eBay

the24-7shop · ‎02-10-2024

I usually don't post on the public forums at all. But I have been selling on Ebay for over 23 years and just

recently I sold a Sirius boombox with the receiver in great condition. Was listed for $35.00 after the fees were taken out my pay to me was $21.40 **bleep** am I not seeing something is wrong here?? I really am thinking outside the box here and is it worth my time and energy to let these people make actually more than I do ... I don't think so I will reconsider my selling options moving forward

dbfolks166mt · ‎02-13-2024

I agree for tax purposes, the shipping fees collected are revenue for tax purposes and needs to be reported that way. The IRS creates all sorts of rules and definitions that fit their needs of collecting taxes for the government. But the IRS definition of revenue is not a universal definition. Accounting definitions of revenue are different than the IRS. In the end, I am not selling shipping services, I am just collecting cash on behalf of the buyer who instructs me where to buy the shipping services (USPS or wherever). When computing the ebay effective FVF, I don’t follow the IRS definition. I would not include shipping as part of gross revenue since I am not selling the shipping-I am just selling an item.

A different example, if Walmart sells an Applebee’s gift card, it is not revenue to Walmart (except for some minor service fees). Just because cash is received, doesn’t automatically make it revenue.

I have done accounting and prepared taxes for many years and I always record any funds received in the accounting spreadsheet that aligns with IRS and GAAP standards. I am curious if you don't record it as revenue where do you record it and how to you reconcile your books against your 1099 if you receive one? If you don't do you simply record your revenue as the amount you received less the shipping? If so I hope you are never audited.

I record expenses the same way including the shipping label cost, eBay fees, COGS, materials.............

In your Walmart example the cash received is revenue but there is a offsetting expense when Walmart pays Applebee's.

isaiah53-57 · ‎02-13-2024

@dbfolks166mt wrote:
dbfolks166mt said "There is NO getting around the fact that the seller received the funds paid by the buyer for this shipping and it is revenue plain and simple. "
Shipping received from the buyer is not revenue. A better description would be "total Payments Received" and not "Total Revenue" because the FVF is based on the total payment. Revenue is the value of the item sold only and does not include the shipping cost.

Tell that to the IRS and take a look at your 1099-K from eBay if you got one. Where is the shipping money you received from the buyer identified? The IRS defines revenue as "everything you receive in payment for ........................."

@dbfolks166mt

Is correct in the statement above - For tax purposes, the shipping in your transaction is reported as revenue and has been for 10 or more years I recollect.

It was not always so - On my tax forms from 2001 to 2009(or up until they started charging fees on shipping) my top line was the amount of my total sales, not total transactions - Further down, there were line item entries for shipping/handling charged and shipping paid - After subtracting the two, a positive number represented a gain(profit) and a negative number represented a loss. Thats how I reported shipping transfers before they started adding shipping into the top line.

Here is a quote from Wayne Spivak, Businessman, President & CFO 2015 that coincides with my mindset and some of the reasons I do not agree that paid shipping should not be counted toward a revenue stream.

"...separately stated shipping when reported as revenue artificially inflates revenues.

If income from shipping is not material, regardless of the GAAP maker’s intent, it can be shown in selling expenses, and such revenue would ultimately flow to the bottom line.

The same logic can be used in billing for reimbursable expenses. They are not revenues.

In some localities, that could even mean more income/corporate-type taxes on items that are clearly not revenue, since they tax based on the top line.

GAAP are principles, they are not absolutes. Disclosure in the financials of the accounting method used lets everyone know what you are doing. Sometimes its quite obvious, other times you really should have the footnote inserted.

On a tangential issue, adding shipping to the selling price to offer free shipping produces a higher GPM, which is also misleading to reader of said financials.

Note his statement: "GAAP are principles, they are not absolutes. Disclosure in the financials of the accounting method used lets everyone know what you are doing..."

And guess what? At the end of the day, if I was working with the same sales and costs over an annual term and I did my taxes the way I used and the way I have to now that shipping has been added to the total revenue, my bottom line would be exactly the same...

Simply stated, shipping complicates the hunt for profit - I do not consider it in the least when considering my Payout profit after the shipping wash - At best, we are talking about pennies in profit and thats if you have a hefty handling charge - I just report it the way they want me to at the end of the year - Shipping is a wash or a loss on virtually EVERY sale - anyone who thinks they really made money on reasonable shipping and handling charges did not account for their expenses and time properly - You can put a $5.00 handling charge into the box and if you dont think the gas and the shipping materials, but more importantly, the time it took you to pack and ship that item, didnt eat that up? then you dont mind working for peanuts - I need to make bare minimum $30 an hr - Thats the lowest I'll go when I source something(when I was selling full-time I avg over $75 an hour) - and a 15 minute pack and ship job means I just lost money with a $5 handling charge.

4mysweetgirl · ‎02-13-2024

I feel your pain, though fees are easy to look up. I know what the fees are, which is why I don’t list much on eBay anymore. I’d rather donate many things instead of selling them here, simply because the margin is too small to make it worth my time. So Goodwill gets it, or my Buy Nothing group.
FB marketplace doesn’t charge fees, and there are a lot of selling groups. But eBay has a bigger reach and people are willing to pay a bit more, so for some items it is still worth it, sometimes barely, but yes. I do wonder how much business eBay loses due to their high fees, but I guess they must have done the math. Going in eyes wide open is always a good idea!

dbfolks166mt · ‎02-13-2024

Note his statement: "GAAP are principles, they are not absolutes. Disclosure in the financials of the accounting method used lets everyone know what you are doing..."

Totally agree with his statement but while they are "principles" most accounting firms and businesses follow them. If your company releases its financial statements publicly or trades on the stock market, then you have to follow GAAP by law. Of course there was that Arthur Anderson thing.

Smaller businesses have more flexibility as to what they follow with regards to their accounting as long as it remains consistent and in accordance with the law. I tend to prefer utilizing accounting methods that I am confident will survive an audit.

The level of profit one achieves, or has as a desired target, is a matter of personal goals. There are lots of things that I do in life that have minimal or no return that I hardly consider to be a waste of my time. A lot have negative returns other than personal enjoyment or satisfaction. I would imagine there are a number of sellers on eBay that are not all that focused on profit.

mam98031 · ‎02-13-2024

@susanb1872 wrote:
I agree for tax purposes, the shipping fees collected are revenue for tax purposes and needs to be reported that way. The IRS creates all sorts of rules and definitions that fit their needs of collecting taxes for the government. But the IRS definition of revenue is not a universal definition. Accounting definitions of revenue are different than the IRS. In the end, I am not selling shipping services, I am just collecting cash on behalf of the buyer who instructs me where to buy the shipping services (USPS or wherever). When computing the ebay effective FVF, I don’t follow the IRS definition. I would not include shipping as part of gross revenue since I am not selling the shipping-I am just selling an item.
A different example, if Walmart sells an Applebee’s gift card, it is not revenue to Walmart (except for some minor service fees). Just because cash is received, doesn’t automatically make it revenue.

It is much similar than that. Most charge a small fee on top of the actual cost of shipping or they estimate it to be the highest costing zone they may have to ship to when they are doing stated shipping. Most sellers do not charge the exact amount of shipping because it can vary due to what state you would be shipping into.

Certainly for some sellers they try and charge the exact shipping, however they aren't always right either. Sometimes they are high and sometime they are low.

So the easiest and cleanest way to do this is to take the shipping the buyer pays, count it as income, then when the seller subtracts their actual costs, it all comes out in the wash. So much better than multiple rules and certainly less confusing.

mam98031 • Volunteer Community Member • Buyer/Seller since 1999

mam98031 · ‎02-13-2024

The name itself allows for variations. GAAP = Generally Accepted Accounting Principles.

mam98031 • Volunteer Community Member • Buyer/Seller since 1999

lvr-3929 · ‎02-14-2024

eBay fees are charged based on the total sale amount. This includes item price, handling, shipping charged, and sales tax. My gross sales includes all of those things.

After deducting all of these things, eBay themselves shows me the fees and expenses are about 30% of the gross sales. This is prior to any costs not run through eBay, such as fuel, shipping supplies and the like.

If I sell an item for $84 plus $10 shipping, at 8% tax I collect $100 and change. eBay takes the fees and sales tax off the top, almost $7 in taxes, $13.64 in fees, about $21 leaves me with $80. If I'm lucky I get 40% off the shipping with an eBay label so it only costs me $6 to ship for $27. Not quite 30% of $101 but you get the idea.

Assume this is a new item retailing for $105, I sell for $84 (20% off) and my cost is $63, I've made a whopping $11 ($74 back to me). Roughly 10% of the retail price is profit.

If it wasn't for the occasional find of things absurdly underpriced (used, collectible, etc.) it would barely be worth the trouble to sell on eBay. Even then you get stung, people return things and you have to eat the shipping costs so even if you resell it you maybe break even at best.

Not sure why this is hard to understand.

oldrockerdanny · ‎02-14-2024

I have experienced the same condition and feel the same way. In order to get what my item is worth , I would need to inflate the price to an unreasonable number. I have been on eBay for 25 years and don't remember fees being this high not long ago. I suggest there be a more reasonable scale of fees implemented , otherwise I can't see the future value of selling on eBay.

dbfolks166mt · ‎02-14-2024

I have experienced the same condition and feel the same way. In order to get what my item is worth , I would need to inflate the price to an unreasonable number. I have been on eBay for 25 years and don't remember fees being this high not long ago. I suggest there be a more reasonable scale of fees implemented , otherwise I can't see the future value of selling on eBay.

I too have been selling on eBay for quite some time and the fees have gone up slightly over the years but so has everything else. However, I have found that the shipping increases have had more of an impact on what I sell on eBay than the fees. A lot of items that years ago I would have listed on eBay I no longer even attempt to list since, like you stated, the price would be an unreasonable number. The exception is for those items that I am just trying to get rid of and even then I simply donate those to goodwill or the salvation army and take the tax deduction.

I am fortunate enough to live in a fairly large metropolitan area and a lot of items I sell these days are through local forums that have no, or low, fees and are local pickup or delivery where the buyer does not have to pay for shipping and I don't have to worry about shipping damage or loss. The buyer also gets to see and inspect the item before paying so the risk or returns is virtually 0.

The entire marketplace is changing and I don't see eBay lowering their fees, they are a business and like most businesses are out to make a profit.

isaiah53-57 · ‎02-14-2024

@dbfolks166mt wrote:
The level of profit one achieves, or has as a desired target, is a matter of personal goals. There are lots of things that I do in life that have minimal or no return that I hardly consider to be a waste of my time. A lot have negative returns other than personal enjoyment or satisfaction. I would imagine there are a number of sellers on eBay that are not all that focused on profit.

Im sure thats true, though I'm also sure its a small percentage - The majority do, and for those who are sensitive about profit and time involved, many short account EXACTLY the way I do.

If I am sourcing an item, in order to save time and brain cells, I use my avg ebay fees against the item's selling price to determine profit - Example: if I buy a $60 item that I can sell for $100, I figure I'll be charged a 20% fee against the items price, which is $20. Guess what - I'm not buying that item, because the risk/reward is not worth my time investment of 40 min on avg based on what I sell. No where in there do I need to complicate the matter by adding in a shipping wash...If its a really heavy or bulky item I usually pass anyway - or if it is really valuable, I'll add another 10% to the avg fees to compensate.

If I was to source the way you so rigidly account, I would be trying to add in the shipping cost, for which I really have no idea what it will be, because I dont know where its going - a cost that is gonna be a wash anyway. I would be worrying about other cogs that I dont need to, because they avg out to very small dollar amounts per sale - And I always conservatively value an item to compensate for those costs in the first place. I would have my spread sheet out, figuring, heming and hawing, artificially inflating revenue, adding and subtracting the same dollars amounts redundantly - No I can come up with the same dollar amount within pennies by short accounting that you'll come up with.

Plain and simply, the only profit baring value in the transaction is the items price and the only MAJOR cost I need to worry about that I have NO CONTROL OVER is the ebay fees, if I chose to sell it here - Shipping? That takes care of itself and has no baring on my profit assessment - So again, when short accounting for sourcing and looking at payout after shipping wash, the only value I'm concerned with it is what I retain after ebay selling fees against the items selling price - If I sell a $100 item here and my fees are $20 then my fees are 20% - The SAME EXACTLY amount within pennies you will come up with after figuring your Net after fees and shipping costs - I'll save the long accounting for years end - and after all is said and done, I will have saved time and sanity and stayed well within my minimum profit parameters and likely made less mistakes by trying to push some measly amount of profit to shipping - Shipping is an amount, that BEFORE THE SALE, I really have no idea of how much it will be until after I shipped it, so how can I even account for it anyway - That same amount that AFTER THE SALE takes care of itself as a wash. No - within reason, I dont need to concern myself with shipping before or after the sale with regard to what I buy or how much profit I am making - Its a non-issue...

dbfolks166mt · ‎02-14-2024

If I am sourcing an item, in order to save time and brain cells, I use my avg ebay fees against the item's selling price to determine profit - Example: if I buy a $60 item that I can sell for $100, I figure I'll be charged a 20% fee against the items price, which is $20. Guess what - I'm not buying that item, because the risk/reward is not worth my time investment of 40 min on avg based on what I sell. No where in there do I need to complicate the matter by adding in a shipping wash...If its a really heavy or bulky item I usually pass anyway - or if it is really valuable, I'll add another 10% to the avg fees to compensate.

If I was to source the way you so rigidly account, I would be trying to add in the shipping cost, for which I really have no idea what it will be, because I dont know where its going - a cost that is gonna be a wash anyway. I would be worrying about other cogs that I dont need to, because they avg out to very small dollar amounts per sale - And I always conservatively value an item to compensate for those costs in the first place. I would have my spread sheet out, figuring, heming and hawing, artificially inflating revenue, adding and subtracting the same dollars amounts redundantly - No I can come up with the same dollar amount within pennies by short accounting that you'll come up with.

Plain and simply, the only profit baring value in the transaction is the items price and the only MAJOR cost I need to worry about that I have NO CONTROL OVER is the ebay fees, if I chose to sell it here - Shipping? That takes care of itself and has no baring on my profit assessment - So again, when short accounting for sourcing and looking at payout after shipping wash, the only value I'm concerned with it is what I retain after ebay selling fees against the items selling price - If I sell a $100 item here and my fees are $20 then my fees are 20% - The SAME EXACTLY amount within pennies you will come up with after figuring your Net after fees and shipping costs - I'll save the long accounting for years end - and after all is said and done, I will have saved time and sanity and stayed well within my minimum profit parameters and likely made less mistakes by trying to push some measly amount of profit to shipping - Shipping is an amount, that BEFORE THE SALE, I really have no idea of how much it will be until after I shipped it, so how can I even account for it anyway - That same amount that AFTER THE SALE takes care of itself as a wash. No - within reason, I dont need to concern myself with shipping before or after the sale with regard to what I buy or how much profit I am making - Its a non-issue...

I source pretty much the same way you do when I am considering an item and I do not factor in shipping because as you said it is irrelevant and will take care of itself. I do however take it one step further without having to break out a spreadsheet or calculator. My major cost, because I know what tax bracket I am in, is Federal, State and SE taxes which amount to a little over 40% of the net revenue. Of course that only applies if you report your income and file your taxes.

As a general rule of thumb, I estimate that all expenses are going to consume about 60% of whatever I sell the item for, at least for items I sell on eBay. That figure has, when doing year end accounting, held pretty consistent.

mam98031 · ‎02-14-2024

@lvr-3929

Yes, FVFs are based on the total amount a buyer pays.

Yes, Fees AND EXPENSES can be 30% of the sale or more, however that does NOT mean that Ebay's FVFs are 30%, it means your COSTS are 30%.

Some posters are confusing the Cost / expenses of selling something with how much EBAY charges in a FVF. The two are NOT the same. Knowing your costs of sale is a very important thing to know, but it is also important to know what is an Ebay FVF and what isn't.

mam98031 • Volunteer Community Member • Buyer/Seller since 1999

mam98031 · ‎02-14-2024

@oldrockerdanny wrote:
I have experienced the same condition and feel the same way. In order to get what my item is worth , I would need to inflate the price to an unreasonable number. I have been on eBay for 25 years and don't remember fees being this high not long ago. I suggest there be a more reasonable scale of fees implemented , otherwise I can't see the future value of selling on eBay.

In most categories Ebay has NOT raised fees for quite a while. When Managed Payments went site wide, in most categories we paid 10.2% FVFs to Ebay and 2.9% to PayPal. For a total of 13.10%

When Ebay started taking MP sitewide in mid summer 2020, they went to a simplified fee of 13.25% in most categories. Also at that time we started paying our FVF on sales tax too. Once Ebay became our Money processor the FVF was charged on the total amount a buyer paid. The same held true when PayPal was our money processor. We paid their fee on the total amount the buyer paid.

What is really increasing the costs to sellers are other factors. Carrier costs just keep climbing and is likely the biggest reason for higher costs. Then for those sellers using Promoted Listings, that can be a big factor too.

mam98031 • Volunteer Community Member • Buyer/Seller since 1999

isaiah53-57 · ‎02-15-2024

@dbfolks166mt wrote:

I source pretty much the same way you do when I am considering an item and I do not factor in shipping because as you said it is irrelevant and will take care of itself. I do however take it one step further without having to break out a spreadsheet or calculator. My major cost, because I know what tax bracket I am in, is Federal, State and SE taxes which amount to a little over 40% of the net revenue. Of course that only applies if you report your income and file your taxes.
As a general rule of thumb, I estimate that all expenses are going to consume about 60% of whatever I sell the item for, at least for items I sell on eBay. That figure has, when doing year end accounting, held pretty consistent.

You know I didnt mention taxes as a cost we have no control over whereas I should have.

I do pay a good amount in taxes, but I am able to write off so much and the taxes are based off the bottom line whereas ebay fees are based off the top line+. Also, my sales have been dramatically reduced since probably 2017, so after all is said and done, my taxes are really not that much nowadays...Oh and I also live in NH, so I dont have to file state income taxes, which is nice...