex for the scope of this thread, but possible.

Again, a tax advisor is an expert and should be consulted for sure, but this was my recent experience.

Not to overly plug H&R block, but I love my tax person - she has given me wonderful advice and info to minimize my tax liability, and she also met with me in the middle of the year to prepare for this in advance. If you already have a relationship with a tax preparer, call him/her with these questions, and you should be able to get some simple answers up front.

There are a lot of tax advantages to having a small business, and the key is documentation. You could easily take a little notebook with you when you attend yardsales, and just ask for a handwritten receipt - even write it up yourself and have the seller sign it. Those receipts are ultimately only critical if you are audited, but they give you protection and piece of mind, as well as a hard copy record if your computer ever crashes and you lose all your spreadsheets!

DMRick

07-18-2003, 11:00 AM

When filing taxes (remember - there's no receipt available) the "profit" would then be the difference between the listing price and the actual sale - correct?

No. The listing price has no play in this.

The government deals only in receipts. If you have no receipt the profit is the entire amount you sold something for. If you have a reciept, you would just take off what you paid for it (but only if filling out a schedule C) and that's your profit..in most garage sales, that's a loss..which of course the government doesn't allow you to take. It's a one way street.

If you do have a receipt, the profit would be the entire amount again...UNLESS you fill out a schedule C, which has places to remove the cost, the fees, etc.

Before eBay, this was seldom a problem (except for the person who made a business out of garages sales). The IRS seldom said a thing, since they figured you are just getting rid of stuff you paid much more for...they could have asked for receipts, but they just didn't...prob didn't want to face the wrath of a nation.

Along comes eBay and online stores, etc, and the IRS sees that people are making a business out of selling old stuff. Will the IRS bother you if they see that you are prob selling your closet stuff (by that, I mean not a lot of multiples of the same thing - what's the chances you have 10 identical toasters in your house..well you prob do CAnn LOL..but most people don't), old clothes, toys, etc)? Prob not. Can I tell my tax clients not to worry about it because the IRS will not bother them? No..because legally, you owe income tax on the profit..and if you don't have a receipt, the profit could be a lot (although almost always on a thread like this, someone will pop in and say their accountant said not to worry about it..of course he wouldn't get in any trouble..just you would). And if you have a recipt, you are suppose to fill out a schedule C or claim the toal as misc income. You really have to do what you feel comfortable with...and take notice I'm not telling you what I would do about income tax on the items from my own attic...since some stuff isn't good to share on a public board.

By the way, I always suggest you go to an accountant the first year, so he can set up your computer depreciation, other depreciations, office in home (and no it's not a red flag if you really have one), and show you what expenses are deductible (gas, postage, ink for printing out auctions, part of your internet cable..all if you use it just for ebay, etc).

DMRick

07-18-2003, 11:07 AM

Not to overly plug H&R block, but I love my tax person

That's who trained me and I worked for for several years (as well as some community college courses)..but please go to a business H & R Block..there are a lot of first year, and not so savy Block preparers at neighborhood offices. It's also good to find one who is familiar with eBay, so they know about Paypal fees, eBay fees, etc. Also, you often can get a lower price by going to an accountant.
It's good to hear you had a great Block preparer (not my favorite place because of how they forced us to charge for each and every form, even some you may not need, and how they pushed the rapid refund to many poor people)..there are some of those out there : )
Once you go one year, redo your own taxes on Turbo tax (if you are up to doing your own), and see how you do..then you can do your own in subsequant years.

Mrs. Snowgod

07-18-2003, 11:22 AM

It's good to hear you had a great Block preparer (not my favorite place because of how they forced us to charge for each and every form, even some you may not need, and how they pushed the rapid refund to many poor people)..there are some of those out there : )

Wow, I guess I'm lucky. She did emphasize the distinction between the regular H&R Block and H&R Block "Premium" (of which I go to the latter). And she was very sensitive to the number of forms, making sure I understood up front how they charge. This particular person has an "EA" designation on her business card and her title is "Master Tax Advisor". Is that as special as it sounds, DMRick?

C.Ann

07-18-2003, 11:27 AM

Well thank you all - for confusing me even further - LOL !!!!! :)

I don't have any receipts for anything - period.. I've had the stuff for years..

So - do I file the schedule C or not? And can I still claim expenses (eBay fees, supplies, etc.) if I have NO receipts for anything I'm selling but I DO file the schedule C?

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I think I'll go back to bed now.................................:confused:

DMRick

07-18-2003, 11:28 AM

This particular person has an "EA" designation on her business card and her title is "Master Tax Advisor". Is that as special as it sounds,

Yes it is : )
As an Enrolled Agent, she can go in front of the IRS for you..and believe me she is very smart! You picked good!!

DMRick

07-18-2003, 11:31 AM

So - do I file the schedule C or not? And can I still claim expenses (eBay fees, supplies, etc.) if I have NO receipts for anything I'm selling but I DO file the schedule C?

You have to decide if you are going to claim income tax on your stuff : )

As far as a schedule C..if you are claiming it..I would go that way. Of course once you see how little your really made, after you take off all the great deductions, it can be a little depressing LOL! It will show your profit as less than you thought...but if you are using one room for eBay, you get to take off lots and lots of stuff (legally) that you would have had to have anyway (part of your property taxes, phone bill, heat and lights, etc, as well as part of your computer, camera (or all if you use it just for ebay)..just keep records of hours the stuff is being used and percentage of it for eBaying.

C.Ann

07-18-2003, 11:58 AM

Originally posted by DMRick
You have to decide if you are going to claim income tax on your stuff : )

--------------------------------

Well - yes - I'm going to claim it one way or the other.. (Like I said, I don't want to mess with those mean IRS people!) but I didn't know if I would have to claim it under "miscellaneous income" (because I don't have receipts) or if I could still file the schedule C..
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Yep - I'm going back to bed................................ LOL