Details emerge on IRS plans to tax eBay auctions

[jayfish]

Source: Ars Technica

Changes are contained in the President's 2008 budget proposal. Instead of targeting only Internet auction sites, the current proposal actually expands the definition of a "broker" to include middlemen that don't actually function as the customer's agent in a transaction—like eBay, for instance. Brokers currently need to file a form with the IRS that gives the name, address, and gross proceeds of each customer they work for; under the new proposal, many more companies would need to do the reporting.

The Treasury Department wants the change because, as the budget request notes, "compliance increases significantly for amounts that a third party reports to the IRS." But this isn't a change that will apply to all eBay sellers; in fact, most will be exempt from the new reporting requirements.

Internet auction sites will only be required to report customer revenue information if the customer does more than 100 separate transactions in a fiscal year and generates more than $5,000 in gross proceeds. In a report from the Information Reporting Program Advisory Committee (part of the IRS), the new proposal is supported by a 2005 study showing that over 700,000 Americans have a primary or secondary source of income through eBay. Essentially, these people are running small businesses, but IRS research on small business tax returns shows that "non-farm sole proprietors under-report 57 percent of business income on Schedule C" (if you're a non-American who has never experienced the wonders of "Schedule C," count yourself lucky).

Read more: http://arstechnica.com/news.ars/post/20070515-details-emerge-on-irs-plans-to-tax-ebay-auctions.html

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Hey, I thought Republican Administrations were all about cutting people taxes. Oh yeah. I remember know. That's only for the top 1%.

Jay

[OlderButWiser]

1. Why would you be against...

...the IRS going after these guys making a living on Ebay?

[Demit]

3. Because $5001 income per year isn't exactly "making a living"?

[OlderButWiser]

6. If I make less than

five thousand on a rental property do you feel I shouldn't declare that?

[Demit]

12. If you are 'making a living' on $5K a year, mazel tov.

Teach the rest of us how you do it, why don't you.

[OlderButWiser]

17. You're beating around the bush

if five grand was all I made in a year I wouldn't pay taxes in any case. The rental income like the ebay income is more than likely extra income on top of other wages. Should the IRS enforce this or not?

[Demit]

20. No, you changed your argument. Your first statement implied that $5K was a living.

You said that "these guys" on ebay were making a living, and the IRS should go after them. The proposal would have the IRS "go after" anyone making over $5K gross on ebay. All my post said was that $5K is not a living. That's not beating around any bushes. That's a straightforward statement.

[OlderButWiser]

22. I see how we were

misunderstanding each other. Sorry.

[napi21]

2. I've been selling on Ebay for 5 years, and have always reported

the income & EXPENSES to the IRS. When I started selling, there were millions already doing that, and I expected the IRS to get around to demanding THEIR CUT much sooner than they have. The last thing I wanted was for the IRS to tell me how much $$ THEY thought I made and force ME to prove them wrong! They ALWAYS over-estimate and it's a real bit*h to prove them wrong.

It's really no big deal to report if you use one of the tax software programs, and after deducting all expenses, I've never owed any taxes. If I HAD owe taxes on additional income, that means I've actually grown this little business and I'd gladly pay what I owe.

The only gripe I have about this whole thing is that companies like Ebay are going to raise their rates AGAIN because of the additional work required on their part!

[Bitwit1234]

4. The thing I find upsetting tho about this

is...with all the fraud...with all the manipulations the rich and famous and big corportations do, why does the IRS continue to target the "little guy"? Why not go after the people that they can really get a windfall from.

[jayfish]

5. My Thoughts As Well.

It's the hypocrisy of the whole thing.

Jay

[w4rma]

7. The little guy is competing against the big guys. The GOP leadership supports the big guys. (nt)

[CountAllVotes]

8. and what about eBay themselves?

They keep raising their fees for the sellers. Does the seller get to "write this off"? I don't know as I have sold like 3 things on eBay this year and that is it for a grand total of about $100.00 in sales maximum (BIG DEAL).

I can see going after some of these "Power Sellers" that charge $19.99 for shipping regardless of the item sold. That pisses me off because it goes in their pocket. If you happen to buy something like this on eBay many sellers tax you if you buy within in your state already and this INCLUDES the shipping fees! :grr:

How can they sort this out I ask? They cannot. And what about returns, refunds and transactions that don't go through?

Did they even think or consider of all of the above? I think NOT.

Frankly, the past few things I've bought of eBay have been not great transactions (greed, greed, greed). This B.S. "economy" we are seeing is total B.S. IMO.

:kick:

[jilln]

9. Out of the $100 you sold...

how much did eBay take? I'm curious and have never sold anything on eBay because it just seemed too complicated. I use craigslist, which is of course free but you're at the mercy of lots of flakes who don't show up to buy the item and you have to relist it.

[CountAllVotes]

10. Probably about $10.00

I guess. Since fees have gone up I no longer sell anything on there. :shrug:

Paypal takes their cut, eBay gets their cut and you get what is left if the buyer pays you that is ... :mad:

:kick:

[grasswire]

13. I sure do miss the old eBay

And I wonder why someone hasn't started up another similar venture that replicates the old model but would keep away from the power sellers and the new cheap goods that have destroyed the whole thing.

I'm sure there's a market for the old-style eBay venture. I can't even buy a CD now with the certainty that it isn't a rogue pirate.

[jayfish]

14. eBay Probably Holds A Patent On Something Like...

online auction methodology. ...and that's only half-joking.

Jay

[Missy M]

11. Yes, the seller gets to deduct the fees and the cost of goods sold..

as in any business.

[dmallind]

15. Remember one thing

Shipping fees are not included in Ebay's increasingly Shylock-like fee structure, so a lot of people selling products deliberately decrease the price of the product and increase the shipping fees so Ebay gets less of a cut. I do this myself actually as a fountain pen collector/seller. I will normally put $25 shipping on anything but instead of a Buy it Now of $200 I'll make it $180. In auction procing people who know what they are doing will take the shipping fees into account and bid accordingly. I've seen it happen many times - I'll list a pen with $5 shipping and the same with $25 shipping, and the final bids will be about $20 apart. The difference being the overall costs (and therefore prices) can be lower with high shipping charges reducing fees.

Now if you see someone selling the same item at the same price with $5 shipping instead of $25 I assume you can work out who to buy from.. But if the same item is $20 more expensive in the first case what difference does it make?

[CountAllVotes]

18. I avoid sellers like you

with good reason too, often if you need to return the item because something is wrong, etc. you don't get the shipping fees back. I would also have to pay SALES Tax on your shipping fees if you happen to live in the same state as I do too via PayPal. Why should I pay $25.00 to have a damn pen shipped to me and be taxed on this shipping fee which is bogus?

Fess up and pay the fees or get out of eBay is what I say!

Honesty IS the best policy and buyers can dispute outrageous seller's fees FYI via PayPal and eBay alike. Are you not aware of this fact?

:kick:

[dmallind]

19. Go ahead

But then you don't get to experience my return policy, which is far different from what you assume.

Your tax example is also wrong. While NE is one of the few states that applies taxes to shipping charges, they and the vast majority of other states apply it to the item too. So $200+$5 or $180+$25 have exactly the same tax burden in NE for in state buyers, but most states do NOT tax shipping charges so for out of state sales (assuming people are honest enough to report and pay use tax) the latter is better for the buyer, who need only pay use taxes on $180. I suppose it's possible there is a state somewhere that taxes shipping fees but NOT items, although I can't quite imagine it's all that likely.

[napi21]

25. I said in an above post that I have been selling on Ebay for 5 years.

I had to get a State Tax ID in Ga. (my home state) and I'm required to collect, report, and PAY the State sales tax. It's not really a big deal since I have so few Ga. sales, but I still have to fill out a tax form every month to report my sales, and what $ amount was to Georgia residents. I'm not saying every Ebay seller does that, but that's the law. That's the reason why so many people ahve been fighting against making it mandatory to collect sales taxes in every state, no matter if you have nexes (a presence) in that state or not. I can just imagin how much time and effort it would be if I had to file a tax return for EVERY state I sold into! GRRRRR!

As to returns and refunds, It's up to the seller to keep track of that and report it on their monthly return.

You're right about some sellers charging exorbitant shipping. Ebay has warned all of us not to do that. They have instituted a new rating system where buyers not only rate the seller as good, neutral, or negative, but also in several catagories, one is shipping charges. You give a thumbs up or down. It's not perfect, but it's better than it was.

[wickerwoman]

26. Because the "big guys" lawyer up

and the IRS is under-staffed and threatened with union-busting and even (god helps us all) out-sourcing.

And since they can't get a lot of sympathy, thanks to "the IRS is a big mean bully" stereotypes, they will continue to be gutted by the present administration's privatization at all costs obsession and will be unable to go after the big corporations.

Kind of a vicious circle.

[Gormy Cuss]

16. The issue isn't forcing eBay sellers to report the income. It's the added layer of complexity

in the process (and the eBay-type sites WILL charge for collecting and maintaining reporting data, no doubt about it) plus the simple truth that every seller will be asked for a Social Security Number if they don't have a business tax ID. Small sellers will face a decision: in order to sell a few trinkets a year on eBay, is it worth divulging your core ID data to yet another vendor with a big database ripe for hacking?

[Demit]

21. Really. The gov't seems intent on killing the golden goose.

Ebay has been such a boon to the US Postal Service, for example. It's created cottage industries like PayPal. It has staved off some collapse in the greater economy now that people who can't afford to buy things retail can still buy things at all. The gov't thinks it is tapping into some kind of middle/lower class store of riches. All they will succeed in doing is make people stop doing it.

Jeebus Christ on a cracker, next they'll be sending IRS agents to yard sales. Is it totalitarianism yet?

[pinniped]

23. When the POS vp said ePay was part of the workforce, I have no doubt this was their plan.

.

[dysfunctional press]

24. since it's in the 2008 budget proposal-

does that mean it won't be in effect until we pay our 2008 taxes? because that will be after the election, and they'll pin the "new" tax on the new president.

[ohio2007]

27. Who granted the IRS the power to tax? I thought congress had that power

I hope congress votes downn the new source of revenue when "the IRS" presents it as a bill
;)

/sarc