Reselling and Tax Exemptions

[dragonor999]

So I've started a reselling business this year and I'm not understanding how taxes will be when I get my eBay form. Because I'm reselling, how would I deduct the original cost of the item and only be taxed on profits? I've read some things like needing a sellers permit or doing a resale certificate and I'm just not sure if those are needed. BTW I am in California.  I also want to know about the tax exemptions like for shipping, fees, and business expenses like supplies. I'm not completely sure about those as well. Any help is appreciated.

[nobody*s_perfect]

Look through IRS Schedule C and its instructions to help understand how they see this. Yes, you can deduct your original purchase price as well as expenses such as postage and eBay fees. You do not need to officially be a registered business, nor do you need any specific certificates or permits to sell on eBay.

[janet9988]

You need to check with an accountant t to have them go over the laws for your personal situation.

[7606dennis]

I would recommend consulting a tax professional for assistance in setting up your accounting practices.

[slippinjimmy]

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@7606dennis wrote:

I would recommend consulting a tax professional for assistance in setting up your accounting practices.

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WAY before one does that they should up a few books (yes books printed on paper) that give you an introduction to small business accounting and/or books on How To Start A Small Business, Both will give the basic information you need BEFORE you start spending money on"tax professionals" who will need answers from an INFORMED client in order to give proper advice.

[7606dennis]

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@slippinjimmy wrote:

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@7606dennis wrote:

I would recommend consulting a tax professional for assistance in setting up your accounting practices.

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WAY before one does that they should up a few books (yes books printed on paper) that give you an introduction to small business accounting and/or books on How To Start A Small Business, Both will give the basic information you need BEFORE you start spending money on"tax professionals" who will need answers from an INFORMED client in order to give proper advice.

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True enough.  I would expect someone contemplating going into business to do a bit of research to get an idea of what they were getting themselves into.   

[espresso_warehouse]

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@dragonor999 wrote:

So I've started a reselling business this year and I'm not understanding how taxes will be when I get my eBay form. Because I'm reselling, how would I deduct the original cost of the item and only be taxed on profits? I've read some things like needing a sellers permit or doing a resale certificate and I'm just not sure if those are needed. BTW I am in California.  I also want to know about the tax exemptions like for shipping, fees, and business expenses like supplies. I'm not completely sure about those as well. Any help is appreciated.

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Keep your receipts and all costs associated with your business. Your cost basis is what you paid for the item. Your profit is taxable.

Difficult to predict your effective rate so plan for 30% but hope for 20%.

[caldreamer]

California requires that you get a business license from the city you reside in.   EBAY reports GROSS SALES (purchase price + shipping income) to IRS.

As a business owner you can deduct expenses (EBAY fees, mileage, costs of goods, etc).   Be sure to deduct for "actual costs of shipping" (because that is included in your gross sales).    

You will need to create spreadsheet for your inventory and assign inventory# to every item you list.   Inventory list should include (date you purchased item, description of item, costs of goods, date sold).

Before you get started it is important to consult with CPA so they can give you guidance as to bookkeeping involved in your business.

[luckythewinner]

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@dragonor999 wrote:

So I've started a reselling business this year and I'm not understanding how taxes will be when I get my eBay form. Because I'm reselling, how would I deduct the original cost of the item and only be taxed on profits?

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The tax form itself (Schedule C) is where you specify your deductions. The form does the math; all you do is provide the raw numbers.

So you would reports your income on the "income" line, and your cost of goods sold on the "cost of goods" sold line, your office expenses  on the "office expense" line, your eBay fees on of the "fees & commissions" line, etc.