Will I have to pay Fed taxes due to new $600 ebay threshold?

[pennypicker]

Hey people, long-time member here with a serious tax question. As we ebay sellers are aware beginning January 1 the Fed now requires ebay to send in a 1099 on all cumulative ebay sales once the $600 threshold is met. My situation is this: in 2020 and 2021 I purchased on ebay roughly $30,000 in quality sterling silver. I of course had to pay state sales tax on all these items (thank you Governor Newsome in California) and shipping on many of the pieces and I have all my ebay purchase receipts. So now its March 2022 and I'm considering selling them piece by piece on ebay where I'll get nailed with 13% ebay fees. The good news is that silver has gone up in price enough to offset my original costs (including the sales tax & shipping) as well as the 13% ebay fees when I sell all 250 pieces this year. In other words I won't make any profit at all and depending on how they sell on ebay I will probably take a 3 to 5% loss.

So my question is since I won't make any profit and have all the ebay receipts to show this will I have to worry about any income tax or capital gains taxes that I may owe to the Fed once ebay sends in the 1099 on all my sterling sales? And will the fact that I purchased this sterling in 2020 & 2021 play a factor or cause a problem when I report my income for a different year being 2022?

Bottom line is I have a Democrat Governor nailing me on one end and a Democrat President nailing me on the other end and it has sure taken the fun out of buying and selling on ebay Any info would be greatly appreciated, Don

[NiBullionCu]

The key is to keep good records/receipts; which it looks like you are doing.

Yes you claim the 'profit' as income. (sale amount less cost, less expenses). So even if eBay sends a 1099 that says you sold $1,000 in silver, your cost + expenses may be $1,100, therefore, no profit = no tax, Fed wise.

For most this is handled on 'Schedule C' of the fed form.
Not sure of the rules for 'incidental sales', i.e. if you are not a business.


Does Cali have a sales tax? (Don't know if Cali would require you to be a 'registered' business or not) you may be on the hook for paying in Cali sales tax.
But that would be an 'expense' on Schedule 'C' that would reduce your 'profit'
Yeah, it can get tedious quickly.

I live in a 'sales tax' state, so I pay annually to the State for my 'in state' sales, but usually end up getting a 'tax refund' that exceeds the sales tax.

I haven't sold on ebay for awhile so not sure how it works regarding sales tax. If ebay already charged the customer for sales tax how does the State know that you don't owe it anymore ??? (I can see State's drooling at that 'double-dip' opportunity).

[natsb88]

A 1099-K is an informational reporting document. It does not automatically transfer over to your 1040 individual tax return. However, if the IRS sees that you were issued a 1099-K and doesn't see that income reported anywhere on your tax return, they may go looking to see why that is. Generally, only the profit would be taxable. So if you have good documentation showing your costs, and you didn't make a profit, you should be ok (other than the hassle of having to prove it to the IRS). For somebody who didn't keep receipts, the IRS could rule that their cost basis is $0.00 and therefore the entire amount reported on the 1099-K is taxable. Documentation is important. One thing to watch out for...under the sale of personal property, I'm not sure if a loss on one item is allowed to offset a profit on another item. Technically, if you make $20 on one item and lose $20 on another item, you may still be considered as making a taxable profit of $20. I don't know the rules for personal property.

I am not a tax professional and this is not financial advise. You should consult with a professional.

Schedule C is for operating as a business entity with a profit motive. As a business entity, a loss on one item does offset a profit from another item, but I don't think this would be applicable to an individual selling personal property, and may open a can of worms. There may be another way to report the sale of personal property, but that is not something I am familiar with.

Again, I am not a tax professional and this is not financial advise. You should consult with a professional.

Over the last several years, numerous states and sales tax jurisdictions have enacted "marketplace facilitator" laws that require platforms like eBay to collect and remit applicable sales tax for transactions that take place on their platform. eBay now collects and remits sales tax for 46 sales tax jurisdictions, including the state of California. When eBay collects and remits the sales tax, the individual seller does not have to collect and remit the sales tax. The individual seller may however still be required to file a sales tax return even if they do not owe any sales tax, depending on their status and state laws.

Again again, I am not a tax professional and this is not financial advise. You should consult with a professional.

[pennypicker]

I thank you both for taking the time to give me some of your thoughts and insights as to possible issues that might arise with regards to taxes. One thing I do know for sure is that I paid California 8.75% sales tax when I bought each piece of sterling and considering I didn't make a profit over the last two years I'm sure as heck not going to pay the Feds (or California again) anymore taxes under any circumstances. I'm starting to get the feeling that Craigslist will be my best solution. Well no rush as I'm bullish on silver long-term so time is on my side one would think. Again my thanks and I will consult a tax professional so I will know exactly what I'm up against--be it Democrats or taxes!