IRS Coming After Online Auction Income

Thu Apr 19, 2007 6:16PM EDT

See Comments (20)

The days of easy cash from selling your baseball cards, comic books, and Pokémon figurines may be coming to a close. The IRS wants auction sites like eBay to start collecting Social Security numbers so users can be more easily taxed.

Technically, income from auctions is no different than offline income. But few people report income from sales of used goods, nor are they required to. Online auctions fall into the same category as making money from a garage sale: You generally don't have to report income from sales of used household goods if you aren't making a profit on them. I don't have any statistics, but isn't this what the bulk of stuff on eBay is? Still, as of 2001, the CNet story linked above notes that the IRS estimated it was not receiving $345 billion owed to it due to underreported or unreported income.

Naturally this proposal hasn't been met with much approval or excitement, probably because the IRS is only considering half of the equation. Business expenses are deductible against any income you make, so the raw materials you spend constructing the homemade dreamcatchers you sell on eBay can be used to offset any income earned. Auction fees are also deductible. In other words: I think it's quite likely that most people selling on sites like eBay aren't making any money at all. The few exceptions are people who run serious businesses off of auction sites, and I'm sure most of them are already paying taxes on their sales.

Auction sites are only the latest online forums the IRS has targeted to scrape up a little extra cash. Late last year talk started generating about virtual assets like those in Second Life being subject to taxation.

Naturally, it's casual sellers of used items who are going to get caught up in the IRS's messy web should this come to pass. I sell a fair amount of junk on eBay, but I've never made a profit on any of it against what I paid. Do I want to have to explain a few hundred or thousand dollars in income to the IRS every year that came at a price of several times higher? Really looking forward to it...

LINK: Selling stuff online? Here comes the IRS 

Comments on IRS Coming After Online Auction Income

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  • 6 Posted by paulghanley on Thu Sep 3, 2009 8:02PM EDT Report Abuse

    A different distribution system doesn't turn nontaxable income into taxable income. The purpose is to go after the "businesses' that are similar to any storefront business that are not reporting their income. If you sell old socks, nobody cares. If you have an ongoing business, it should be reported like all others.

  • 7 Posted by rogueist on Thu Sep 3, 2009 8:49PM EDT Report Abuse

    I had the IRS come after me when I was a kid and selling lemonaide from a lemonaide stand. I made the mistake of saying out loud that I had made a ton of money when an IRS agent happened to be passing by. I never forgot that - they wanted to issue a warrant to seize my business assets for failure to report and non-payment of taxes - for a lemonaide stand run by an 8 year old kid!

  • 8 Posted by purltwo on Thu Sep 3, 2009 8:22PM EDT Report Abuse

    Well, the folks who've opened eBay "stores" often tout their wares as new or directly from the factory. They would appear to be a sort of retail outlet. However, one wonders just how much they do actually realize after expenses and what amount of tax revenue collecting from the would really generate. Same with people who sell "antiques" or "collectibles." They seem to be trying to make a profit, but, again, just what would this amount to in tax revenue? I'm with royal_18: If corporations, especially the multi-nationals who currently don't pay taxes on profits that are not repatriated, were made to pay their fair share of taxes, the IRS would realize a whole lot more than the penny-ante proceeds from taxing eBay sales.

  • 9 Posted by mralewine on Thu Sep 3, 2009 7:27PM EDT Report Abuse

    If you remember GATT and NAFTA, you might note the loss of revenues generated is quite large. "Most Favored Trade Status" and other diplomatic tools have shifted the tax burdens greatly. These events bridged many administrations of both parties. A shift back might stem the tide of offshoring of manufacturing and services. Less money going out, means more stays in the pot.

  • 10 Posted by mikestrb on Thu Sep 3, 2009 7:20PM EDT Report Abuse

    what a joke.most people are already scrambling these days just to keep a roof over their heads,food on the table,clothes on their backs and a car on the road it's just ridiculous how much things cost these days and how wages have not kept up at all,no matter what the gov says.min wage would be around 11 an hour if it did.

  • 11 Posted by rdoc@prodigy.net on Thu Sep 3, 2009 8:33PM EDT Report Abuse

    When you see feedback numbers in the thousands, this isn't a casual seller - it is a business. I hope those are running their sales as a business, but if not, they deserve to get nailed. I pay my taxes, as all Americans should. If you think all the benefits of this country should be free, then you need to find somewhere else to live.

  • 12 Posted by wiggles02895 on Thu Sep 3, 2009 10:45PM EDT Report Abuse

    What is happening with this world. Give me a break. I sometimes sell on Ebay and I dont make much money to e honest. I neede to get rid of some stuff and I wan't working so I sold the things that I didn't mean. Sometimes we just have to make some extra cash to keep up with all the bills and of course the gasoline. Come on can't we fight this. The government needs to budget like we americans do. It's not like we are making millions off of this. What happened to the freedom of this conutry. Sounds like it's going to ----- .

  • 13 Posted by imerrit@sbcglobal.net on Thu Sep 3, 2009 4:23PM EDT Report Abuse

    Everytime taxes come up everyone says tax corporations. Corporations don't pay taxes. Consumers do. Taxes are passed on to the consumers. You increase taxes on corporations (which produce almost all the goods and services we buy)you will be paying higher prices for everything and the some corps will just move some of their operations out of the jurisdiction of the US to avoid paying them. What we need to do is stop demanding that our government takes care of us. Welfare, social security, medicare, health care. How about if the inefficient government stop providing those services and taxes us considerably less and we save money on our own. Those who don't want to save will suffer.

  • 14 Posted by imerrit@sbcglobal.net on Thu Sep 3, 2009 4:23PM EDT Report Abuse

    The government isn't going to tax you on ebay sales. You will just receive a 1099 and on your tax return you will put that you earned say $1000 and the cost of goods sold is $1000 so there is no gain. Now people who are conducting a business will show a gain. If they lie and later get audited they will pay the heavy fines, interest, and possibly jail time if the lie is large enough.

  • 15 Posted by seanbellnj on Thu Sep 3, 2009 9:10PM EDT Report Abuse

    If the govt needs a lil' extra cash, they should just sell stuff on ebay :)

  • 16 Posted by cantwells on Thu Sep 3, 2009 3:17PM EDT Report Abuse

    Initially I too was thinking this was a crock of doo doo. However, after talking to my better half (apparently smarter, too) she pointed out to me that this was most likely to deter businesses from trying to avoid taxes. I guess we should ALL look before we leap. Hmmm???

  • 17 Posted by mjzapp2004 on Thu Sep 3, 2009 7:23PM EDT Report Abuse

    I am an artist. World Trade and Large Corporations importing paintings from other countries pay no duty because there is now Duty tax on Art or the Frame it is in. I cannot compete with mass produced paintings and prints for $29.95. Now my work IS used merchandise and must be sold on the street- because the Galleries buy framed wholesale art from the large corpoaration monopolies. Labor costs a dollar an hour. This is NOT Fair Trade for the American Artist who now has the same problem of the small farmer and we are not subsidized. Tax me TOO- for what service? " Taxation without representation"

  • 18 Posted by tperkinsjr on Thu Sep 3, 2009 10:18PM EDT Report Abuse

    Look, I paid my sales taxes when I bought my records/computers/knick-knacks etc as new stuff - why should ANYONE have to pay taxes again when selling old junk. Maybe just the BUYERS of the pre-owned stuff should have pay. After all, they didn't own it until they bought it (used)!

  • 19 Posted by kevnet1001 on Thu Sep 3, 2009 4:50PM EDT Report Abuse

    I much prefer reverse auctions, they make the competition between sellers and buyers win!

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