Shipping Counted As Income

[dolphintale154]

Hi, I was just wondering how Ebay can count shipping as income on 1099 when it is not income?

[lamber9347]

It is income when it comes into your account. It is up to you to account for it as a cost when you do your taxes.... 

[stainlessenginecovers]

Income is, and has always been, the 'gross' amount that you collected (were paid). You did NOT collect Sales Tax (nor were you paid that amount) so that is NOT included in the gross.

You can easily charge $20 for shipping even though you ship it for $12, so that is why it is in the gross. 

[dolphintale154]

Okay thanks, that never occurred to me since I always charge the exact shipping costs

[stainlessenginecovers]

The 'gross' is also just that; and then you 'write off' the cost of shipping, shipping materials, cost of the item and the fees paid to others (ebay for example). 

[slpentico]

It is income since eBay pays you the shipping paid by the buyer and you purchase the shipping. Or in the case of free shipping you pay for it. This is not a big deal if you have someone prepare your taxes. Just print your full monthly statements so your tax person can deduct fees, shipping and other business expenses from your taxable income. 

[melcurra1]

I personally don't think the way eBay treats shipping as income is fair to sellers who are just selling to declutter their homes. I don't have a business for eBay sales, so I am not able to deduct the cost of shipping on my taxes. I work a regular job and just sell misc. stuff on eBay. I sell items for much less than I paid for them just to 'give them a new home'. I don't mind paying taxes on the actual sale price, but I am having to leave eBay as a seller because I refuse to pay taxes on shipping. I sold $320 worth of items and recently received the 1099-K notice from eBay saying it went over the $600 mark (due to shipping).  I guess it turns out that eBay is not for me (anymore)! Member since: Nov-23-01

Tip to eBay staff if you read this. Maybe come up with a 'casual seller' option where the buyer purchases the shipping directly and then the seller prints the label to ship it.

[slotcarwill]

Having the buyer purchase the label runs into the issue of box dimensions, weight, etc

[rustydalmatian]

On last years schedule 1,  Part 1, line i..."Activity not engaged in for profit income".  This is where you report the 1099 you receive from eBay.

Part 2, line z..."Other adjustments".  I write "Personal items.  See attached"

Attach a letter (don't forget to include your name and SS#)  explaining what type of items you sold.  It doesn't have to be specific, but should give the IRS basic info as to why you don't owe taxes on your sales. 

It's not difficult and you won't be bothered by the IRS, as you have already provided them with the reason you feel your sales are not taxable.  They have bigger fish to fry.

[fab_finds4u]

It is not eBay not being fair. eBay is required by law to report your gross sales. 

[mr_lincoln]

@dolphintale154 

In a one year period if Buyers pay you a total of $ 10,000 in shipping through eBay BUT with shipping discounts you only pay $ 7,000 out of pocket to ship everything that leaves $ 3,000 of potential taxable income ... you deduct your out of pocket shipping expense against what Buyers pay you ...

[dryophelia]

@melcurra1 

You can claim the shipping as an expense at the end of the year. 

If you list with any online marketplace facilitator, you are a business, as defined by the IRS.

Businesses have expenses. Most/many of these expenses can be claimed back at the end of the year. 
If you have an office or workspace, at your residence, dedicated solely to your business, you can claim certain expenses. Pens, paper, labels, ink, tape, gas to the post office (mileage), packaging materials, ... anything you need to run your business. Even a portion of your rent/mortgage, utilities, insurance, internet, phone service... 

[melcurra1]

Thanks @dryophelia I will treat my 2022 sales as 'occasional garage or yard sale' treatment as noted in this turbotax article. 

https://turbotax.intuit.com/tax-tips/self-employment-taxes/a-tax-filing-factsheet-for-ebay-sellers/L...

[melcurra1]

Thanks for the tip @rustydalmatian! I will take this approach on my 2022 taxes since my sales should be like the 'occasional garage or yard sale' treatment noted on turbotax.
https://turbotax.intuit.com/tax-tips/self-employment-taxes/a-tax-filing-factsheet-for-ebay-sellers/L...

FYI to others. The shipping cost I charged to buyers was exactly what it cost to ship the item. I did not pad the shipping cost or add any 'handing' fees. All of the items I sold were at a loss to the original price I had paid for the item(s).

[holditwfo]

Then ebay needs to separate that from our sales and handle it themselves so we never see that money in our account we sell items not shipping this is a huge problem