Taxes

[jieyinl_2]

I'm thinking of selling more seriously on eBay (as in selling a higher volume of products and potentially setting up a business account). What are the steps I should take?

Also, I know that I would probably have to report taxes when I sell in a higher volume. Does eBay automatically charge sales tax, or do I have to fill in the sales tax table? Will I collect the sales tax and pay it at the end of the year?

There's also the resale certificate aspect. Can some of you experienced business sellers provide me with information on how this process works? Thanks!

[the*dog*ate*my*tablecloth]

Very few Ebay sellers are paying taxes that they rightfully owe? Is there some study I haven't read yet? Everything is online. The taxman cometh and hopefully goes back all the years they can and assess fines and penalties to those who refuse to do their civic duty.

Just a heads up. The MA government started requiring 1099s for sales over $600. That 1099 is going to the federal government. Pretty soon it will be easy for them to find the tax cheaters. Once they assess interest and penalties you can bet it's going to be worth the effort.

I cannot believe there are people here on the boards repeatedly and PUBLICLY telling new sellers to break the law. SMH.

[nobody*s_perfect]

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@the*dog*ate*my*tablecloth wrote:

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 ... Just a heads up. The MA government started requiring 1099s for sales over $600. That 1099 is going to the federal government. ...

MA isn't the only state that has a low threshold for requiring PayPal to send a 1099-K to the seller (and to the IRS).

[twnpopcards]

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@faithfashionfriends wrote:
I will be honest and tell you an eye opening secret. Very few of Ebayers are paying taxes and you know what the IRS isn't coming after them. Why? You ask? It is because they know it isn't worth their time. Like me for instance. I buy more inventory than I sell. I do not make enough profit after my expenses and purchases to even pay taxes on. There ya go. So keep on trying to scare Sellers and intimidate them,but let the truth be known. That is why people sell on Ebay,especially people on disability. So look around you and you will see what I am talking about. Have a nice day. Go Sell!

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Eye opening Secret??  ROFLMAO 

There are a lot more sellers who are reporting their income than you think their are, I guarantee that.  However the IRS is starting to look at all of these sites and loves to see people bragging about not paying taxes so don't be surprised if and when you get a letter from the IRS asking you about your Ebay sales.  

As for your purchases of more inventory than you sell, once again you might want to take Accounting 101 or buy the Business Accounting for Dummies where they discuss how to calculate Cost of Goods Sold and the necessity for a year end inventory.  Also if you donate all those clothes as you state, that is separate from your business and may not even be deductible depending on your other Schedule A deductions as donations are completely separate from a business as far as and individuals taxes go.  Just because your inventory grows and you do not selll it does not mean it is an expense, it is considered an asset that is available for sale.  

I am on disability but follow the rules and file my taxes properly, both sales tax and income taxes as well as business license taxes that are due on the city or county level.  I used to love hearing the sob stories from people like yourself when they IRS does catch up and they suddenly want the tax professional to help bail them out.  Then when all is said and done and the proposed tax has been reduced and all the corrected tax returns have now been filed , they then scream at the tax professional for having the nerve to charge them more money for their services than the proposed taxes were.  Nevermind that the tax professional now had to dig out all the old information and try to put all of that information together into something that makes sense and that the IRS will believe because they do not have to accept what you decide to file after the fact as then you are being audited and have to PROVE any and all expenses you are claiming.

Also I would not be bragging anywhere about not paying your taxes because the IRS does accept tips from the public as to the identity of people such as yourself and actually rewards them with a % of all the monies they determine you should have paid in taxes.  I don't do this but I know of others who have and still do.

[myboardid]

Cheating on income tax is a really foolish - at best, stupid at worst - thing to do.  Tax fraud is punishable by prison time. 

[softersilk]

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@faithfashionfriends wrote:
I will be honest and tell you an eye opening secret. Very few of Ebayers are paying taxes and you know what the IRS isn't coming after them. Why? You ask? It is because they know it isn't worth their time. Like me for instance. I buy more inventory than I sell. I do not make enough profit after my expenses and purchases to even pay taxes on. There ya go. So keep on trying to scare Sellers and intimidate them,but let the truth be known. That is why people sell on Ebay,especially people on disability. So look around you and you will see what I am talking about. Have a nice day. Go Sell!

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It's called "cost of goods sold".  Starting inventory + inventory purchases the cost of the merch sold.  Your leftover inventory at year end is the start for the next year.

If you get audited, the IRS can figure out your little scheme quite easily.  

[7606dennis]

I would strongly advise you to consult with your accountant or other tax professional rather than rely strictly on opinions rendered on this discussion board, OP.

[librarypaced]

A few people mentioned "cost of goods sold." Let me explain a bit more.

The IRS doesn't care about the grand total of all goods you buy and sell. You can claim a loss on an item only when you dispose of that specific item. For example if you buy a $100 box of Amiibos and sell a $50 box of wallets, you can't claim a $50 loss solely on those grounds. Now, if you have a statement showing you paid $100 for those wallets last year and sell them for $50 this year, then you can claim a $50 loss this year (rather than, for instance, a $100 loss last year with a $50 profit this year).

A large retailer can elect a different type of inventory method. Suppose you start the tax year with $5000 of a certain SKU of wallets in inventory. Every quarter, when you take inventory of that SKU you can simply report a gain or loss based on the difference in inventory. With that inventory method it doesn't matter when any specific wallets were bought or sold. Some retailers even don't take exact counts of their inventory. They make predictions based on market trends then back-peddle when they get busted by the IRS. This is partly why the IRS gets on people's cases.

[reallynicestamps]

@jieyinl_2

I would probably have to report taxes when I sell

If you are buying for resale, any profit is taxable.

do I have to fill in the sales tax table?

You have to get a sales tax number in order to remit the money you accept.

And then you fill in the sales tax table.

Will I collect the sales tax and pay it at the end of the year?

It would depend on your jurisdiction, but when we were in ON, sales taxes were remitted monthly.

But we also got a small honorarium for filling in the form and delivering the cheque.

[sharonnlikely]

Since you are in CA I will ask you a question, if you don't mind.

I just moved to CA last year and decided to resume selling on ebay but hopefully on a larger scale.

I obtained my sales tax permit and just sent in the fee for my business tax certificate.

I will be registering with the IRS to pay estimated taxes and my question is this:

Do I also need to register with the franchise board to pay state taxes? 

Or do most sellers in CA just pay at tax time? I guess I'm just wondering if this is a requirement. I am terrified of fines or penalties. Thanks if you can help.