IRS May Ask eBay To Snitch On Sellers

Makarand writes "The IRS thinks that many sellers on online auction sites are unaware of their obligation to declare their profits and pay their taxes to the IRS. Tax experts are now asking the IRS to require online auction sites like eBay, Yahoo, and Ubid to report the gross sales numbers for their sellers. Such a requirement will surely send a shock wave across the online trading world because it could drastically reduce the profits a seller would make on these sites. The IRS thinks it can collect an extra $2 billion in taxes from this requirement that auctioneers report sellers who complete 100 or transactions a year worth at least $5,000."

+ tax

[iknowcss]

Does this mean that sellers will now add a "sales tax" to what they're selling in order to compensate for this new tax? And who decides how much tax is paid? States? The National Government? (Please excuse my ignorance in American Government policies)

Is there some law?

[Frosty Piss]

I'm not upon this stuff, but is there some law that says everything has to be taxed?

Re:It's really simple.....

[Chmcginn]

The catch here is that if you're audited, they (through Ebay) will have the proof you made, say, 10000 dollars last year selling stuff on Ebay. But you have to provide the reciepts proving that you spent 8000 (or 11000, or whatever) acquiring those goods for sale.

Re:It's really simple.....

[Anonymous Coward]

Yeah, I'm a little unclear on what happens if you don't have those receipts. Sorry, Uncle Sam, I don't have the receipt for the DVD player I bought back in 2001 for $599 and just sold for $100. If you insist on assuming that my basis in the DVD player was $0 and tax me on the whole $100, you can bet I will find a way to make up for it elsewhere.

Bring it on.

Hmm

[bperkins]

When my employer tells the IRS how much I'm making it's reporting.

When eBay tells the IRS how much auctioneers are making it's snitching.

Funny how that works.

Re:+ tax

[Ucklak]

If it's going to come to State tax, you might as well do Craigslist and avoid the Ebay tax altogether.

Re:Hmm

[omeomi]

I dunno, I can see the difference...your employer is reporting on how much money *they* give to you, so it's just reporting. With eBay, they're not giving you any money, they're reporting on how much other people gave to you. So yeah, it kind of is "snitching"...although, it might be wrongly pejorative, since it's just enforcing existing tax law.

Re:Cry me a river

[NotQuiteReal]

Most things on eBay are sold below market value.

How do you figure? The purpose of an auction sale is to determine the market value of an item.

I presume the IRS is after those who sell new stuff on eBay, as a business, not the "garage sale" types selling used stuff.

I have purchased many "new" items on eBay, from sellers with very high positive ratings, so high, that I presume they are using eBay as a storefront for their business.

If I get a better price because the seller isn't paying taxes, that is not my problem.

The interesting question is what taxing authority has jurisdiction over those Hong Kong sellers who sell items to US buyers?

Cost of Goods Sold?

[marklyon]

I've sold a lot of things on eBay, but never for more than those things cost me. For instance, I use a laptop for a year or two, then sell it on eBay for less than it cost me.

If forced to account for the "income", can't I also offset it by the "expense"?

Re:Fair Tax = Screw the middle class

[The Rizz]

anyone who has actually read up on the proposed "Fair Tax" laws/reforms and has critical thinking skills knows that your above argument is bullshit.

Oh? Let's see these things that are supposed to make up this money...

You don't get rich and stay rich by simply not spending part of your money. Most rich people cycle through most of their money regularly...

How so? Most rich people dump their money into stocks. Stocks are not considered a "purchase", but are considered an investment, like putting money in the bank (but more risky). You only ever pay income taxes on stocks and other investments, not sales tax .

you know, paying employees,

Tax free.

buying and selling property,

Like houses/etc? Property taxes, not sales tax.

paying for components that go into consumer goods that they sell

Tax free.

investing in new technologies,

Mostly covered by employee wages and component purchases, above. i.e. tax free. There will be some "purchases" of new technology for internal use (thus taxable), but that's not what I think you meant.

funding start-ups that either fail or make you even richer after a few years...

Holy crap, you actually came up with something that would be taxed under "Fair Tax"!

Add to that the money saved by getting rid of unnecessary federal institutions if a "Fair Tax" is ever passed.

You mean the same savings you'd get under a flat tax plan? (Actually, more savings with flat tax, since you don't need to send out monthly "rebate checks", or totally replace the infrastructure we currently have in place for tax collection.)

I wish people would actually think this through instead of knee-jerking every time it's brought up.

I have thought it through. Unless a whole lot of stuff gets added to the "Fair Tax" that isn't currently covered by sales tax, you're still looking at a massive shortfall that will end up with raised taxes that burden the middle class more (as stated in my grandparent post).

How about you show me exactly where and how this extra money will be recovered, rather than listing a whole lot of areas that are never going to be taxed under the "Fair Tax" plan?

Ebay is already doing this

[rs79]

This happened two weeks ago to a friend of mine, Jim, who called me in outrage and explained:

He geows and collects orchids and has phytosanitary (ie, the proper) permits to import
flasks of seedlings into Canada from the US.

Now, most sellers won't/can't ship to Canada, but that's alright, we both know a guy
that lives in Buffalo, Dick, that receves these shipments then they're collected by Jim from Buffalo
and he walks them through customs with the proper forms and the flasks are imported legally and properly.

Last time he did this he got won some auctions for plants, as well as flasks of
seedlings - the plants were a gift for the guy in Buffalo for his trouble.

Last week he had a guy from the Ministry of the Environment that explained to him when he showed up
at Jim's house than Jime has a permit to import flasks but not plants and he bought some plants and
they know this because they saw it on ebay. The catch is ebay had had to have
given the MoE this Jim's contact data as there is nobody else who has it and no
other way to get it.

So apparantly ebay cooperating with the IRS might be news but ebay cooperating
with any gov official that walks in and asks for data is already happening.

(My friends simply had to show the plants in question were delivered to the US
and stayed there which was easy)

Re:+ tax

[anthony_dipierro]

If you buy a car for $20,000, and then sell it a year later for $18,000 but the blue book value is $16,000, then you've just made a $2000 capital gain which you have to pay taxes on.

Please don't listen to this guy, he's utterly wrong.