Ebay fights plan to report users to IRS
By Eoin Callan in Washington
Published: February 19 2007 17:47 | Last updated: February 19 2007 17:47
Ebay is fiercely resisting a Bush administration plan it says will force it to snitch on customers who are not paying tax on billions earned on the popular online auction site.
The Treasury estimates it could collect $2bn in unpaid tax if companies such as eBay reported American users who carry out more than 100 transactions worth at least $5,000 a year to the Internal Revenue Service.
But an eBay spokesperson said: “We do not believe it is our responsibility to serve as the go-between. We believe that it is the seller’s responsibility.” The company pointed out that many users file self-employment and business tax returns based on their eBay income.
Ebay said it would co-operate with IRS investigations into specific persons but would not voluntarily report its customers’ sales “en masse”.
The US measure, planned to come into effect on January 1, 2008, would only affect American users of eBay, but separately this week UK Revenue and Customs warned taxpayers to report income from eBay activity or face penalties.
Ebay says the measure is especially unfair because it does not apply to rivals such as Craigslist, the online classified advertisement site, whose business models do not have the auction or payment tools of eBay.
Ebay has more than 200m registered users of its auction services and estimates 4.3m rely on its website for a significant portion of their income.
The company, which has a market valuation of $47bn, has mobilised its extensive lobbying network in Washington to resist the Treasury by challenging its authority and questioning the legality of the government proposals.
Pamela Olson, a tax partner at Skadden, said: “The proposal is aimed at companies like eBay facilitating the sale of personal property for their customers.”
Representative Rick Boucher, a member of the internet caucus in Congress, said he had been in touch with eBay and would rally opposition on Capitol Hill.
Barbara Weltman, an expert on eBay sellers, said the company did little to encourage tax compliance by customers, but already collated the data the IRS was seeking.
“It is a burden but it is doable,” she said.
The company is marshalling legal arguments that it does not meet the government’s definition of a “broker” and that the millions of auctions that take place on its websites are not actually auctions.
“We do offer sellers auction-like transactions but they are not auctions,” said a spokesperson, citing technical definitions in state law that an auction has no fixed end-time.
The fate of the Treasury plan is likely to depend on the success of eBay’s lobbying and wider talks between the administration and Congress about President George W Bush’s budget proposals.
Copyright The Financial Times Limited 2007
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The Beatles - Taxman
Let me tell you how it will be
There's one for you, nineteen for me
Cos I'm the taxman, yeah, I'm the taxman
Should five per cent appear too small
Be thankful I don't take it all
Cos I'm the taxman, yeah I'm the taxman
If you drive a car, I'll tax the street
If you try to sit, I'll tax your seat
If you get too cold I'll tax the heat
If you take a walk, I'll tax your feet
Taxman!
Cos I'm the taxman, yeah I'm the taxman
Don't ask me what I want it for (Aahh Mr. Wilson)
If you don't want to pay some more (Aahh Mr. Heath)
Cos I'm the taxman, yeah, I'm the taxman
Now my advice for those who die
Declare the pennies on your eyes
Cos I'm the taxman, yeah, I'm the taxman
posted on February 25, 2007 02:52:17 PM new
The beginning of the end. I see the nails for ebay's coffin , , , Now where is that coffin. Ah yes, The coffin isn't available yet. The auction doesn't start 'til next Sunday on Ubid
posted on February 25, 2007 03:18:06 PM new
I report my earnings. With the new monthly reports its sure ALOT!!!! eaiser than it used to be. Yardsales, who cares but this is a business and needs to be treated as such.... I think
posted on February 25, 2007 04:12:34 PM new
I have reported all my eBay earnings since day one. I thought this would happen at some point. Those penalties will be hell to pay.
posted on February 25, 2007 04:42:08 PM new
There is no need to report selling personal items,IRS assumes we are selling them for less than we paid for.
Examples will be used clothes,jewelry,shoes,perfume etc.
But now if someone is sellling his collectibles and reaping good profits,then IRS wants to know.
For those of us who are buying to resell,it becomes a business so we should report our sales,returns,cost of goods sold,fees,use of car,office etc.lets see,how much of a profit do we have left??
posted on February 25, 2007 04:48:59 PM new
Good and bad...
I say good... because I already report my ebay income to the IRS. Considering that after paying taxes, I'm only getting about 75 cents on the dollar... I think it's only right that my competitors are held to the same standard.
I say bad... because if the IRS is dependent primarily upon figures reported by eBay, then that information could be drastically skewed. eBay has good records of sales that are SUPPOSED to have occurred. However, we all know the perils of Non-paying bidders. While I do go through the hassle of the Unpaid item process for most of my sales, I'll admit that some slip through the cracks. However... now, those unreported unpaid items would be reported to the IRS as income. Anyone else see possible problems there?
Another good point... this might be the final blow to eBay necessary to crack their "we're only a venue" defense. It could potentially make it more difficult for them to use that defense for other issues (fraud, copyright infringement, etc...).
Another bad point... it might give international sellers another advantage on eBay. They won't be paying taxes (depending on their own govt), won't be paying fees (depending on their country), and won't be contributing anything to our US economy. Could be bad for the IRS, eBay, AND the sellers and buyers.
Lots to consider with this article... can't say I'm confident in the solution that two of my favorite organizations will develop, especially if the majority of the plan comes from the Bush administration...
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posted on February 25, 2007 04:51:12 PM new
Some one said -
For those of us who are buying to resell,it becomes a business so we should report our sales,returns,cost of goods sold,fees,use of car,office etc.lets see,how much of a profit do we have left??
```
If buying to resell? Why do that if year after year you do not profit.
Also items bought to resell is called business. You should have a tax number -resell certificate.
If a business continually shows a lost, that still does not skirt the responsibility to file state and federal tax information.
The numbers have to be reported.
I would think if year after year one show they buy to resell, and never made a dime - it would put a red flag on their report .
Income loss or income gained by businesses has to be reported to the IRS - it is the law.
I pay taxes, keep records,all should.
My time and money is just as important to me as theirs is to them. It is only fair --- and the law.
posted on February 25, 2007 04:56:17 PM new
eauctionmgnt, you said it. Very well put. In my post above, I was trying to sarcastically give a hint to what you said. Yes, most of us do the right thing and claim our ebay sales on our taxes but I believe smaller sellers may not be so inclined to since their profit margin is so slim in some cases. I know, I know, before anyone gives me a hard time I must add that you can add these costs into your business plan etc etc. and if they aren't making money on ebay, they should quit. I just believe this is alteast going to give the corporations another edge against the small mom and pop operations that are just getting started. I know it shouldn't but I am sure it will.
posted on February 25, 2007 05:00:20 PM newIf a business continually shows a lost, that still does not skirt the responsibility to file state and federal tax information.The numbers have to be reported. I would think if year after year one show they but to resell and never made a dime - it would put a red flag on their report .
This is a common misconception. Consecutive years of losses is just one criterion the IRS takes into account. There are many more.
As long as you do business in a businesslike manner, keep some form of books, keep your business finances separate from your personal ones and can show that you are actively engaged in a business with every expectation of profiting, there's no need to worry. There are thousands, maybe tens of thousands, of startups in Silicon Valley that never showed a profit. But it was obvious they were not just someone's hobby. So make it obvious in your case, too.
I have to say that the lackluster attitude in these parts about making money doesn't bode well for a determination of your ( the generic "you" ) eBay business as an actual business. Hobbies are fine; just make sure you and the IRS are on the same page.
fLufF
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[ edited by fluffythewondercat on Feb 25, 2007 05:01 PM ]
posted on February 25, 2007 05:06:39 PM new
Being honest with the IRS is always best. Saves penalty fees and sleepless nights.
I said "I think' it would send a red flag if year after year you purchased goods and lost money .... like i said "I think" , I did not say it would .
However if a person does lose money year after year and keeps buying goods;some kind of RED Flag should go up somewhere.
