IRS wants eBay to report seller sales

If you're making a lot of dough on eBay and not reporting it to the IRS, you might want to start socking some of it away for the IRS.

"In short, the US government wants to treat eBay as a "broker" who would then be required to file notices with the government about how much money its traders have made. The US proposal calls for this reporting to take place only when people sell more than several thousand dollars worth of merchandise in a year."

Complete article here:»arstechnica.com/news.ars/post/20···919.html

The slimy thugs are everywhere. Next it will be a sales tax. And it won't stop there.

Ebay is old old news.

IRS has slow crawling spiders searching the web for situations that 'likely involve' unreported cash.

http://www.wired.com/news/technology/security/0,72564-0.html?tw=wn_index_14

"A five-nation tax enforcement cartel has been quietly cracking down on suspected internet tax cheats, using a sophisticated web crawling program to monitor transactions on auction sites, and track operators of online shops, poker and porn sites."

"Whereas a spider like the Googlebot might hit thousands of websites in a second, "With Xenon it may take minutes, hours or even days to do a slow search."

"The slow search prevents the crawler from creating excessive traffic on a website, or drawing attention in the sites' server logs. Den Uyl declined to say what user-agent the Xenon software reports itself as, but it's likely to be variable or configurable on the tax investigator's part."

(Moderator note: Hotlinked pic removed.)

Consider that a lot of the sales on eBay, even from sellers who move several thousand dollars or more annually, are items cleaned out from attics and closets being sold for less than what was paid for them. This is technically a loss and no taxes whatsoever are owed. I'm sure most of what is sold on eBay fits this category so the government will be dealing with a lot of paperwork only to find it's not really entitled to much extra taxes. In fact, my guess is that the losses of many sellers will be used to offset their other taxable income to the point that the government will lose more money than it might gain from those few sellers who actually make profit.

Enough already! The income tax was a bad idea to start with. It was the one thing that allowed big government to flourish. In the world of online transactions it's becoming ever more difficult to enforce. Eliminate it already, perhaps replace it with a national sales tax of perhaps 5% which will replace all income taxes (federal, state, local) as well as all state and local sales taxes. One tax, everybody pays, eBay and other online merchants can easily collect it and remit it.

My guess is if this passes former eBay sellers will just start posting their wares on BST forums.

I'm not sure why this sounds new, eBay has been cooperative with Federal, State, and Municipal tax agencies for years now and has regularly provided that information for income tax, collection of sales taxes where applicable, and insuring that businesses operating on eBay have the appropriate local licenses necessary to operate a business, and the collection of local business taxes. Perhaps it is the multi-national effort that is new?

Unfortunately, the disclosure of such income may impact the eligibility of those who may also be receiving payments from government assistance programs like unemployment insurance payments or TANF.

That would just expand the places where the tax collectors will look to locate scofflaws.

jtr1962 said:

My guess is if this passes former eBay sellers will just start posting their wares on BST forums.

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Brighteyez said:

That would just expand the places where the tax collectors will look to locate scofflaws.

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At some point though it will reach a point of diminishing returns where it will cost more to pay the tax collector than they will get in taxes collected. Like I said, the income tax is getting more and more cumbersome to implement as more people derive their income from sources other than wages. It's time to just replace it with one and only one national sales tax which supercedes all other income and sales taxes on all levels.

One thing I find onerous about this is what happens if a person sells old goods for less than they paid but lacks the receipts to prove it because they bought the items many years ago? They'll pay tax on the whole sales price of the item when in fact they really have a loss. And if they do have receipts to prove it's a loss, then they can use the business loss to offset other income such as wages. The IRS loses then. I think because of this, and the cost of tax collection here, the IRS might do well to leave well enough alone. Probably the majority of the sellers making substantial income (>$100,000 annually) on eBay are already reporting some or all of it since it's difficult to hide that kind of money without eventually getting caught. The petty players who are making a few thousand aren't exactly going to enrich the Treasury by paying any taxes they may technically owe, and they could potentially end up costing the IRS many times what they owe in taxes by going to tax court. Maybe a compromise might be to have eBay only report annual sales in excess of $100,000. That lets the IRS focus on the big fish from whom they'll get the most taxes.

Section 62 of the IRS code defines income as coming from "whatever source derived". So any income, from any source, including ebay or illegal conduct, is taxable.

Now, I don't care for it. I despise the IRS. They operate under a "guilty until proven innocent" framework. I would participate in a bloody revolution.

But until then, or until we elect some real conservatives to Congress, it is what it is.

cheers

Realistically, those aren't the people that they're going after, but rather those who are in fact running a business and are in fact evading income taxes. A few years ago, my wife sold off a bunch of collectables at a loss, that she didn't have receipts for. It still resulted in a significant (5 figure) deduction for a couple of years even for those items that were just sold below "market" value. Yes, eBay reported it to the city, the city inquired about a need for a business license, and said that one wasn't necessary given the circumstances. Ridiculous as it may seem to the naysayers, the IRS does not assume that you received the goods at no cost, and are realizing 100% gain on the goods, though there may be some question if the price of acquisition was extraordinarily high.

jtr1962 said:

One thing I find onerous about this is what happens if a person sells old goods for less than they paid but lacks the receipts to prove it because they bought the items many years ago? They'll pay tax on the whole sales price of the item when in fact they really have a loss.

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Yeah, I get a kick out of those who think that it was right for the government to put Al Capone in jail for tax evasion, but they themselves should be exempt.

powernoodle said:

Section 62 of the IRS code defines income as coming from "whatever source derived". So any income, from any source, including ebay or illegal conduct, is taxable.

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This text from the article doesn't make eBay sound very cooperative.

"eBay is resisting calls for it to file any documents, saying that it does not fit the definition of a broker, and that to selectively target it puts the company at a competitive disadvantage. eBay apparently believes that sellers would go elsewhere if they knew that the government would learn how much they made in a given year."

Brighteyez said:

I'm not sure why this sounds new, eBay has been cooperative with Federal, State, and Municipal tax agencies for years now and has regularly provided that information for income tax, collection of sales taxes where applicable, and insuring that businesses operating on eBay have the appropriate local licenses necessary to operate a business, and the collection of local business taxes.

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That's nice, but I don't always believe everything that is written on web sites. Especially if real first-hand experience differs from it.

Lightmeup said:

This text from the article doesn't make eBay sound very cooperative.

"eBay is resisting calls for it to file any documents, saying that it does not fit the definition of a broker, and that to selectively target it puts the company at a competitive disadvantage. eBay apparently believes that sellers would go elsewhere if they knew that the government would learn how much they made in a given year."

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powernoodle said:

Section 62 of the IRS code defines income as coming from "whatever source derived". So any income, from any source, including ebay or illegal conduct, is taxable.

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Yup, that's how our tax advisor explained it. They actually had quite a laugh when they heard I'm into lights...

...and, yes, definitely check with your city and state administrations; some require you obtain a "reseller permit" and/or obtain a "dealer certificate" (each jurisdiction calls it differently) if you do business on-line.