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KristineS
08-10-2008, 01:53 PM
I don't know if anyone sells on Ebay here, but I thought this was interesting. According to the Wall Street Journal, the IRS is going to start collecting taxes on Ebay sales.

Here's the article (http://online.wsj.com/article/SB121737220325394931.html).

orion_joel
08-11-2008, 01:41 AM
I didnt look at the article to close, however, in Australia it is something similar if you selling on ebay, and exceeding the minimum limit for sales tax sales then you must pay the GST on those sales and report it.

For truly personal sales wher someone may want to clear out a bit of junk, i can see that taxing ebay sales can be down for many people. However for people truly operating in a business capacity selling thousands of dollars worth of products every week then i do not think that they should be able to escape tax just because it is online. However it comes down i think to working out how to split the two groups and tax just the people who are selling at a level that should be taxed.

KristineS
08-11-2008, 11:21 AM
It seems to be that there should be some income threshold that you would have to cross before you're considered a business. I know some people who just sell bits and pieces on Ebay and probably make a few 100 bucks a month. I'm not sure they should be taxed.

I do agree with you though, Joel. If you're making several thousand dollars a month, than you're a business and should be taxed accordingly. As you so rightly pointed out, the problem lies in separating the two groups.

Evan
08-11-2008, 03:37 PM
If you sell a single item on eBay all year, you should be reporting it as income on your tax return. Even if you won money on a scratch ticket, it should be reported. But a lot of people make good-faith errors and forget about those things and don't keep track of it.

This type of law doesn't surprise me. The problem I see with this is the implementation. Say your mom PayPal's you money for college expenses or tuition (a gift -- maybe a loan -- but certainly not business income), it'll probably show up as "business income". Now once you're 1099'ed, it's your burden to prove it isn't. I just see more people getting audited as a result.

KristineS
08-11-2008, 03:48 PM
That's a good point Evan, and one I hadn't considered. I could see the potential for lots of conflict in those cases.

Aaron Hats
08-12-2008, 03:58 PM
I think this will force many people to legitimize their ebay business which is a good thing (at least for real merchants). It may not be good for the average buyer though as they watch their reserve prices increase now that the seller has overhead such as a home office and taxes to pay.

Next will be sales tax to worry about.

vangogh
08-14-2008, 02:28 AM
This isn't really an eBay thing. I think the article just mentions eBay to attract people into the article. It's the processors of online payments that have to report the income. Paypal owned by eBay is one, but far from the only processor.

The article also says:


The payment processors will be required to file a 1099 form for each merchant to the IRS and to the merchant. They won't have to file for merchants with less than $10,000 in gross sales and less than 200 transactions in a given year.

If a 1099 lists you under $600 then you don't have to claim that with the IRS. The article says the merchants won't have to file for a much higher dollar amount, but not having to doesn't mean they won't file.

I think it's fair you'd have to include the revenue you make over a certain amount, though I think it's silly for someone who sells something for $100 one time on eBay to need to include it when they file regardless of whether or not they technically have to.

Aaron I hope sales tax doesn't become something to worry about here. I think it'll just drive business outside the U.S. It's also very complicated trying to figure out sales tax should apply. I realize states are losing money, but there are probably better ways to get that money back.

Aaron Hats
08-14-2008, 12:58 PM
Aaron I hope sales tax doesn't become something to worry about here. I think it'll just drive business outside the U.S. It's also very complicated trying to figure out sales tax should apply. I realize states are losing money, but there are probably better ways to get that money back.

There are several ways the sales tax issue could go and I think we'll have to deal with it at some point. Being in one of two states (I think) that don't have a sales tax I'm hopeful that I won't have to worry about the issue for a very long time. Can you imagine the boost to my business if 48 other states have to eventually collect sales tax and I don't! :D

vangogh
08-14-2008, 02:13 PM
That would be nice wouldn't it.

Some of the issue to me is that international companies aren't going to have to collect sales taxes giving them a competitive advantage. Say the US decides all of us operating in the US need to collect sales tax. Why shouldn't someone move to Canada in that case.

I think it builds in a competitive advantage for companies outside the US.

Another issue though is at the state level. Say your business is in Texas and you sell to someone living in New York. Which sales tax are you collecting? I think it's based on where the customer lives so we all need to know the tax rates for every state and we need to collect that information from people in order to make a sale. If your product needs to be shipped you need that info anyway, but what about when you sell software or a digital product.

And in that case what's to prevent a person from giving you an address in a state where there is no sales tax, which defeats the whole system anyway.

I understand the issue that states are losing money by not being able to collect taxes, but I think other ways of recovering that money might be better.

Evan
08-14-2008, 06:00 PM
If a 1099 lists you under $600 then you don't have to claim that with the IRS.

1099s do not need to be issued if it's under $600. There are exceptions. But if one is issued, it must be reported. The IRS will be looking for it.

vangogh
08-14-2008, 06:04 PM
I didn't realize that. I report them all anyway, but I was under the impression you didn't have to report the income if it was under $600. I guess as long as the 1099 is issued you do need to report. Good to know.