EBay, PayPal and Taxes?

[Guest stovepipe]

I've been doing a little spring cleaning and I'm trying to get a grip on setting up EBay and PayPay accounts... In going over the details I see sales tax collection mentioned here a there as part of PayPals services. - Are individuals really required to pay sales tax (or income tax) on things they sell on EBay, or is that only for merchants, and people selling subscriptions and taking donations? I'm already taking a loss on the items I'm selling. By the time I pay the EBay and PP fee's there wont be much left for me if I need to cut out an additional 10% for (TN) state and local taxes.

Thanks!

(FWW: I don't think the items I want to sell would be of interest on my local Crag's list site)

[Guest Broomhead]

AFAIK, You are a private citizen selling to other private citizens, therefore you do not need to collect/pay sales tax. Companies that sell on Ebay do need to collect sales tax from consumers in their own state only.

To ease the Paypal fees, simply state in your listing, if possible, that Paypal users will need to pay an additional ~3.5%. I have done that on most of my transactions where I have sold things and see it a lot on GunBroker. Not sure if Ebay allows that or not though.

BTW, What ya selling?

[Oh Shoot]

AFAIK, You are a private citizen selling to other private citizens, therefore you do not need to collect/pay sales tax. ..

First, if you are merely selling off personal items you already own, don't worry about claiming the income, unless you made some ginormous profit on something, which I'm sure you won't.

However the "private citizen" definition has no meaning - if you were buying products for resale, you owe income tax on any profit, whether you have a biz license or not. Also, in that case you are also are required to collect TN sales tax on any sale where possession is taken in TN only. Interstate sales are still, so far, exempt.

eBay does NOT allow you to charge a fee for USING PayPal.

Indeed eBay and/or PayPal will nuke your account for doing so.

It does little good to have eBay selling account without PayPal, since that's one of the few allowable ways to pay for anything there now. (no more checks/money order).

AND, BroomHead, if anyone complains on your for doing that on GunBroker, PayPal will nuke your account also, maybe after a warning, maybe first time.

- OS

Edited April 9, 2010 by OhShoot

[Guest mosinon]

yeah, of course you are. It is taxes after all. You pay taxes on income, not on "I was selling it to another guy" deal.

Remember that you only have to pay taxes on the profit. So if you buy something for 50 bucks and sell it for 30, no tax.

[Guest ScottD]

To ease the Paypal fees, simply state in your listing, if possible, that Paypal users will need to pay an additional ~3.5%.

FWIW, this is a violation of paypals TOS. A good way of doing it, is having the person send the money as a gift. Then no one takes a hit and it's legit.

[Oh Shoot]

FWIW, this is a violation of paypals TOS. A good way of doing it, is having the person send the money as a gift. Then no one takes a hit and it's legit.

Prob is, you can't do that with automated checkout after auction.

Takes personal communication back and forth.

And of course, if that comm goes through eBay, well....there's a record of it.

- OS

[Guest 1817ak47]

FWIW, this is a violation of paypals TOS. A good way of doing it, is having the person send the money as a gift. Then no one takes a hit and it's legit.

found that out recently, but it might be difficult to get strangers on ebay to go gift method, no one here ther is another story. never heard of individuals charging sales tax that I recall. and my paypal and ebay account date back to 2000. in the past some would charge a 3% for using payenemy, but I didn't know that is now against communist policy. any idea when that changed??

if they send it as gift paypal won't send you there address, found that out also

[Oh Shoot]

...in the past some would charge a 3% for using payenemy, but I didn't know that is now against communist policy. any idea when that changed??...

Has always been PayPal policy since eBay first bought it and ended their own payment program, which was called BillPoint.

A merchant can't charge a surcharge for using a credit card either, is against policy of Visa, MC, AmEx, etc. Can offer a discount cash price, though. But of course, can't choose cash/check as payment option on eBay anymore. Only way to really get away with it would be in the rare occasions buyer shows in person.

- OS

[ftncityfatboy]

there is a place when you sell your item to include a handling fee. This will automatically be added to the shipping charges. You most likely will know what price the item will sell for so go ahead and include a # for just that. I always, regardless of item, charge a $2 s/h fee. Its for the box, tape, peanut bubble, etc.......As for the tax, eBay is like a giant garage sale. If you were to sell those items in your front yard, would you charge tax on them. Unless you have purchased these items yourself without paying sales tax on them, then you would not be required to collect sales tax.

[Mark@Sea]

I've heard that as of 2010, ebay/paypal will report all transactions to IRS. Don't know if that is fact, as I don't sell on ebay.

[monkeylizard]

If buyer and seller are within the same state, the seller is supposed to collect sales tax and pass it on to the state. Merchant vs. individual is not a factor. Garage sales count too.

If the sale is across state lines and the seller has no presence in the buyer's state, the seller has no duty to collect sales tax, but the buyer is supposed to report the purchase to their state and pay sales tax.

Nobody would try to collect sales tax at a yard sale and nobody would fill out a form with the state to pay the $14.83 in sales tax they technically owe for the iPod they bought from Amazon. States that rely on a sales tax are quite aware of how much is being lost to these types of dealings. That's what the eBay tax thing is about. Trying to get those taxes collected that are actually owed, but are currently going unpaid.

The second tax being mentioned by mosinon is either a capital gains tax or an income tax, depending on the nature of the sale and what the sold item is. This tax has nothing to do with sales tax or with eBay or others offering to collect taxes during the transaction. The sales tax is based on the full amount of the sale, not on the sellers profit/loss. The sales tax should be handled as stated above, but the seller may owe additional taxes on the gain/profit. If the item is sold at a loss, sales tax still applies, but the lost value can be claimed as a deduction by the seller.

Edited April 9, 2010 by monkeylizard
Edit fer spellin n gramer

[brooksjr]

When I sell on Ebay I always add just enough to my shipping charges to cover materials and fees.

[Oh Shoot]

I've heard that as of 2010, ebay/paypal will report all transactions to IRS. Don't know if that is fact, as I don't sell on ebay.

Yeah, it's actually a reporting rule that was buried in some housing bill passed a while back. Something about 10 grand and/or 200 transactions all credit card processors must send 1099 to gummit. Mandatory compliance by 2011, so they may already be doing it, dunno.

It's said that eBay/PayPal already provided the IRS with their API so that they can do spot check investigations at will, rather than do a court order for each individual investigation, but I can't find documentation on this. I know that eBay will give out information to gummit investigations upon request without their having to get a court order, though, I've read that somewhere in their TOS.

- OS

[Dolomite_supafly]

I ,as a frequent user of Paypal, will not pay for something using teh gift method. Mostly because you lose the Paypal insurance that comes wiht the transaction. I have used Paypal to resolve disputes in the past and had I gifted the money I wouldn't have been able to fight it.

Dolomite

[Guest 1817ak47]

When I sell on Ebay I always add just enough to my shipping charges to cover materials and fees.

Ido that too, cause ebay doesn't charge a commision fee from what is charged for shipping, just for the purchase price of the item. but the paypal still charges commission for both purchase and shipping though. I have had people complain about shippings costs, I have to sources the boxes, tape packaging materials, and gas and mileage to drop it off.

[SavageSig]

I won't use Paypal or eBay ever again. Their policies are completely unfair and their cut keeps growing larger and larger while their services remain static or are in decline. I think eBay is charging 18% of final value now? And to top it off, the last time I sold on eBay and accepted Paypal, Paypal HELD my money until the guy I sold to confirmed that he was satisfied. That's just begging for abuse by the buyer, especially since the seller can no longer leave feedback for buyers.

I blame it all on that Meg person. The one trying to break into politics because she managed to turn eBay into fee hell.

[Guest bkelm18]

I won't use Paypal or eBay ever again. Their policies are completely unfair and their cut keeps growing larger and larger while their services remain static or are in decline. I think eBay is charging 18% of final value now? And to top it off, the last time I sold on eBay and accepted Paypal, Paypal HELD my money until the guy I sold to confirmed that he was satisfied. That's just begging for abuse by the buyer, especially since the seller can no longer leave feedback for buyers.

I blame it all on that Meg person. The one trying to break into politics because she managed to turn eBay into fee hell.

They hold your money for certain items under certain circumstances until either the person posts positive feedback, 4 days have passed since the item was delivered (need a tracking number for that one), or I believe 30 days since the end of the auction in the event of no tracking number.

[Oh Shoot]

.. I think eBay is charging 18% of final value now? ..

Flat 9% for auction, $50 max.

Fixed price, 8-15% for first $50 depending on item, less after that....

Insertion fees are next to nothing, on the bright side.

Anyway, still the only real game in town for many items. If you can sell stuff for the same or better price using another service, good for you. Has always been thus.

- OS