taxes on ebay profits?

[annsteere]

The long thread on ebay your way to Disney inspires me. Do you owe taxes on your profit? If so, it makes sense to me that if I buy an item at a garage sale for $1 and intend to sell it for $5 that I will owe taxes on a $4 profit. But, if I bought a video or book for $20 and now I can clean my family room and get $4 for it, do I have a profit and if so how much?

 

[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).

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]

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?

 

[GAIL HAYDEN]

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?

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]

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]

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]

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]

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]

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]

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]

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

 

[disneychrista]

**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]

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]

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]

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]

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.

 

[DMRick]

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]

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.

 

[GAIL HAYDEN]

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]

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.