posted on December 8, 2000 08:50:07 AM
Maybe this is too personal a question, but I'm struggling with it. I started selling on ebay in 2000, starting with personal belongings. I branched out to buy things at book sales, yard sales, etc, for re-sale on ebay, half.com, etc.
In "real life" I have another friend doing the same thing, but neither of us have a business license, tax ID number, or stuff of that sort. I don't think she even keeps records for income tax, though I have been doing that.
My "business" amounts to the hundreds in a month.
Did the rest of you scrounge & sell folks wake up one morning and say "hey, I'm a business!" and run out to get your tax ID number, home occupancy permit, and business license?
So far the people I've tried to consult locally have either not returned my calls or have said "what's ebay?" so you can tell that I'm having some trouble getting informed advice.
posted on December 8, 2000 09:22:41 AM
keziak: this stuff *is* confusing....luckily I went through it a long time ago with my flea market business so it's at least somewhat familiar. I am not required to have a business license where I live, but of course I am required to have a tax resale number and I will be sending in my sales tax for all items sold to buyers in the state of California as required by law. Luckily, I sell few items here, so I won't have to eat too much tax. I don't charge the CA customers tax even though I do pay it for them.
posted on December 8, 2000 09:34:50 AM
If your selling on a casual non-regular basis, you might not have to file for a Federal Tax ID and License. I recomemend that you seek the opinion of an accountant in your area who is familiar with the specific rulings that apply to your activity.
Once I decided to go into the business of internet auction selling and e-commerce, I followed the proper procedures and hired an attorney and accountant to get me properly set up. They secured my company name and filed all the Federal and State forms that were required.
The accountant remains a hired hand who handles all of my quarterly reporting and keeps track of all of my accounting, tax information, liabilities and filings. It's amazing how much red tape and work is involved. So much,in fact, that I can't imagine the average person having the knowledge and discipline to adhere to both the Federal and State requirements. They're always some sort of tax or payment that is due. State Business License payments, State Filing payments, State Tax, Federal Quarterly estimated tax payments, State Quarterly Estimated tax payments, Unemployment Tax etc. It's very discouraging to see how much you actually have to pay in taxes. I play it strictly by the book and it hurts to do so, but at least I go to sleep at night knowing that I'm doing the right thing and don't have to worry about the IRS.
There are also liability issues involved in setting up a company. If you set yourself up as a sub-s or C corporation, the amount of personal liability you face for the company varies. Some does the tax rate. Once again, you need the advise of a professional to figure it all out.
The purpose of this note is to let you know that this issue is complicated and more involved than you would ever imagine. If you are able to overcome the above obstacles and play by the rules, your most likley organized and responsible enough to build a successful business.
Makes you think twice about listing your Furby, doesn't it?
posted on December 8, 2000 09:36:53 AM
In a nutshell:
You basically have at least two or three taxing agencies to consider. Let's look at them one by one.
FEDERAL:
Unless you plan on incorporating or operating as a partnership, you don't automatically have to apply for a tax ID number, you just use your Social Security Number. Here's an IRS link with more information:
If you don't incorporate, you are considered a sole proprietor and you file Schedule C with your normal 1040 by April 15. Keep track of expenses and income carefully.
STATE/LOCAL:
The other major thing you need to take care of is sales tax. Unfortunately, every state has different rules and requirements. You should see if your state has a website and look for a link for businesses. I'm in Ohio and their web site had a wealth of useful information.
This is just a start, but I hope the information is helpful.
posted on December 8, 2000 09:43:54 AM
I Live in Nevada and I am a fully licensed retailer. I have my tax permit, fictious name permit, business bank account and of course a business license. Of course I do a lot more than just selling on Ebay. It depends on what you are selling whether it is worth getting a license or not. I sell new merchandise and it helps being licensed.
posted on December 8, 2000 09:43:59 AM
I am now a full time online seller, but was in (small business) accounting for the last few years. I'm familiar with the issues surrounding business licenses, sales tax id's, and income tax ramifications of selling online. Here's my take on it:
If you buy items as a consumer, possess them, then sell them, this is known as a person to person sale. If you do not sell on a regular basis, and selling is not your primary source of income, then you do not need a business license, nor a sales tax ID. (You can put your profits and losses for each sale on schedule D of your income tax return, but each sale must be on a separate line!)
A example of person to person selling is having a garage sale or yard sale maybe once a year. Another example is selling your car. You don't have to collect sales tax on the sale, the buyer pays the sales tax directly to the state.
If you transact business on a regular basis, you probably are required to get a business license and a sales tax ID. This would apply even if you set up a table at the local flea market once a month. However, if you have a full time job, and selling is your hobby, a grey area develops. According to the IRS, if you show a profit in your hobby for 3 of 5 years, you are considered in business for profit.
Remember, as a hobby, you cannot deduct any of your expenses or your losses.
If you think you need a business license, check with both the city and the county. sometimes you are required to get licenses for both.
I have seen online sellers (in their TOS) refuse to sell items within their home state to circumvent the sales tax issue.
Some other things to consider-
If you work out of your home, you may be required to get a home business license, which may even require an inspection of your home.
If you do business as yourself, as sole proprietor with no DBA certificate, you may not need a business license. This is more the exception than the rule.
A litmus test for the IRS when considering your online venture - do you have separate bank accounts for your personal funds and/or your online selling funds? If yes, you are probably a business. If no, you are probably a hobby.
posted on December 8, 2000 09:55:33 AM
thank you, all. I appreciate your taking the time to share your perspective! I feel that at this point I am grappling with the question: "am I a business?" Sort of like when PayPal decided every seller is by definition a business and needs their business account.
My city tax office appears to take the position that the minute I buy something with intent to sell it, I am a business. That's what made me curious about all the folks here who talk about buying at thrift shops to sell on ebay. How many of us *really* think of that as a "business"? And in a sense, what does it matter what we think, if the Powers that Be think differently.
In a way, I DO think of myself as a business in that I strive to be professional and reliable to the business I...do business with. So maybe I'm ready to legitimize it. I would still like to hear from others in this situation. Those of you who have your own retail stores, flea market booths, etc, still strike me as being in a different league!
