eBay

wallaceupdike · ‎01-06-2023

Hi!

Quick question. When calculating my cost of goods for tax purposes, am I supposed to include the total? For example, if I paid $19.99 for an item, but after tax and shipping, the item cost me $25.52, then listed and sold the item for $50 shipped, would the $25.52 total be what I deduct from the $50 to get my profit?

Thanks!

caldreamer · ‎01-06-2023

You report "gross sales" (purchase price + shipping income) to the IRS. Sales Tax money did not go "to you" so that is not included in your "gross sales".

When you file taxes as a "business" you can deduct business expenses on Schedule C (EBAY fees, cost of goods, packaging supplies, mileage, amount that YOU PAID to ship item). You are correct....your "cost of goods" would be $25.52 (total amount you paid).

You pay taxes based on "net profit" (after you deduct all expenses).

wallaceupdike · ‎01-06-2023

Thank you! That's super helpful. Do you know if the 1099-K that eBay sends me and the IRS will already have subtracted taxes and seller fees and just be the Net Sales number on the right?

mtgraves7984 · ‎01-06-2023

The gross eBay figure won't include taxes. The FVFs are another line item for your Schedule C.

wallaceupdike · ‎01-06-2023

Thanks! So, in this case, the gross eBay figure on the 1099-K would be $427.67-$14.82=$412.85? And then you'd deduct the $106.85 on Schedule C, along with the total amount you paid for the goods you sold?

wattadeal · ‎01-06-2023

If what you are saying is that you ordered this item onli1ne for 19.95 + tax & shipping...and then resold it, yes your cost would be $25.52

monica-sells · ‎01-06-2023

in theory, yes, that would be the right number

but there are other factors that you may have not considered.

Did any of those sales transcend the period between accounting cycles (that twilight zone of Dec 28 - Jan 2) or were there any refunds/returns that might affect those numbers....

that final number may not be exactly the amount on your 1099-K

the 1099-K is all funds processed on your behalf (except sales tax collected)

jitalo2022 · ‎01-08-2023

"When you file taxes as a "business" you can deduct business expenses on Schedule C"------What if you are not a "business"?

1786davycrockett · ‎01-08-2023

@jitalo2022

"What if you are not a "business"?"

In the eyes of eBay and the IRS, sellers are considered a "business" if they sell on eBay -- it doesn't matter how "small" you believe that you are, or how few items you sell.

Yes -- you ARE a "business."

nobody*s_perfect · ‎01-08-2023

eBay sellers who usually sell at a net loss would fall into the IRS definition of "hobby" rather than "business." This would include many small sellers who are selling off personal possessions for less than they originally paid.

https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses

https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFRcc67ec453a5e51...

lacemaker3 · ‎01-08-2023

@jitalo2022 wrote:
"When you file taxes as a "business" you can deduct business expenses on Schedule C"------What if you are not a "business"?

If you're not a business, then you can't use a Schedule C. In this case you are a casual seller, and instead you would report your income and expenses using a Schedule D Capital Gains and Losses.

There's more information about this, from eBay and TaxAct:

https://www.taxact.com/tax-information/ebay-seller-faqs-and-unique-scenarios

...

ms.rodriguez* · ‎01-08-2023

You also have other expenses that you can deduct like the cost of printer ink, paper, shipping materials. You can pro-rate the cost of a camera, printer, laptop or whatever you use to list on ebay. I say prorate because you can use it for more than a year. Also if you use that device for something else like looking on Facebook, then the percentage that you deduct would be less since that device is used for something else than doing ebay. I use a po box as my address for ebay. My account said that too would be a business expense.

And also the cost of the internet. You have to deduct a percentage of it since you probably share it with others in your home and also do non-ebay stuff with it. Definitely start saving receipts and if you don't have receipts, get a notebook and write the the price that you paid for an item that you listed. Try and get a ballpark figure. Be specific when you write it in the notebook especialy if you have alot of the same item.

Example .. don't write blue shirt $ 10.oo

WRITE : Men's Wrangler shirt blue size Large and then the price that you recall. 10.oo in my example

Get a box sealed it. Cut a slot on the top and start putting in the receipts as you buy stuff. Label the outside of the box with the year. Get another box or a bigger box if you fill it.