Any fears in selling large $ items on ebay?

glchen · #1 06-19-2015, 10:37 AM

Not sure why this sales tax issue for PWCC is continually being brought up. I thought that I read that Brent stated that the California Board of Equalization (which is the state tax board) has already audited PWCC and found them in compliance. I guess you could always say that they only audited this past year and not 2011. However, there is a paper trail for how much taxes a seller owes on ebay, so it would be too easy to be caught. Every invoice on ebay shows how much sales tax is owed on that item. The state tax board could just go to ebay (in addition to Paypal), and ask how much state tax this seller should have paid for that tax year. If the seller did not pay that amount (or more), then there would need to be significant explaining to do to the authorities. Therefore, it doesn't matter if the buyer does not pay the sales tax because as far as the state is concerned, somebody has to pay it (i.e., the seller). As long as the state receives every cent of the tax that is due, that is all they care about. Therefore, what I'm taking away from this is that PWCC believes that it saves the 3% from the Paypal fees, therefore it is willing to eat the 5+% extra. I agree that this is a significant amount, so not sure how they are able to do this, but I'm assuming they pay much lower ebay final value fees than regular sellers on ebay do. And obviously, PWCC has now moved to Oregon with no sales tax, so they don't need to worry about this for future sales. The one thing that I can think about on how to weasel your way out of this would be to adjust the ebay invoice to remove the sales tax if the buyer pays by check. This would be similar to how it would be done if the buyer had a reseller license for California. However, resellers need to fill out a reseller forms, which PWCC asked me to do in the past since I am in California and have a license. I would think that if the state saw that a high % of California buyers did not pay sales tax because the ebay invoice was adjusted to remove the sales tax, they would want to see the reseller forms at that point. The point here is that it's much too easy to be caught on this sales tax issue with little benefit. It would not be worth it for any seller to take this risk for just an incremental bid up, most especially a consignment seller.

Peter_Spaeth · #2 06-19-2015, 10:41 AM

Yeah Gary if Brent said it it must be true, eh? Or did you miss the fact that other things he said demonstrably are not true? When the little boy keeps crying wolf, hard to know what to believe, for me anyhow.

He did say that he only makes "a couple" of percent on each auction. So that must mean, if that was true, that even with the saving of paypal fees he lost money by paying 8.25 percent on all California transactions where the buyer did not have a resale license and paid by check or money order. If that option was offered for many years, then that's a lot of money he paid out as a favor to buyers. Maybe he in fact did, and I hope so.

glchen · #3 06-19-2015, 10:52 AM

Peter, my point is for the sales tax issue, it is simply too easy to get caught. The figures and paper trail are right there. If you are audited once, you are dead meat. You'd have to be an idiot to try to avoid giving the state their taxes due. For monitoring shilling, you can probably try to claim benign neglect or something similar, but sales taxes are an open and shut case.

Peter_Spaeth · #4 06-19-2015, 10:54 AM

Quote:

Originally Posted by glchen

Peter, my point is for the sales tax issue, it is simply too easy to get caught. The figures and paper trail are right there. If you are audited once, you are dead meat. You'd have to be an idiot to try to avoid giving the state their taxes due. For monitoring shilling, you can probably try to claim benign neglect or something similar, but sales taxes are an open and shut case.

So offenses that are easily caught don't get committed? I don't follow you. To the contrary, many people who commit such offenses (talking now in the abstract) delude themselves into thinking they are above the law, will get away with it, etc. I see it time and again -- just as one example, smoking gun memos instructing employees to obtain phony sales in order to create the appearance of higher revenues.

glchen · #5 06-19-2015, 11:00 AM

Well, of course, some still happen (Watergate quickly comes to mind). However, you'd have to be an idiot. I am not a lawyer or in law enforcement, but I always thought most of these tax fraud cases occur when using cash only transactions with no receipts. Here the receipts are digitally stored in a third party (in eBay's system). You're not going to be able to get away with that.

Peter_Spaeth · #6 06-19-2015, 11:03 AM

Again speaking in the abstract, a lot of fraudsters are idiots, delusional, arrogant and driven by hubris, etc.

And regarding sales tax, I am aware of instances where there was a complete paper trail, with the buyer requesting an item be shipped to a state that had no sales tax in order to avoid it. I am sure many cases involve cash, but again, ease of detection does not prove to me the offense did not occur.

calvindog · #7 06-19-2015, 11:23 AM

Gary, do you consider Bill Mastro, Doug Allen and John Rogers to be idiots? Because I understand there were some paper trails there too.

savedfrommyspokes · #8 06-19-2015, 11:34 AM

Quote:

Originally Posted by glchen

However, there is a paper trail for how much taxes a seller owes on ebay, so it would be too easy to be caught. Every invoice on ebay shows how much sales tax is owed on that item. The state tax board could just go to ebay (in addition to Paypal), and ask how much state tax this seller should have paid for that tax year.

I would find it hard to believe that any state tax auditor would rely on ebay to prove any type of tax evasion as they would likely focus on paypal transactions and more importantly the business/personal bank accounts of the business and it's owner. Ebay is not set up to accurately or effectively disclose in-state purchases and they are not even set up to offer tax documents such as the 1099 form that paypal provides to users with $20k+ in income annually. Just because a bidder "wins" an item on ebay does not mean that there was a taxable transaction that occurred. However either a paypal payment or a deposited check/MO would indeed indicate that a transaction has occurred and if it was an "in-state" transaction the business owner would then be accountable for showing that the proper tax amount was remitted for this transaction or a re-sale certificate was present.

glchen · #9 06-19-2015, 12:08 PM

Quote:

Originally Posted by savedfrommyspokes

I would find it hard to believe that any state tax auditor would rely on ebay to prove any type of tax evasion as they would likely focus on paypal transactions and more importantly the business/personal bank accounts of the business and it's owner. Ebay is not set up to accurately or effectively disclose in-state purchases and they are not even set up to offer tax documents such as the 1099 form that paypal provides to users with $20k+ in income annually. Just because a bidder "wins" an item on ebay does not mean that there was a taxable transaction that occurred. However either a paypal payment or a deposited check/MO would indeed indicate that a transaction has occurred and if it was an "in-state" transaction the business owner would then be accountable for showing that the proper tax amount was remitted for this transaction or a re-sale certificate was present.

The tax authorities could easily use ebay in addition to paypal to come after a business. They wouldn't have to "prove" anything. They would just tell the business that your numbers don't match what ebay or paypal are reporting, and you need to explain that to us. If you can't give a proper justification, then you'd better look into hiring a good lawyer. Sure, ebay does not give those 1099's to individual sellers, but I'm sure if the authorities asked ebay for the information, they could get it easily. For every item you sell on ebay, you set up the tax table in ebay, so that item is readily available and stored in their system if the item is won by an in-state bidder. As the seller, you are responsible for getting the proper forms completed by the buyer if they claim they are a reseller. If you are audited, these would be what you need to show the tax authorities to justify why sales tax was removed.

savedfrommyspokes · #10 06-19-2015, 12:50 PM

Quote:

Originally Posted by glchen

The tax authorities could easily use ebay in addition to paypal to come after a business. They wouldn't have to "prove" anything. They would just tell the business that your numbers don't match what ebay or paypal are reporting, and you need to explain that to us. If you can't give a proper justification, then you'd better look into hiring a good lawyer. Sure, ebay does not give those 1099's to individual sellers, but I'm sure if the authorities asked ebay for the information, they could get it easily. For every item you sell on ebay, you set up the tax table in ebay, so that item is readily available and stored in their system if the item is won by an in-state bidder. As the seller, you are responsible for getting the proper forms completed by the buyer if they claim they are a reseller. If you are audited, these would be what you need to show the tax authorities to justify why sales tax was removed.

I agree that tax authorities would certainly use paypal records to verify tax compliance, but not ebay records. I have been selling on ebay for years, and NEVER have the "sales" numbers provided by ebay ever been remotely close to the actual numbers derived from my paypal tax forms that have been forwarded to my accountant each year. Please explain EXACTLY how ebay can confirm IF a transaction was actually completed or not? Ebay can't, bottom line.

As an example, I had a lower priced item returned back to me recently. Ebay, due to some system glitch, would not allow me to request a FVF credit or provide a refund through their system because the buyer opened and then closed a return request before the item arrived back. I simply wrote off the very small FVF credit and refunded the buyer through paypal. This item is still marked as paid with ebay, however, I refunded the buyer. I clearly would not rely on ebay in this situation if I was faced with a tax auditor as the sale would still be showing as "completed". I would however, show the auditor my PP refund(which is linked to the original transaction).

What matters to auditors in regards to an ebay business is the paper trail that is created in either paypal or a bank account that shows an actual payment received thus creating a taxable "transaction", as I am pretty sure that no state is not going to impose a tax on a "commitment to buy" made through ebay that may not ever be paid for. I also highly doubt that an auditor is going to waste their time pouring over ebay records of commitments to buy, but instead they will review actual payment transactions made through paypal and deposits into bank accounts.

glchen · #11 06-19-2015, 01:09 PM

Quote:

Originally Posted by savedfrommyspokes

I agree that tax authorities would certainly use paypal records to verify tax compliance, but not ebay records. I have been selling on ebay for years, and NEVER have the "sales" numbers provided by ebay ever been remotely close to the actual numbers derived from my paypal tax forms that have been forwarded to my accountant each year. Please explain EXACTLY how ebay can confirm IF a transaction was actually completed or not? Ebay can't, bottom line.

As an example, I had a lower priced item returned back to me recently. Ebay, due to some system glitch, would not allow me to request a FVF credit or provide a refund through their system because the buyer opened and then closed a return request before the item arrived back. I simply wrote off the very small FVF credit and refunded the buyer through paypal. This item is still marked as paid with ebay, however, I refunded the buyer. I clearly would not rely on ebay in this situation if I was faced with a tax auditor as the sale would still be showing as "completed". I would however, show the auditor my PP refund(which is linked to the original transaction).

What matters to auditors in regards to an ebay business is the paper trail that is created in either paypal or a bank account that shows an actual payment received thus creating a taxable "transaction", as I am pretty sure that no state is not going to impose a tax on a "commitment to buy" made through ebay that may not ever be paid for. I also highly doubt that an auditor is going to waste their time pouring over ebay records of commitments to buy, but instead they will review actual payment transactions made through paypal and deposits into bank accounts.

It's reconciliation. Paypal and your bank accounts can have multiple types of payments going into those accounts. Not all of them may be related to your business. It could be friends paying you for their share of a dinner expense. How do you determine which payments into your accounts are personal and which are for your business? Or you may receive your regular paycheck deposited into your bank account. How do you handle this? You reconcile your paypal and bank account transactions with your ebay transactions. In addition, your ebay fees are still a business expense when you are working on your federal and state taxes, so you still need to loop back to your ebay documentation if you are audited for income tax purposes. Your monthly account statement from ebay with your fees also has your sales figures so you can use this in conjunction with your paypal statements.

savedfrommyspokes · #12 06-19-2015, 01:25 PM

Quote:

Originally Posted by glchen

It's reconciliation. Paypal and your bank accounts can have multiple types of payments going into those accounts. Not all of them may be related to your business. It could be friends paying you for their share of a dinner expense. How do you determine which payments into your accounts are personal and which are for your business? Or you may receive your regular paycheck deposited into your bank account. How do you handle this? You reconcile your paypal and bank account transactions with your ebay transactions. In addition, your ebay fees are still a business expense when you are working on your federal and state taxes, so you still need to loop back to your ebay documentation if you are audited for income tax purposes. Your monthly account statement from ebay with your fees also has your sales figures so you can use this in conjunction with your paypal statements.

Wow, I would think it foolish if an ebay seller(who receives a 1099 from PP) put themselves in a position of not utilizing both a separate bank account and paypal account that is only used for their ebay selling and is not used for personal type transactions.....I certainly use separate accounts. This makes it VERY easy to differentiate any ebay business transactions from any personal income transactions.

As far as outgoing payments, I use one credit card for all expenses, such as inventory, supplies or paying bills like my ebay (fees) bill. Since I keep all outgoing payments for ebay only expenses on one account, it is quite easy to forward these expenses at year end to my accountant for accurate tax preparation purposes.

Similar Threads
Thread	Thread Starter	Forum	Replies	Last Post
Ebay seller re-selling undelivered items	Prof_Plum	Modern Baseball Cards Forum (1980-Present)	18	03-26-2017 08:35 PM
Large Baseball Items FS	sayhey24	Baseball Memorabilia B/S/T	1	11-26-2014 11:51 AM
(All Sold) Selling large Legendary lot	Leon	Boxing / Wrestling Cards & Memorabilia Forum	1	12-07-2012 09:07 AM
OT: Selling on eBay? Be careful sending items to Canada	tbob	Net54baseball Vintage (WWII & Older) Baseball Cards & New Member Introductions	10	07-07-2010 10:47 AM
Selling a large part of my collection.....	Archive	Ebay, Auction and other Venues Announcement- B/S/T	2	08-10-2007 12:09 PM