Are Tax Issues and Proposed Legislation Giving You a Headache? (Part 1)
If so, you might want some aspirin. Or better yet, a glass, or two, of wine.
Either way, I want you to read this article from a relaxed state of mind. Because I’ve done the research for you. After all, you don’t have time to spend hours searching for information that should be easy to find.
But it’s not, which has led to some confusion among Ebay sellers. And this is what I want to shed a little light on. (Here’s where I mention that I am not an accountant or a tax professional and that this article is for educational purposes only.)
Just for “fun,” I’ve spiced it up a bit with the presidential candidates’ proposed plans for income tax rates, capital gains, and other tax burdens. Because this is the election that could change everything. Or nothing.
So find a super comfy chair. Bring your glass of wine. And read on.
Your Ebay sales may be mainly personal items. Which means you will likely be selling them for less than what they originally cost you. And when there is no profit on a sale, you don’t have to report anything to the IRS.
But if you do make a profit on an Ebay sale you must report it on your tax return. This will often be the case when you auction off antiques and collectibles since the amounts you receive for them will often be much higher than what you paid. This is considered the sale of a capital asset.
And your profit will be taxed as a capital gain. It will either be a short or long-term gain, depending on how quick the turnaround time was between your original acquisition of the property and the subsequent Ebay sale.
If it was held for longer than a year, your profit is a long-term gain and you will receive a more favorable tax rate. Short-term capital gains on quicker turnarounds are generally taxable at ordinary income tax rates. But, like anything else with the IRS, there are always exceptions to the rules.
So, what are the candidates’ takes on income taxes and capital gains?
Bernie, who in my book is still in the race, says he plans to increase the tax rate on capital gains and dividends for households earning over $250,000. He also wants to significantly increase and add new taxes that would target the wealthy and the big corporations.
Hillary is pretty much status quo. Her proposed plan would for the most part maintain the current tax codes on income and capital gains. Although she will raise taxes on higher income earners, but much less so than Bernie.
And then there’s the Donald. He favors tax cuts across the board. However, regular Americans would see only very modest savings. But he does favor eliminating the federal income tax for individuals making less than $25,000. Nevertheless, it will be the uber wealthy, the 1%, who will benefit the most.
Under current tax laws, you, the seller, are only required to collect sales taxes from buyers who live in your same state. Although I would suggest checking with your state tax authority for more details, because certain items, such as food, may be tax exempt.
County/City Business Tax
Many counties and cities require online auction sellers to obtain a business license in order to do business in their jurisdiction. This is a once-a-year business tax that may cost roughly a hundred dollars or so. You should check your county or city government website for more detail.
Stay tuned for Part 2 of this article (UPDATED: Read Article Part 2).
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