While awaiting (hopefully) probater's elaboration, I think its reasonably clear that if you have a business/habit of "finding" items and then reselling them, then it is income, since they really aren't "personal property" (items acquired originally for personal use). The truly "once in a lifetime" "I found something valuable on the beach" is an interesting case (but won't really apply, sad to say, to most of us...).
Fortunately, for 99.9% of people on ebay, the practical rules for income tax, per probator, are clear: if you are selling off your no-longer-needed personal household items, no tax, no matter how much you sell off. Keep records to substantiate the fact that you sold household items.
If you buy items for resale, then tax will be due (assuming you make a profit of course). Keep records to substantiate not only what you sold, but how much it cost to acquire, and how much other selling expenses you had. The fact that you sold on ebay is not a factor - a business is a business.
Social security would apply in the latter case as well, although their may be a minimum amount ($400/year or quarter) that may apply.
posted on October 10, 2000 11:30:52 AM new
So I guess I have to keep my heart pure when I shop the estate sales: I really am buying this to keep, reallyreallyREALLY, and then keep it, but then realize I can't, and then - sigh. Have to sell it?
Sorry. Couldn't help it, ck; I know you're kindly giving a reasonable answer to my facetious question
I think the irs rule is that you have to carry it with you for at least two weeks to become "personal property", or one week if directly touching the skin, or if your body odor can be detected on the item in question within 10 feet by a blindfolded IRS agent (as measured downwind).
[ edited by captainkirk on Oct 10, 2000 11:48 AM ]
posted on October 10, 2000 01:12:58 PM new
Guess the best idea, then, is to tape the item to my naked torso like a bomb, and eschew deodorant while wearing said item around to maximize the BO molecules attaching themselves to it.
How about if I pencil "Property of HCQ" on the item? Or will the IRS accept, say, lab results showing my DNA has transferred to the item? Nah, probably not. Doesn't show how long I've been carrying the item around, does it. Sigh.
posted on October 10, 2000 08:46:52 PM new
Pre-sales are proliferating on eBay, especially in the beanie baby and trading card sites. Does anyone know how the IRS treats the monies buyers pay in advance to the presellers who often do not deliver items for three or four months, and advertise that fact in descriptions? Some of the presellers have hundreds and often thousands of dollars at their disposal. These are like interest-free loans and if the seller were to invest the monies would show a profit. Just wondering. I don't sell items I don't own and have on hand.
posted on October 10, 2000 09:29:30 PM new
It ain't that tricky, unless you're doing something unusual.
Generally, if you sell something for more than you paid for it, that's a taxable event, and your profit is taxable.
If you sell something for less than you paid for it, that's not a taxable event. The vast majority of garage sale sales are thus non-taxable.
Exceptions are rare, and include such things as depreciated real estate, and investment losses which have their own special treatment. Businesses can "write off" loss sales by (simplistically) reporting profit as the total of sales income minus cost of merchandise, but this does not offer any legal way to sell your old car for $100 and write off the "loss".
In most sales tax states, all retail sales are taxable with respect to sales taxes, very much including garage sale sales.
Collecting is a different story, but the laws are pretty clear.
posted on October 10, 2000 10:10:09 PM new
Consult a tax person to find out about your specific case, however, a person who is selling excess "stuff" must pay capital gains on all money collected, as only businesses can deduct expenses.
The IRS officially states that you must report every dollar earned. Now if they are going to make a big deal about it is another issue entirely.
posted on October 11, 2000 06:15:18 AM newtaisha1"Pre-sales are Proliferating on eBay, especially in the beanie baby and trading card sites. Does anyone know how the IRS treats the monies buyers pay in advance to the presellers who often do not deliver items for three or four months, and advertise that fact in descriptions? "
First, it is obvious that these people are buying for resale, so they have to report the presale dollars on their taxes and offset them with the cost of the merchandise. This would be on their schedule C for an individual, or their corporate taxes if they are incorporated as a business.
As for the interest earned on these dollars until the items are available, if they invest the dollars in something that earns money, they must declare that as interest earned on their taxes as well.
posted on October 11, 2000 06:53:30 AM new
To shed some general light on the "presale" tax issue, companies generally are on either a "cash" or "accrual" accounting basis.
Cash companies basically report profits as "cash in minus cash out". In this case, if they receive the check in the current year, but don't pay their supplier until next year, they pay taxes on the whole check amount (but get a big deduction next year when they write off the whole supplier cost amount).
Alternatively, accrual companies keep track of sales, and "match up" income and expenses, such that they wouldn't report the income from the sale until the expenses had come in, and vice versa.
Note that this is a very high level overview of this topic, and there are many exceptions and so forth.
Capital gains tax applies to the difference between what you paid and what you recieved.
That can be a good way for person who is mostly selling their own personal property for less than what they originally paid to deal with the exceptional "diamond" found on the beach.
Of course, then you don't get to claim expenses, which you would if you were a business.
posted on October 11, 2000 09:48:07 AM new
I was surprised to hear about "presellers" on eBay. I thought it was against eBay's policies to list items that you don't have on hand. Have they changed that?
Back to taxes. Someone said that money taken in selling "excess stuff" is income and tax needs to be paid on it. I don't think that is correct. If I take a part of my paycheck and buy some "stuff" for my house or personal use (not intended for re-sale) and then decide to sell it because I've lost interest in it, need the money, etc. I don't think I owe any taxes on what I get for it. I already paid tax out of my paycheck. I bought the "stuff" with the part of my salary the government let me keep. That is of course unless my "stuff" appreciated in value and I was able to sell it for more than I paid for it. In that case I would be liable for a capital gains tax on the amount over what I originally paid for the "stuff."
cybercat
--
What if the Hokey Pokey really is what it's all about?
posted on October 11, 2000 10:35:39 AM new
Cybercat: Presells have been on eBay for eons. Whenever the news is announced that a new issue is to be released, the auctions become loaded with presells. All you need do is click "presell" on the auctions or go to a specific new-release beanie and you will see for yourself. It boggles my mind that presells can be legal when items not owned are being sold and advance monies of buyers are in effect interest-free loans to the sellers. That is what prompted my tax question. On top of that, where are some of the big sellers obtaining hundreds, and sometimes thousands, of beanies? Not difficult to answer, wot? I bought into them in early July; my money is floating around out there somewhere, and I am still waiting. When members find items and put them up for auction that is entirely different. Il for one, believe that preselling should be abandoned. I notice that auctions on some other sites do not allow them.
posted on October 11, 2000 11:27:34 AM new
There is nothing inherently illegal about "presells", nor should there be (in my opinion, anyway), as long as the transaction is clearly described. If a buyer wants to voluntarily pay a seller for an item that they know up front isn't in their possession, so what? Its their money, let them do with it what they want. If *you* don't want to make an interest-free loan to someone, feel free to wait for the item to "really" appear and buy from someone with physical possession of same.
Conceptually, this kind of transaction happens all the time in the business world. A buyers pays a seller to deliver an item and/or a service, within the stated terms & conditions, and the item/service either is or isn't delivered. If not, the usual legal remedies are available.
Now, I can see why "person to person" auctions want to forbid/discourage this kind of activity, since it is ripe for more abuse at this level. But that's just a matter of policy for each auction, not based on legal issues per se.
posted on October 11, 2000 12:43:34 PM new
I just had to comment on presells and wasn't sure I should start another thread for it. Ebay has recently chnged their rules I was told on pre sales. The seller must guarantee shipping within 30 days or auctions end or offer the buyer a refund. This was because of all the presales that weren't ever getting delivered and the buyers not being able to leave feedback under the feedback rules or file a claim to ebay's insurance because it had been to long.
posted on October 11, 2000 02:20:50 PM new
Sweil: The problem was, as I see it, eBay didn't announce this major rule change. Obviously hundreds of auctions wouldn't have been ended by eBay had the sellers known, and how many go to the rules each time they list.
There is another part to that rule which says: "You may not list an item where you cannot ensure that the item will be available for shipping by the 30th day after th listing ends." Seems to this poster to be a very specific condition. The new 30-day rule was in effect early in September. As of a few days ago, it has been watered down to now permit sellers to say that the item "will be delivered in 30 days or your money will be refunded." When an item was listed for presell the seller appparently could not ensure that delivery would be in 30 days. So why does eBay let the "ensure" provision stand? Is saying that your money will be refunded if I can't deliver not in conflict with "You may not list where you cannot ensure . . .?" Typical of eBay, it appears it is not of a mind to clarify the wording of the rule so that all sellers will be apprised of the newest change.
To captainkirk: But it is not the presellers' money being used. They are working on the buyers' money and purchasing their auction items with the buyers' money. It is a one-sided arrangement in presellers' favor. If there were say a 10% deposit until an item is on hand for shipping, both seller and buyer would be protected. The buyer would lose only the deposit if the sale were not consummated and the preseller would have the 10% to keep and still have the item to relist.
Yes, I got caught. Several hundred dollars of mime have been out there for more than three months for beanies which have been on retailer shelves for weeks.
posted on October 11, 2000 02:35:43 PM new
taisha, ebay is notorious for sneaking rule changes in and then making them suitably vague so as to be almost useless. I still unfortunately collect beanies butluckily have always had the strength of will not to buy a presale. I think ebay made this rule now in preparation for christmas. I know of several people last year who got ripped off and majorly upset for buying hot toys on presells way before christmas.
posted on October 11, 2000 03:58:27 PM new
sweil. I think you are right and eBay's writing of vague rules is their standard operating procedure. The presell rule I don't find vague as written but certainly eBay is reading something into it that isn't shown on its face. All eBay would need do is rewrite the rule to say what it intends it to mean. That's probably asking too much of eBay.
I have noticed one thing since I got my ire up over this presell matter and that is eBay's bias in favor of high-volume sellers. While the small guys had their auctions ended for violations, most of the big guys' auctions remained standing, in toto.
TY, whether by design or accident, put the Christmas beanie issues on the retailers' shelves very soon after their announcement, thereby thwarting the prellers' dreams of big profits.
It is not the pre-sale concept per se that bothers me as much as the gnawing question of where the presellers are able to obtain hundreds and sometimes thousands of beanies when we collectors are unable to find them on shelves. With the exception of trading cards, I have not seen other categories on eBay that have presell listings in large numbers. I suppose each category has its own unique problems.
