IRS To Go After eBay Sellers

prostoalex writes "Fed up with numerous violations of tax law by individuals and businesses selling goods on eBay, Amazon Marketplace, uBid.com, etc., IRS is pushing Congress to make online marketplaces responsible for reporting the sales information to the tax man, in order to prevent under-reporting of the income. eBay's 'own statistics suggest that there are 1.3 million people around the world who make their primary or secondary source of income through eBay, with just over 700,000 in the United States', News.com says." How long before the same fate befalls the folks who make a living working the Massively Multiplayer secondary markets?

Comments

I welcome the IRS

[Anonymous Coward]

I welcome the IRS. There are wars to pay for, pork for politicians to dish out, and below-the-line credits for the stinking rich to take. How else to pay for this but from the scum selling on ebay ?

Re:I welcome the IRS

[miskatonic alumnus]

I've got karma to burn. The parent isn't trolling --- but telling it like it is. Government at all levels throws tax dollars away, then comes back to the public for more. Why don't they just get it over with and take it all.

Re:I welcome the IRS

[Planesdragon]

I've got karma to burn. The parent isn't trolling --- but telling it like it is. No, he's trolling.

Let's say that you individually make $60,000 a year on ebay, and you skip out on the income and sales taxes. Assuming a 20% federal income take (as this is likely in addition to your regular job) and a 10% state income-and-sales take, that'd be $12k that the federal government either has to do without, borrow, or get from the rest of us, and $6k that your state has to do the same with.

Tax policies aside, it's just a rule of law thing. the law says pay the tax, so you pay the tax -- and if you don't like it, you get off your ass and work to change it.

Re:I welcome the IRS

[itlurksbeneath]

Hang on there hoss... So if I buy some XBox or something, I pay taxes on it. So if I sell it to somebody else, I have to pay taxes on it again? Where's the fairness in that? I'm getting screwed twice. Say the XBox was 400 bucks and I pay 10 pct taxes on it, that's 40 bucks to the Gov. If I sell it on EBay for 300 and have to pay taxes on it AGAIN for another 10 percent, that's 35 more bucks. Now this XBox has netted the government taxes TWICE. I've already paid taxes on it. If I want to sell it to somebody else, explain why I should have to pay taxes again?

Re:I welcome the IRS

[crayiii]

You would need to keep good records to show that you didn't "make" money on the sale. In your case I would think you could actually report a loss of $100 and that would reduce your taxable income. Keep in mind that I'm not a tax expert or even a tax newbie...

Re:I welcome the IRS

[miskatonic alumnus]

Tax policies aside, it's just a rule of law thing. the law says pay the tax, so you pay the tax -- and if you don't like it, you get off your ass and work to change it.

Well, let's go down this path the whole way, shall we? If I decide to sell my Playstation on ebay, then I should be able to deduct its cost --- just like any other business does. If I do this from my home, then my home is used for business purposes, and I should be able to deduct a portion of my rent, utilities, and phone service. Hell, I'll even deduct my computer, printer, and DSL service --- since it's used for business. And when I drive to the Post Office to mail the package, I can deduct for my transportation. I should also list any furniture used so that I can depreciate it. Better fill out the self-employment tax forms, and get a state sales tax ID number while we're at it.

Ridiculous.

Re:I welcome the IRS

[kimvette]

Taxes have never been about fairness, nor have they even been about supporting necessary services. They are all about social engineering.

If taxes were about fairness and supporting the infrastructure and not something more insidious, we would have had a flat tax for many decades now.

Re:I welcome the IRS

[DDLKermit007]

Thats not very difficult to do if your doing that kind of thing in all honesty (keeping receipts on things you'd be buying anyways is fairly easy). The IRS doesn't want people who sell their old junk periodically. They want the person who is using it as a continual revenue income stream (probably 5k-10k minimum a year they want).

Re:I welcome the IRS

[briancnorton]

That's not what they're going after, it people that make a living and pay no income taxes, in some cases getting paid (by you) to do so. Sales tax isn't the issue, it's income tax. If EB sells an Xbox, they have to report the revenue for their business income taxes. If you buy a lot of 100 Xboxes and sell them across state lines, you legally avoid sales tax. If you make 10,000 dollars doing it, that's income just like EB had, and you owe your share of that just like everybody else.

And your approval of what the government spends it on should be reflected in your voting, not tax fraud.

Re:I welcome the IRS

[Maxo-Texas]

Taxes are only due on a net profit which is determined by your basis.

If you basis is $330 and you sell it on ebay for $380, you owe taxes on $50 profit.
You might be able to reduce that further by showing expenses for the internet connect, your gas to go buy the item, and so on.

If all business were to go to ebay, it becomes trivially obvious that ebay profits must be taxed since the government has to collect some taxes.

Ebay has been benefiting from the garage sale except (too small to worry about) but folks who hold large garage sales every week get noticed.

Re:I welcome the IRS

[bhiestand]

Well, let's go down this path the whole way, shall we? If I decide to sell my Playstation on ebay, then I should be able to deduct its cost --- just like any other business does. If I do this from my home, then my home is used for business purposes, and I should be able to deduct a portion of my rent, utilities, and phone service. Hell, I'll even deduct my computer, printer, and DSL service --- since it's used for business. And when I drive to the Post Office to mail the package, I can deduct for my transportation. I should also list any furniture used so that I can depreciate it. Better fill out the self-employment tax forms, and get a state sales tax ID number while we're at it.

Ridiculous. If you actually get a business license for your business of selling stuff on eBay, this isn't ridiculous at all. Most home-based and small businesses do exactly that. Hell, my father's business leased his car from him for slightly more than it cost because it allowed him to keep personal ownership of the vehicle and deduct it as a business expense. There's nothing wrong with any of this, and it's certainly the same game everyone else plays, except for large corporations (they just lobby their tax deductions into the law instead of trying to find and use them).

Since I'm not an accountant, I can't remember the numbers off the top of my head, but there is a threshold for this personal transactions like this. Basically, you can sell your XBox and not owe any taxes on the sale (or even have to report it), but if you sell 10 XBoxes a week you'll owe taxes. Also, if you sell your $10,000 car, you're probably going to have to report that, too.

Re:I welcome the IRS

[ciscoguy01]

You would need to keep good records to show that you didn't "make" money on the sale. In your case I would think you could actually report a loss of $100 and that would reduce your taxable income. Keep in mind that I'm not a tax expert or even a tax newbie...

You said it. The problem with all this is ebay reports to IRS that you sold something for $50. What they don't report is that you paid $300 for it, used it, didn't like or need it and are now selling it for $50.
It creates a whole new accounting nightmare for everyone.
What's next, if you sell your old stereo on ebay or craigslist for 75% off that is somehow "income"? What about when you sell your used car? Is that income now?
It's just nuts. I hope congress quashes the whole idea.
Not that professional ebay sellers shouldn't declare their sales, they should.
But there is a difference between that and selling your old stuff at a loss.

Re:I welcome the IRS

[sumdumass]

I think there are two distinct issues at hand here. You getting $45 for a stereo that cost you $150 new isn't one of them.

First, there are people who go yardsale-ing and pick up loads of crap for next to nothing and then turn a profit on Ebay. This is the same as the corner store buying crackers from Nabisco and selling them to you for a profit. That profit should be taxable income-minus expenses.

The next issue is tax depreciations. Several items when used in conjunction with a business can be depreciated over a useful life time. Usually this is between 3 and 5 years but can be more or less depending on what they are. Now, If you depreciate the cost of your work computers over 3 years, then turn around and sell them at a higher value, then their depreciated value, you are making a profit.

This depreciation is used commonly for work vehicles, computer software, office chairs and stuff like that. Machinery and tools are also depreciative. If i remember correctly, You can depreciate to 30% of the value over three years on most things and your can depreciate to scap ($0.00 value on some)over the expected lifetime of the item. So after going this route for three years on a $10,000 car, you have deducted the costs of an asset costing $10,000 to $3500 or so. But if you sell it for $5000, then you have to repay the taxes on the $1500 in deductions for depreciation as income. A common step is to re-appreciate the value if you know you will be disposing of it soon and you can offset the differences with other tax structures.

Now, It has been a while since I handled my own taxes so some things could have changed since then. This is also a grossly over-simplification of the situation concerning depreciating items but it serve the point of illustration well. I'm pretty sure this is the taxes that the IRS is looking for. The Ebay businesses and the sell off of depreciated items for more then their depreciated value. But in either situation, if your are making a profit, you are collecting income and should be paying tax on it.

This later is a confusing animal. It is like deducting the amount of taxes paid in 07 for the tax-bill that was owed in 06 from the return being filed in 08. This beast is best left to qualified CPAs as far as I'm concerned(err have found).

Re:I welcome the IRS

[ciscoguy01]

This depreciation is used commonly for work vehicles, computer software, office chairs and stuff like that....So after going this route for three years on a $10,000 car, you have deducted the costs of an asset costing $10,000 to $3500 or so. But if you sell it for $5000, then you have to repay the taxes on the $1500 in deductions for depreciation as income.

That's called recapture.

If the issue is people selling stuff on ebay that they bought for that purpose no problem. They should be paying taxes. They are already required to.

But what may happen here is ebay will be forced to send an information return (1099-ish thing) based on what you sold on ebay. There will be no distinction on that return as to what is crap from your garage, items you used and paid much more for and are **NOT** making a profit on versus those that you bought to resell.

So the IRS gets a paper saying what you sold. They now have to determine whether that is income (which they cannot do), or bother you about it when you don't list the profit from selling your old stereo for $45.

What a nightmare. We would be forced to keep records of how much we paid for that old stereo, how long we had it, and when we sell it on ebay IRS will be demanding we pay as if that were income. Unless we have stellar records, that is.

Do we really want the IRS demanding records from us for the stuff we sold on ebay at a loss after using it? That's what will happen here. There will be 5 million demands for explanation from the IRS. 5 million people will have to jump through hoops.

FWIW the IRS has done onorous things like this before. About 20 years ago they changed the rules as to what kind of records you needed to keep for mileage deductions. They said you had to keep a record of every trip, where you were, where you went, the date, mileage, what you did when you got there, etc. It was impossible, onerous. Luckily congress agreed and reigned in the IRS. You don't have to keep those detailed records for mileage deduction anymore. For a couple years that was the rule however. It was awful!

Re:I welcome the IRS

[sumdumass]

That's called recapture.

Thank you.

If the issue is people selling stuff on ebay that they bought for that purpose no problem. They should be paying taxes. They are already required to.

I'm under the impression that they are only looking for people not doing this. It is like the drug dealer down the street. He doesn't pay taxes on the money he makes form dealing drugs but should because it is income. Similarly, working under the table somewhere is the same thing and this is what they are looking for.

But what may happen here is ebay will be forced to send an information return (1099-ish thing) based on what you sold on ebay. There will be no distinction on that return as to what is crap from your garage, items you used and paid much more for and are **NOT** making a profit on versus those that you bought to resell.

I think the volume and frequency of what you sell will speak to this more then anything else. You can only sell so many things you have laying around in the attic before you run out of things in the attic.

So the IRS gets a paper saying what you sold. They now have to determine whether that is income (which they cannot do), or bother you about it when you don't list the profit from selling your old stereo for $45.

No, All they need to do is determine what is likely income. And if it is significant enough to ask you about, then you tell them to bark up a tree when it isn't or claim it when it is.

What a nightmare. We would be forced to keep records of how much we paid for that old stereo, how long we had it, and when we sell it on ebay IRS will be demanding we pay as if that were income. Unless we have stellar records, that is.

I know the kneejerk reaction is to be concerned when the IRS does something like this. I am concerned too. But I don't see it as the end of the world or the most complicated thing ever. It will goto the amount of activity a person has and how much the sales were going for. There are plenty of people who were making full time jobs out of selling things on Ebay. I have had several ask me how to do it too (of course I don't know). This is what the government is looking for. I would be surprised if anyone who hasn't sold more then two or three dozen items ever get questioned.

Do we really want the IRS demanding records from us for the stuff we sold on ebay at a loss after using it? That's what will happen here. There will be 5 million demands for explanation from the IRS. 5 million people will have to jump through hoops.

Actually, yes I do. But I'm not wanting this to happen to satisfy some tax obligation but to have 5 million people wake up and smell the tax problems we have. I mean right now if you ask the majority of people who aren't pushing some agenda, they will either say the rich get too many breaks give me something or they will say they are taxed too much already. Few people will be pushing some sort of agenda and answer with "i don't pay enough taxes" but you can tell it is an alternative agenda because they won't donate extra money at the end of the year where the tax forms have a place to enable this adjustment.

I think the more people the IRS hassles the more they will wake up and demand something fair and demand the government gets out of their life. It seems to be a win win after the initial grievance.

FWIW the IRS has done onorous things like this before. About 20 years ago they changed the rules as to what kind of records you needed to keep for mileage deductions. They said you had to keep a record of every trip, where you were, where you went, the date, mileage, what you did when you got there, etc. It was impossible, onerous. Luckily congress agreed and reigned in the IRS. You don't have to keep those detailed records for mileage deduction anymore. For a couple ye

Re:I welcome the IRS

[RockDoctor]

So if I buy some XBox or something, I pay taxes on it. So if I sell it to somebody else, I have to pay taxes on it again? Where's the fairness in that? I'm getting screwed twice.

Ah, that's where you're getting confused. You seem to be under some misapprehension that there was a sign above the metaphorical doorway into life when you were born/ conceived/ became self-aware (wherever you care to put the line), and that sign read "Welcome to the Real World, where honesty is welcomed, fair treatment is the norm, and the cheque really is in the post."

Whoever told you that the world was like that, lied.

Welcome to the Real World ; feel thankful that you're only getting screwed twice, and that they use lubricant.

Re:I welcome the IRS

[Cramer]

Indeed. However, for anything you buy and then turn around and sell, you can claim the sales tax you paid and thus get it back. However, if you're doing this on a measurable scale, you should have a business license and thus be able to purchase (for resale) without paying sales tax. Of course, no ebayer wants to do this because it's expensive and time consuming. (all the accounting and paperwork)

But technically, the buyer pays the sales tax(es). That's why there are fields on most state tax forms to report uncollected sales tax -- from sales where the buyer didn't collect any taxes. The real issue is, as others have said, eBay only knows how much was sold, they don't know how much you paid and thus what you should be claiming as a taxable profit, etc., etc.

Re:I welcome the IRS

[vaxen]

What stupidity! Supposedly that's what the so called "American Revolution" was all about. That was a lie too. No one owes these 'non governmental,' private debt collectors, scumbags, anything till... via fraud... they unknowingly "volunteer" into the Private Corporation For Profit called the UNITED STATES which has power only in Washington D.C. (Not even a State!) and territories assigned unto it. This bloody bunch of fools is so G'dm'd stupid that they've given up their individual Sovereignty for a mess of red pottadge! Yeah, the ten proverbial planks!

The Strawman, Corporation Solo, is born with the birth certificate (A bond against the bankruptcy (Oh, ya didn't know that the 'Government' IS bankrupt since roughly 1933?) Corporations are 'fictions,' color of the law, fictions! Thus when you are hoodwinked, or rather your mother is at the hospital hoodwinked, into selling your birthright (your sovereignty as well as the first ten amendments to 'the Constitution for the UNITED STATES' (another gimmick), for debt enslavedness via 'the Birth Certificate (GO ahead look at yours America. Notice anything weird? Just why does the Dep't of Commerce and Transportation have the original copy? Cause you've been bonded!) (Governmental guarantee of socialist 'benefits')

Your STRAWMAN, interface to the world of Commerce, takes the fall. Most people know nothing of this fraud so... go right along with the presumption that they are 14th Amendment slaves (Thanks to the traitor Abraham Lincoln,) identical with their STRAWMAN representative. You see, fictions can only 'talk' to other fictions!

Well... is that a rant? Do some re-search. Then laugh at the IRS...

"I'd rather be a King in Hell than a slave in heaven!" - Rothbard

http://www.newciv.org/nl/newslog.php/_v308

Cue

[Oligonicella]

The socialist and marxist rants.

Re:Cue

[Anonymous Coward]

The Ministry of Truth has modded your doublethink to that of "Troll," as there clearly would never be powerful outspoken socialists/marxists. Perhaps you should be re-educated?

Nothing To See Here

[pandrijeczko]

Admittedly, I am in the UK but I'm told that our own Inland Revenue tax people have already started looking at eBay sellers also.

But I don't see how this affects most of us anyway. I've personally done a lot of selling on eBay - no trading, just emptying a lot full of years of accumulated junk. All the stuff I sold was stuff I bought over the years and therefore paid tax and VAT ("Sales tax" in US speak) on the items already so I'm not sure I needed to pay any additional tax.

And as for those who trade on eBay, then join the club with the rest of us. None of us like paying taxes, do what we can to minimize our tax bills but have to pay them - so why should you be an exception if you trade on eBay?

Re:Nothing To See Here

[owlnation]

Yep, the UK Inland Revenue and eBay have been co-operating for a number of years. This is also the case with the equivalents in Germany.

I guess the only question I'd have is: why has it taken so long for the IRS to get involved?

Re:Nothing To See Here

[kt0157]

There is no tax due in the UK on your personal property when disposed of, even if at a profit (personal effects are exempt from capital gains tax because they would mostly generate losses to be offset against other gains). If you trade stuff you acquire for re-sale, and you trade enough to go over the VAT threshold (which is quite high), you will have to account for VAT as a second-hands good trade (essentially, VAT is charged on the difference between the buy and sell price). On the upside, you can reclaim VAT on all the kit you use to trade (e.g. computers, fuel, etc.).

In the US and Canada things are a bit different due to sales tax. In Ontario, for example, everyone is required to send a cheque for PST to the Ontario finance minister for all sales of goods, no matter how small, no matter if a yard sale, no matter if a private sale. Of course, not one citizen abides by this crap law (except where the provincial or federal Government can track the ownership of private goods, such as cars, planes and boats). But once EBay are sending nice XML files straight to the Government tax weasels you can imagine a nice automated bill (applied directly to your EBay account, naturally).

Re:Nothing To See Here

[UbuntuDupe]

In Ontario, for example, everyone is required to send a cheque for PST to the Ontario finance minister for all sales of goods

You have to send a check? Canada's treasury hasn't adapted to allow electronic payment?

Re:Nothing To See Here

[KDR_11k]

I've often heard that electronic money transfers are pretty expensive in the US, perhaps it's the same for Canada and a cheque is just cheaper?

Re:Nothing To See Here

[UbuntuDupe]

Electronic money transfers aren't expensive in the US. Wiring is, but that is not what most electronic transfers are.

(To be honest, I think the GGP was just trying to "folksy-up" his writing. Cause, you, see, most /.ers typically think of checks when they think of money transfers, right? Oh wait, that would be Time magazine's demographic.)

Re:Nothing To See Here

[kt0157]

Since no-one actually obeys the law (or is even aware of it) there aren't enough transactions to warrant the $100,000,000 it would take for the Government boondoggle IT system required.

Re:Nothing To See Here

[Anonymous Coward]

It's worth noting that in the USA, sales tax is state imposed, and can't be levied on interstate transactions, which is partially what gave rise to online sales - if I want to buy, say, an expensive TV made in Japan or Korea, why should I pay sales tax in Texas, or California, or what-have-you on everything I own? That's silly, and afaik, and though IANAL, that's how it works. You'll find that today this is less common with large retailers like Amazon, who have some sort of office or warehouse in most, if not all, states. Once a business locates themselves in a state, even if they ship from elsewhere, they must pay sales tax for goods sold to that state's citizens. I know a bit about this because I had my own business in high school, and a sales tax license, and as I sold to people in other states, almost never, if ever, paid any sales tax.

Now, this has nothing to do with the IRS. The IRS levies income tax, if you make enough income that you live over the poverty line you have to pay some percentage of that to them. I work as a software contractor, my clients send me and the IRS duplicate (ish?) copies of a "1099 form" which keeps record of nonemployee compensation.

As someone else mentioned, why should people who make their primary living on eBay, or in an online game, have any less responsibility than I do? If you live in the USA, you're expected to help pay for the roads, national parks, and yes, of course, TSA and those lovely gold toilet seats upon which the fate of the free world is no doubt arbitrarily weighed.

Someone also commented in this thread that the amount collected wouldn't justify the government computer system they'd have to develop, but of course they already have one, and tons of paper pushers to make sure they don't have to write code to parse an xml file from eBay. I was, however, told by an employee of the IRS that they do not pursue amounts owed which are less than USD$1,000, because the cost of pursuit is greater.

--
http://www.siggraph.org/members/jryan

Re:Nothing To See Here

[Anonymous Coward]

"You'll find that today this is less common with large retailers like Amazon, who have some sort of office or warehouse in most, if not all, states"

Although you're correct about companies having to collect applicable sales tax from sales within states in which they have a physical presence, you are incorrect that Amazon has some sort of office or warehouse in most, if not all, states:
http://www.amazon.com/gp/help/customer/display.htm l?ie=UTF8&nodeId=468512

Also, if you're going to attempt to post AC, you should probably turn off the signature :)

MMO Black market

[keatonj]

Trying to tax the MMO scene is like trying to tax the black market. It's "technically" "illegal" to sell most MMO stuff like gold and characters, at least for the most heavily populated. The irony? They will spend more on simply getting this through congress in terms of paying the various people who will have to spend time on this, as well as if it does go through, instituting some sort of scheme to track all this, then they will even get back. Most people who make enough money to actually have this cause a serious dent in their income, will just alter their techniques to make the money flow else ware (off shore bank accounts anyone? (as a simple easy solution)). Serious flaws in thinking this is going to work.

Re:MMO Black market

[vertinox]

It's "technically" "illegal" to sell most MMO stuff like gold and characters, at least for the most heavily populated. The irony?

No... It is not "technically" illegal. Violating an EULA does not actually violate any criminal laws. They can of course refuse you service or take you into civil court for a breach of contract but they cannot impose criminal fines or jail time on you for such an act.

Secondly, the IRS still requires taxes paid on money gained through illegal means. Drug dealing, gambling, bootlegging, extortion, and laundering all count under this aspect. Chances are if they can't prove you are doing something wrong they will nail you for tax evasion.

Happened to Al Capone since they couldn't get him any other way.

Re:MMO Black market

[apathy maybe]

I recall the story of a brothel owner in the US who was only prosecuted for running a brothel. She paid her taxes, had a good working environment for the workers, health insurance and all the rest. (Of course, I can't find a link to the story.)

Moral of the story? Don't get cause for speeding when leaving a bank robbery.

Or in other words, break only the law that you intended to, and not any other.

On topic to the story, in Australia at least personal items are not taxed if sold, and don't have to be declared for either Centrelink (the government handout department, they pay my way!) or the taxation department. As far as I know, hobbies also don't have to be declared (or maybe they do, but just aren't taxed).

Re:MMO Black market

[UbuntuDupe]

I recall the story of a brothel owner in the US who was only prosecuted for running a brothel. She paid her taxes, had a good working environment for the workers,

Yeah, I guess, except for the fact that she required her employees to have sex with strangers or they'd be terminated.

Re:MMO Black market

[FritzTheCat1030]

My employer requires me to write computer code or I'll be terminated. Those bastards. I had no idea they would expect me to do something for them when they hired me. And I can never, ever quit and find another job if I don't like it.

Re:MMO Black market

[UbuntuDupe]

Chill, I'm on your side on this one. I was just questioning whether, under current OSHA and sexual harassment guidelines (which of course I find ridiculous), a brothel can be classified as having "good working conditions" :-P

Re:MMO Black market

[thona]

Not sure where the problem would be.

Sexual harrasment is non-consensual. Naturally if you WORK as a protitute and enter into the agreement to have sex for a certain amounf ot money, then this IS consensual.

I actually turn around and say that is a neasy sexual harrasmanet case - as there is full proper paper documentation about what was consensual and expected. In most cases you ahve to rely on what both parties remember/say and that is a lot harder to proove.

Re:MMO Black market

[UbuntuDupe]

You're being a little naive. If an employer did a "quid pro quo" whereby employees perform sexual favors in exchange for perks (raises, promotions, bonuses, etc.), that would qualify as sexual harassment, even and especially if the employees were okay with it. In fact, many employees are more than happy to go along with such arrangements, but the employer can still be sued for it. "Consent" doesn't have much to do with it.

makes me chuckle

[Chumba1]

wow. The war in iraq must be getting dicey if we are chasing after the income of less than a million people.

Re:makes me chuckle

[keraneuology]

Indeed. Come to think of it, the number of people who have salaries over $1,000,000 probably number far fewer than a million... shall we stop chasing income of that subset?

Re:makes me chuckle

[Mikkeles]

'...salaries over $1,000,000 probably number far fewer than a million... shall we stop chasing income of that subset?'

Well, given the arcana of the current tax laws plus "deductions" and loopholes, they mostly have except for the very stupid.

Additionally, that accounts for more than 1 billion (trillion in the US) dollars; far more than the few million (if that) accounted for by the eBay sellers.

I support the IRS on this issue

[140Mandak262Jamuna]

A sale is a sale and income is income. If the law says there is a tax on income it should apply uniformly to everyone. Being a fully computerised market place, such reporting would not be too onerous on E-Bay. In fact small businesses, the mom-and-pop stores would find documenting their tax compliance more burdensome. Banks send out 1099-INT forms listing one dollar and two dollar interest earned. Why cant E-Bay?

When I came to USA first I was amazed to see how much of the expensive stuff is left around the homes completely unsecured. 1000$ grills, 800$ deck furniture, children's toys, garden tools, garden sheds are all left unlocked and no one would steal them. I have lost one tiny bottle of coconut oil left on the sill of an unlocked window in my hostel back in India. Then slowly it dawned on me that most Americans would not buy goods of doubtful provenance from shady sellers. Infact there is a market in b ombay called Chore Bazaar (thief market) which does brisk business. I would very much E-Bay not to degenerate into a giant "Chore-Bazaar.com"

Re:I support the IRS on this issue

[GeorgeS069]

Now wait a minute here.I paid tax on my income when I earned the money from my regular job to buy something and then when I bought it I had to pay a sales tax and now I want to sell it and I have to pay taxes on it AGAIN????
That just does not seem right to me.

Re:I support the IRS on this issue

[dreamchaser]

Sales tax in the US is a State (sometimes with an additional % or two for the county) tax. The IRS is in charge of Federal Income Tax. You are comparing apples to oranges.

However, I do agree that our whole tax code is messed up. A flat or consumption based tax would reduce the size of the IRS by an order of magnitude, save taxpayers billions spent on accountants and tax software, and probably bring in more overall revenue than the current system.

The Tax Code is more about power and control than it is about money.

Re:I support the IRS on this issue

[Snorpus]

If you buy an item, and then resell it at a higher price, you are no different than the shop around the corner (or WalMart)... the difference between your selling price and your purchase price, less expenses, is income, and subject to income tax. If you're selling used household items (that baby carriage that's been collecting dust for years in the basement), and you sell it for less than you paid for it, there is no income tax (in fact, you *might* be able to deduct the loss, if you have other gains to offset it). Of course, the IRS wants proof that you sold it at a loss.

The fact that you paid income tax already on your wages from your regular job is irrelevant.

Re:I support the IRS on this issue

[pla]

A sale is a sale and income is income.

No.

Let's look at this mathematically, considering me buying a $2000 laptop from you on EBay...

The money with which I pay for that laptop already had up to 50% taken out for income tax (including either payroll or SE taxes, which everyone seems to forget Uncle Sam collects and adds roughly 15% on top of the supposed 35% highest tax bracket - Remind me again why we don't have socialized healthcare, when countries like Japan can manage it on only two-thirds the taxes?).

You paid up to 10% sales tax on the laptop in the first place (it actually goes higher in some places, but I'll presume neither of us live in NYC). For simplicity, let's presume you just want to get rid of it at par, not even make a profit.

My state (and many others) expects me to declare "use" tax on goods bought online. No one actually pays that, but in theory, another 10% to Big Brother's coffers.

Then you get to pay up to that same 50% on your income taxes for the laptop.

So, in the simple transaction of you sending me a laptop and me sending you $2k, The government manages to get up to... $2,200!!!



If you don't see the problem there, Thomas Jefferson may as well have never existed.

Re:I support the IRS on this issue

[vertinox]

A sale is a sale and income is income. If the law says there is a tax on income it should apply uniformly to everyone.

Oh lordy. You don't know how wrong that statement is because current tax laws are all messed up due to uneven tax brackets. (I'm sure someone will come out of the wood work and post a link to that fair tax website) Secondly, it has always been questionable on how much authority the IRS and the Feds really have on non-interstate commerce.

Even if it is the way the laws are, I will still disagree with them because these laws do more harm than good to the average American while affording larger corporations more loop holes.

Then slowly it dawned on me that most Americans would not buy goods of doubtful provenance from shady sellers.

You make me chuckle. At least in my city (where we had 300 murders last year) it is quite common for break ins to your house and car. I had a CD case with CDRs stolen... even though it cost me $200 to replace the window I wonder the surprise of the thief who tried to pawn those off.

But yeah... I've had relatives who don't lock their house that live in nice neighborhoods, but most of the US isn't like that if you live in a major city and most Americans wouldn't give a second thought to buying shady items as long as they didn't get ripped off in the process. (Think flea markets and Pawn shops)

Re:I support the IRS on this issue

[140Mandak262Jamuna]

When you make a profit, on something you have owned for more than one year you pay capital gains. If you have owned it for less than a year the profit is deemed income and you pay income tax on the profit. The buyer will pay the sales tax on the price. If the thing you are selling is your home, and you have owned it for more than five years and lived in it for more than two years in the last five years then upto 600,000$ in capital gains is exempted from tax. There could be more laws and issues on it.

Re:I support the IRS on this issue

[140Mandak262Jamuna]

If you sold your 2000$ lap top for less than 2000$ in E-Bay, you made a loss, there is no tax for you. There are people who scoop up items on garage sales for very low price and resell it in Ebay for a profit. Some of these folks are so good at it, it increases their income substantially. Those who make profit pay tax on the profit. The fact that you sold it to pawn shop, or on the garage sale or on the flea market or Ebay makes no difference. If you make multiple deals, some at profit and some at loss you pay a tax on the net profit, it any. You can deduct the cost of your computer, ISP charges etc as business expense if you used them for ebay work exclusively. If you have paid a professional photographer to take pictures of your car to post ebay you can deduct that too. If you make a net loss you can deduct upto 3000$ of it from your regular income. If you made more than 3000$ loss, you can carry it over to the next year and the year after etc etc indefinitely.

The system is quite fair, indeed.

Re:I support the IRS on this issue

[nomadic]

The money with which I pay for that laptop already had up to 50% taken out for income tax (including either payroll or SE taxes, which everyone seems to forget Uncle Sam collects and adds roughly 15% on top of the supposed 35% highest tax bracket - Remind me again why we don't have socialized healthcare, when countries like Japan can manage it on only two-thirds the taxes?).

Countries "like Japan"? That's misleading, as it implies that Japan is just one of many countries a) with socialized medicine, and b) less taxes collected. As I'm sure you're fully aware the U.S. collects significantly less taxes per capita than the majority of first world countries. And Japan has a much more progressive income tax, which hits the extremely wealthy much harder than the U.S. tax system does.

You paid up to 10% sales tax on the laptop in the first place (it actually goes higher in some places, but I'll presume neither of us live in NYC).

NYC sales tax is 8.375%, not 10+%.

Re:I support the IRS on this issue

[140Mandak262Jamuna]

Even if it is the way the laws are, I will still disagree with them because these laws do more harm than good to the average American while affording larger corporations more loop holes.

You have the right to hold such beliefs and vote accordingly in the elections. Even if you disagree with the law you dont have the option of simply ignoring it. Either challenge it in courts or refuse to obey the law and accept whatever punishment the government dishes out. Civil disobedience is not simply ignoring the law. Civil disobedience means, defy the law, report that you have defied the law and challenge the government to punish you. If the govt decides to punish you, be willing to take it.

Re:I support the IRS on this issue

[140Mandak262Jamuna]

You make me chuckle. At least in my city (where we had 300 murders last year) it is quite common for break ins to your house and car. I had a CD case with CDRs stolen... even though it cost me $200 to replace the window I wonder the surprise of the thief who tried to pawn those off.

You are comparing present state of affairs of USA to some sort of ideal utopian society and find it wanting. I am comparing the very same USA to present state of affairs for 80% of the world population. In most developing nations, property crimes are rampant, people are poor and the temptation to buy stolen goods at 50% off is very very high. Very clearly you have not lived outside USA.

Re:I support the IRS on this issue

[pla]

That's misleading, as it implies that Japan is just one of many countries a) with socialized medicine, and b) less taxes collected.

I didn't mean it to sound misleading, more as a proof-of-concept. If they can do it, why can't the US?



NYC sales tax is 8.375%, not 10+%.

Really? Hmm, I have to admit my error there.

My larger point, however, remains - A simple personal property sale between two upper middle class people (enough to approach the highest tax bracket, not enough to have any real tax shelters), if viewed as "income" for the seller, will result in federal+state+local taxes quite possibly more than the total transaction price.

Re:I support the IRS on this issue

[KDR_11k]

That's assuming you do business with a private seller. Many accounts on eBay belong to companies that use eBay as their main source of profit. Also the law does not differentiate between private and commercial sellers, at least not in this regard.

You can deduct your expenses provided you can properly document them.

Re:I support the IRS on this issue

[Rob the Bold]

A sale is a sale and income is income. If the law says there is a tax on income it should apply uniformly to everyone.

If you're an average person selling off unwanted stuff on ebay and buying the junk you want instead, then you aren't going owe income tax. You already paid income tax on the money you made to purchase your junk years ago. Most of it has not appreciated, to put it bluntly. If the IRS were to start playing hardball and try to tax you on the sale as Capital Gains, you would play hardball right back and show them your original basis and then the IRS would owe YOU for your loss. Likewise if they tried to call it ordinary income -- you're selling it at a loss, so no income. And then you'd started claiming your ISP fees as business expenses, and you'd take the home office deduction for the space you use to photograph and package your old junk. So the IRS won't come after ordinary "garage sale" type transactions.

Natch, this wouldn't apply so much to someone whose business is turning stuff over on ebay. They could be taxed on income the same way the corner store is, because they are presumably making a markup by buying wholesale and selling retail.

When I came to USA first I was amazed to see how much of the expensive stuff is left around the homes completely unsecured. 1000$ grills, 800$ deck furniture, children's toys, garden tools, garden sheds are all left unlocked and no one would steal them.

There's some unwritten rule about not stealing outdoor furniture and stuff like that. Even when my wife was my girlfriend and was living in a "bad" neighborhood, no one ever messed with her porch furniture. Sure there was gunfire in the hood, and her landlord's maintenance guy was murdered a few blocks away. And her house was broken into and her laptop stolen. But the porch furniture was always left alone.

Re:I support the IRS on this issue

[apathy maybe]

Apples and oranges can be compared, and to try and claim that they are significantly different is flawed. Here are two studies that back me up.
http://www.improbable.com/airchives/paperair/volum e1/v1i3/air-1-3-apples.html
http://www.pubmedcentral.nih.gov/botrender.fcgi?bl obtype=html&artid=27565

Also, the fellow has a point, no matter that there are two or three levels of government taxing you, they are still taxing the same income. This is a flaw in federal systems. (In Australia, while both federal and state governments can raise taxes anyway they want (almost), the federal government is the only government that taxes income or has a sales tax on general items and services. The states have stamp taxes and the like, and the local councils rates. The federal government then provides most of the states their income (in fact the GST was intended to replace stamp duties, hasn't happened of course).

Re:I support the IRS on this issue

[Stormy Dragon]

>the difference between your selling price and your purchase price, less expenses, is income, and
>subject to income tax

Actually, it's not quite that simple. Depending on what you're selling and why, it may be income, or it may be capital gains.

Re:I support the IRS on this issue

[vertinox]

You have the right to hold such beliefs and vote accordingly in the elections. Even if you disagree with the law you dont have the option of simply ignoring it. Either challenge it in courts or refuse to obey the law and accept whatever punishment the government dishes out.

True. Just because I disagree with the IRS doesn't mean I won't play my taxes, but I will argue that just because elections are held means that what they do is right. Secondly, if a law is wrong then it should be ignored without civil disobedience.

Take the US prohibition of alcohol in the 1920's for example. It was largely ignored by the general populace to an extent that the Federal government eventually relented and reverse its decision. No one got into the streets and protested nor had "drink ins" and let the police take them away.

The other example of ignoring laws was during the American revolution when the colonists ignored many monopoly and tea trade laws. The patriots actually avoided detection by pretending to be Native Americans and refused to turn themselves in after throwing the tea into the harbor.

Not really your definition of civil disobedience, but I would say it would be towards the same goal.

Re:I support the IRS on this issue

[Anonymous Coward]

Stores don't have to figure income on each individual item then neither should we. If everything we buy can be potentially sold for a profit on eBay then everything we buy should be figured into the cost of goods sold and/or overhead costs. If a roll of paper towels gets used in a convenience store for example the roll is written off as in store use. If the IRS goes in this direction of assessing taxes on eBay income from basically items we could have sold less competitively at a garage sale then we should be able to deduct all items we buy as part of the cost of doing business. This should include cost of storage for the items too, aka our rents and utilities and taxes. This should give all but the eBay professionals a net loss to their online retail efforts which they can deduct from their taxes. Would love to see some business and law schools do some studies in areas that could lead to substantiating this arguement in court. Of course if it ever succeeds in court that will possibly lead to spouses sueing each other over various issues of "company" funds.

Re:I support the IRS on this issue

[johndmann]

Businesses, when purchasing goods for resale, do not pay sales tax on those goods.

Re:I support the IRS on this issue

[Ph33r th3 g(O)at]

. . . you would play hardball right back and show them your original basis and then the IRS would owe YOU for your loss . . .

So who has receipts going years back for garage sale-type items they're selling on eBay? Sure, going forward, we can all keep every receipt, but cleaning out the basement could be a taxable event now. Of course, all this kind of thing will do is drive people to dump things into landfills rather than deal with the hassle.

Re:I support the IRS on this issue

[Snorpus]

Agreed. Your point is well taken.

I was illustrating the "simplest" (and I think, typical eBay) purchase-resale case. I think the required holding period is six months to be treated as a capital gain, but I could be wrong. I'm not sure if this applies to "anything" (knick-knacks, etc.) or just to items worth more than a minimum amount (cars, paintings, buildings, etc.).

Re:I support the IRS on this issue

[Waffle Iron]

Secondly, it has always been questionable on how much authority the IRS and the Feds really have on non-interstate commerce.

Not since 1913. The 16th ammenment says:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

"Whatever source" does not exclude income from intrastate activies.

Re:I support the IRS on this issue

[Lumpy]

Because how does Ebay prove I made a PROFIT on an item I sold? every item I sell I sell at a loss.

Therefore, I should get a tax credit for all my personal losses if they do this crap.

The IRS is simply grasping not for new revinue streams but more control. If you are a business selling products you already have laws in your state and country to cover these things. adding the same laws but pasting a sticky-note with "on the internet" or "on ebay" does not make the laws any more effective.

It is NOT ebay's responsibility to do this, it's the seperate sellers responsibility. and the IRS can get off their lazy asses and do their jobs instead of passing laws to force companies to do their work for them.

Re:I support the IRS on this issue

[ari_j]

You're not paying sales tax when you sell it. (Well, you may have to in some cases but your buyer should be paying you for that.) You are, however, paying income tax on the gain you realize when you sell. If you buy something for $10 and sell it for $20, that's $10 of income. That said, I haven't RTFA or anything and don't really see why the IRS wants to track eBay sales: how many sales on eBay are really going to realize taxable gains?

Re:I support the IRS on this issue

[k1e0x]

A sale is a sale and income is income. And theft is theft..

it doesn't matter who does it. Or in this case who taxes the same object mutable times.

The taxes that the US government should be allowed to collect are clearly spelled out in the Constitution. It demands that any such direct tax (such as a income tax) be apportioned equally to the states.. we all know that the income tax is not.. but sometime along the way they changed the rules on us.. The 16th amendment was passed that gave government this power, however look at the language of that amendment.

"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

Basically this reads.. "We can tax any fucking thing we want and we don't have to report shit." Does this amendment belong in document that itself was designed to limit government? How does this amendment limit governments ability to lay taxes?

The income tax is unjust, it is fraud, and it is unnecessary. This country became the richest nation on earth with the ability to rival the great wealth of all the ageless wealth kingdoms of Europe all within a short 100 years.. and we did it all without the Federal Reserve OR the Income Tax.

Re:I support the IRS on this issue

[TheSpoom]

You're likely looking for this.

Re:I support the IRS on this issue

[k1e0x]

You paid much more for it actually.. You need to conceder the fact that Dell was taxed heavily to create the product in the first place.. Since Dell wishes to operate at a profit they must pass this tax on to you in the form of higher prices for their products.

Without Corprate taxes (as corprations don't really pay taxes at all) That laptop may have only cost $1000.

So by your logic the government could have made $3,2000 on it.

Re:I support the IRS on this issue

[140Mandak262Jamuna]

All IRS is demanding EBay to do is to report the sales and identify the sellers. It is the responsibility of the sellers to calculate capital gains or short term profit and pay taxes if any. The demand from IRS is simply a tool to verify tax compliance. Nothing more.

Schwab, Vanguard and Alex Brown send me 1099-(B/Div/Int) and it reports every sale I made last year, identify the security, date of transaction and net proceeds from the sale to IRS and to me. The data is machine readable. IRS checks to see if I have reported all these sales in my tax return. It is upto me to calculate the profit/losss/captial gains. It is my responsibility to prove the correctness of my calculations if I am ever audited. Ebay's responsibility is nothing more than what almost all the financial institutions have borne for ages.

Re:I support the IRS on this issue

[Sj0]

"Outside the US" is one of those ignorant little sayings that sounds good but is meaningless, like "In Europe". Where in Europe? Sweden? Turkey? The Netherlands? Russia? There are some countries on that list that I'd really enjoy living in, and some that you couldn't pay me to live in.

Re:I support the IRS on this issue

[140Mandak262Jamuna]

How does this amendment limit governments ability to lay taxes?

It does not. It does not have to. You talk as though the government is some monarch sitting in a throne across the ocean taxing you every which way he pleases. The Govt is you. It is the politicians you voted for who is taxing you.

This country became the richest nation on earth with the ability to rival the great wealth of all the ageless wealth kingdoms of Europe all within a short 100 years.. and we did it all without the Federal Reserve OR the Income Tax.

If you could live in the 19th century, you would not like it. The wealth was concentrated on very few individuals. Andrew Carnegie had more income than one million Americans back in 1900s. That when the poulation of America was 100 million or so. Almost all except the richest of the rich has very tough lives. Poor white people were exploited may be a tad less than poor blacks and native Americans. The difference made the poor whites thank their lucky stars and dutifully enforce the class/race order.

Just look at the economics of the South during the civil war. The fact was that most of the white farmers in the south did not own slaves. A few rich ones did. The rest rented the slaves or hired free men paying very high wages. They could never make a profit because the rich slave owning whites were under selling them. If the South had abolished slavery and made all people pay market wages it would have raised the price of cotton so much that all of them would have benefitted. But what did the 95% of the farmers who had no slaves and the 4% who had less than five slaves do? They drank the cool aid supplied by Jefferson Davis and his ilk and became cannon fodder, willingly.

You think it is some stupid analysis of some far long gone days? Just poke around the Death Tax issue. Follow the money. Who is funding the debate, who paying off the talk radio hosts, and think tanks and Cato institute to distribute this kool-aid.

150 years have gone. And you can trust the middle class white folks to be played like a stringed instrument.

Re:I support the IRS on this issue

[Anonymous Coward]

probably bring in more overall revenue than the current system

And that's a good thing? We're talking about the most expensive, most powerful government that has ever existed in the history of organized coercion, with military bases in some 150 countries around the world. Clearly, the power elite who control this government have been enjoying an excess of revenue for quite some time.

No, what this government needs is less revenue, not more.

Re:I support the IRS on this issue

[Registered Coward v2]

However, I do agree that our whole tax code is messed up. A flat or consumption based tax would reduce the size of the IRS by an order of magnitude, save taxpayers billions spent on accountants and tax software, and probably bring in more overall revenue than the current system.

Actually it would replace one set of convoluted rules and tax avoidance methods with another.

For example, some proposals suggest only taxing the final sale price to the end use; not the sale of goods required to produce an item. So a house, for example, would be taxed when it was first sold, but the lumber, etc would not be taxed when the builder bought it. While this makes sense on the surface - you only tax the items once; the goal then becomes to either:

1) lower the sales price as much as possible while still getting the desired cash. So, for example I build a home and then take out a $500,000 mortgage on it - which I get in cash. I sell you the house for a dollar and you assume the $500k debt. The government collects tax on a dollar, I have the desired cash and you avoid a large tax bill. This was actually a way to do a tax free sale of assets in the US until the Feds outlawed it via the tax code.

2. find a way for the ultimate end user to be the builder and never sell the house. So I form a corporation for the express purpose of building a home and hire a contractor to do so. Once the house is built I occupy rather then sell it. Since the first sale has not occurred I have not incurred any tax liability. When I go to sell the house I sell the corporation which owns an asset - so unless you tax sales of corporations as well I make a second tax free transfer; or I do 1 above as part of the sale.

A "Fair Tax" as some propose on consumption will not simplify the tax code; all it will do is cause smart people to find new loopholes that Congress will then try to close.

A secondary effect is the impact on such things as home sales - new homes would have to sell for less than existing ones since they would be taxed and buyers tend to look at the final price, not the one "before tax" price.

Of course, Fair Tax advocates simply ignore these points when making their argument. I set next to one on a plane flight, when he brought up the "Fair Tax" and try to sell m e on it I started asking about these things - his response was to get upset and say the details weren't important. At least I shut him up so I could enjoy my book.

Re:I support the IRS on this issue

[k1e0x]

It does not. It does not have to. You talk as though the government is some monarch sitting in a throne across the ocean taxing you every which way he pleases. The Govt is you. It is the politicians you voted for who is taxing you. I'm insulted by you saying that I am the government. They are our rulers and I am absolutely NOT the government. neither are you. I did not vote for them to impose a tax on me, I did not give them any such authority for them to rule me at all. If you did I feel sorry for you, but they imposed this upon me, and the rest of America too by the use of force. Where did they get this authority to rule other men? I don't have such authority so I don't see how any other person COULD.

Why do you want to make this about slavery.. America didn't start the practice of slavery.. America was the country that ENDED slavery.. and we did it so well that we ended it in practically the entire world.

You know, your argument doesn't hold a lot of weight.. when we were cavemen.. times were hard. In 100 years we will look back on today as being hard times too. However we can make things easier by casting off our tyrannical rulers. And the mafia we call the us government is plenty tyrannical. ..if you dont believe that... tell them "NO!" and see what happens to you.

Re:I support the IRS on this issue

[Chmcginn]

And if you get a state tax ID number, you can give it to the people at Sam's Club, etc, and avoid having to pay sales tax on goods there. What's your point?

Re:I support the IRS on this issue

[KDR_11k]

Private use remains private use. A company can deduct everything because a company is a business by definition. A private person isn't and has to keep track of what is done for business and what not.

Re:I support the IRS on this issue

[KDR_11k]

Because how does Ebay prove I made a PROFIT on an item I sold? every item I sell I sell at a loss.

Like all taxes it's your job to document your expenses to show that you made a loss.

If you are a business selling products you already have laws in your state and country to cover these things.

Indeed which is why this law is intended to help with enforcement, not levy new taxes.

Re:I support the IRS on this issue

[fyngyrz]

Secondly, it has always been questionable on how much authority the IRS and the Feds really have on non-interstate commerce.

No, actually, it isn't. They have none. What they have is the ability to coerce; aside from that (and the fact that they broadly use that ability to coerce), they are operating entirely outside the constitution:

Sec 8: [The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

10th Amendment: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Given that the constitution has not been amended to change either of these rules for the fed, no other conclusion can be drawn but that they have no such authority.

Re:I support the IRS on this issue

[fyngyrz]

Not since 1913. The 16th amendment

The 16th amendment is an invalid amendment, because it contradicts, without accounting for, both section 8 and the 10th amendment. Unless those are changed, there is no legitimate authority for the fed to do anything, taxwise or otherwise (like drug laws and speed limit laws) about intrastate commerce. No change to the constitution that makes it contradict itself can be valid. What they have is the ability to coerce and the ability to bribe. Because they are criminals operating outside the constituting authority that is the only leg they have to stand on that justifies their existance. And they use both liberally. That's not the same thing at all as "authority." The fed behaves considerably more like the Sopranos than does as a legitimate representation of the form of government the constitution actually enables.

Re:I support the IRS on this issue

[Anonymous Coward]

A sale is a sale and income is income. If the law says there is a tax on income it should apply uniformly to everyone. Being a fully computerised market place, such reporting would not be too The monthly sales and expense reports I receive from eBay originate from eBay International AG in Switzerland. Seeing as eBay founder Pierre Omidyar is from Massachusetts, I'm just guessing that his grandfather didn't have a cottage in the alps. Businesses crave tax shields too.

Banks send out 1099-INT forms listing one dollar and two dollar interest earned. Why cant E-Bay? Because PayPal is "Not-a-Bank". Although because eBay owns PayPal they do excel at nailing ya coming and going, so I can see where you might be confused. ;-)

dawned on me that most Americans would not buy goods of doubtful provenance from shady sellers. Infact there is a market in bombay called Chore Bazaar (thief market) which does brisk business. In North America the desire to save money (regardless how high the price of the item) frequently trumps common sense. You can buy watches right off someone's wrist or coat, pawn shops have lots of stolen goods, and on eBay it wasn't considered fraud if you hid a small sentence informing the buyer that they will only receive a PHOTO of an Xbox 360. Deeming that "creative product marketing" I would say that yes, the seller should report it as income.

Re:I support the IRS on this issue

[TubeSteak]

Take the US prohibition of alcohol in the 1920's for example. It was largely ignored by the general populace to an extent that the Federal government eventually relented and reverse its decision. No one got into the streets and protested nor had "drink ins" and let the police take them away.

1913: Create Income Tax
1920: Ban alcohol because there is another source of tax money
1930: Income tax revenues plummet (AKA The Great Depression)
1933: Repeal Prohibition because they need the tax money again.

Notice how none of those reasons had anything to do with the rampant civil disobediance going on at the time? In 1913, Alcohol taxes provided ~1/3 of the Fed's revenue. By 1920, income taxes were ~2/3 of their revenue.

Prohibition was a perfect storm of feminists, very moralistic Christians and an exploding income tax base.

Re:I support the IRS on this issue

[fyngyrz]

The Govt is you. It is the politicians you voted for who is taxing you.

There are no politicians that I have voted for who have ever had the opportunity to contribute to making law. Every law that has been made was made by people I explicitly did not vote for, largely never had an opportunity to vote for, and where the votes that put those politicians in office were entirely from people who I in no way have ever agreed were qualified to make law, or select people to make law, on my behalf.

Furthermore, the constitution itself was crafted by people whom I had nothing to do with, did not authorize, have not sworn an oath to nor signed an agreement binding me to their machinations, and did not even know, who crafted the document long before I would have ever had any opportunity to have any input on any level whatsoever (and that goes for most laws, too.) So get off your high horse. The government and the laws are no different than decree from a monarch in fact - I have had, and will have, exactly ZERO input to them. And that goes for every other normal citizen too, they're just too bewildered to realize it.

Furthermore, to the extent that anyone - perhaps a legislator - has input to the system, any two uninformed people directly have the ability to outvote any one informed person, to which we can add the dead certainty that the vast majority are woefully uninformed, a situation that bodes poorly in theory, and has turned out even worse in reality.

So the government and its laws are not "me." If the government and its laws are "you" to any realistic extent (which I highly doubt, despite your piteous cries of representative malarky), then let me take this opportunity to appraise you of the fact that I would as soon drown you in the nearest adequate puddle as speak to you. You represent the worst of the very absolute worst. Are we clear?

Re:I support the IRS on this issue

[k1e0x]

Nicely put.

I might also add that the people in no way control the government because.. Where at best only 50% of the people vote at all.. it only takes 50% of those that do to win so by all BEST accounts 25% of the people get a winning vote.. if we can assume as high a number of half of them (and I seriously think that is a high estimate it) are educated on the issues and don't just vote for whatever color they think they are.. then you get 12% (or bout the population of California) of the people in this country who's vote would "in theory" matter.

But they don't because the bureaucrats rarely actually do what anyone wants.. and why should they? Nothing will happen to them if they don't.

Re:I support the IRS on this issue

[Breakfast Pants]

Since the IRS requires receipts, damn near all of them. The IRS has completely sidestepped innocent until proven guilty, by making 'not proving yourself innocent' a crime which they can easily prove you guilty of, thus sidestepping the constitution.

Re:I support the IRS on this issue

[fyngyrz]

But they don't because the bureaucrats rarely actually do what anyone wants.. and why should they? Nothing will happen to them if they don't.

Well... yes, but remember: the concept of any two uninformed voters being able to outvote any single uninformed voter applies to our elected representatives just as much as it does to the rank and file voter. "The Internet is a series of tubes", anyone? So assuming you could get past the legislators voting based on PACs and lobbies and payola (which you can't) you'd still have to face the whole problem with the raw democratic process being flawed at its very core. If you don't pre-qualify your voters, you are simply handing power to the village idiots.

The bureaucrats - by which I mean the unelected powerbase, such as the FCC - are an entirely different kind of problem. They cannot be controlled by any measure traceable to the voters - there is simply no mechanism provided to do so.

Re:I support the IRS on this issue

[k1e0x]

WSo assuming you could get past the legislators voting based on PACs and lobbies and payola (which you can't) you'd still have to face the whole problem with the raw democratic process being flawed at its very core. Oh? We can fix this problem. The solution is simple. We get rid of them and the democratic process and for that matter the government itself and any that would replace it.

Why men feel they must use force and control other men I will never know. Initiating the use of force on others is plain wrong, it does not make it ok when you call it the "government". Using force on others is the root of all the evil in the entire history of man. Slavery, war, oppression, tyranny.. you name it.. its all force and its ALL had governments in one form or another put their stamp of approval on it.

"It's your patriotic duty citizen to allow us to steal the wealth of every man woman and child in America! YAY for the IRS!"

Re:I support the IRS on this issue

[hazem]

Is it really so hard to understand that it's a transaction that generates a tax, not the objects or money themselves?

System Dynamics talks about stocks and flows. A stock is something that accumulates things - or holds value independent of time, like a tank full of water. A flow is is dependent on a rate of change - water flowing from one tank to another. If you look at a point-in-time snapshot of such a system, you can measure the stocks, but not the flows.

Income and Sales taxes both tax the "flow" of things. It is not the actual money being taxed but the fact that it's flowing. Income tax is like your employer having a tank of money and you have a tank of money. It's only the flow of money from one tank to the other that is taxed. The store has a tank too - and when you buy something, that flow is taxed as well. Sell that thing? The buyer has a tank and the money flows from his to yours.

So, the money is not getting taxed over over, but rather the flow of money from one place to another.

Property tax, on the other hand, is where you do get taxed over and over. The value of your house is like a stock. Yet, every year, the tax that value over and over.

It really shouldn't be that hard to understand, but most of us are taught to think in simple linear ways rather than systems that have complex interactions.

Of course, some people just don't want to pay taxes, regardless of whether they are owed or not, or fair or not.

Re:I support the IRS on this issue

[Kymermosst]

Now wait a minute here.I paid tax on my income when I earned the money from my regular job to buy something and then when I bought it I had to pay a sales tax and now I want to sell it and I have to pay taxes on it AGAIN????

Maybe. Here's how it works in the real world:

Suppose you paid tax on your income and then paid a sales tax on a $100 item. Some time down the road you decide to put the item up on eBay. One of two things happens:

(a) The item has depreciated in value and you have sold it at a net loss. For ease we will fit break-even sales into this category as well.

(b) The item has appreciated in value and you have sold it at a net profit.

You do not owe any tax for (a). The IRS doesn't really care about you. You do technically owe tax for n net profit from (b), but the IRS probably doesn't care if the gain is less than some attention-getting amount and it is not a usual source of income for you.

What the IRS cares about is if a major source of your income for a year is all from the (b) category, and you are not paying the taxes owed. At that point you are operating a business (whether licensed or not, the Federal gov't doesn't care) and should be filing schedule C for ongoing activities or adding it as an income source (on the honor system) on your 1040 for occasional activities.

Naturally, if you are buying stuff at wholesale (as a business) and retailing it on eBay, you are operating a business and should be paying applicable taxes as well (and won't be paying sales taxes except to buyers resident in a state where you have a business presence).

It may not seem right, but that's the way it works. You can minimize your tax burden if you are doing something on eBay that could be considered a business activity. You need to save your receipts, account your profits and losses, and deduct all your business expenses, such as computer upgrades and the fees that eBay, paypal, et al charges. File your Schedule C and be done with it.

Remember, it is the duty of citizens to pay their lawful taxes - and it is also a right of all taxpayers to pay the minimum possible tax that they can legally justify. So if you are doing significant business on eBay, you should be deducting your fees, computer costs, etc.

Re:I support the IRS on this issue

[akintayo]

> Most of it has not appreciated, to put it bluntly. If the IRS were to start playing hardball and try to tax you on the sale as Capital Gains, you would play hardball right back and show them your original basis and then the IRS would owe YOU for your loss.

Pure genius.

Re:I support the IRS on this issue

[Anonymous Coward]

Japan doesn't have any nappy-heads or beaners. That's why they can do it and we can't.

Re:I support the IRS on this issue

[jadavis]

Fair tax has some inconsistencies.

Consumption tax should be run like an income tax.

If you buy something as an end-of-the-line consumer, you pay taxes on that consumption. It doesn't matter whether it's food, shelter, or second-hand, it's still consumption, and you should still pay taxes. The only type of consumption you shouldn't pay taxes on is when the same person produces and consumes something (which isn't taxed under the current system anyway).

It should be run more like income tax than sales tax. Your banks can report withdrawn amounts (including credit-card purchases) rather than your employer reporting income. Large purchases and monthly bills can include withholdings (which could also be done by the bank).

The benefit is that you tax those who consume not those who produce.

Re:I support the IRS on this issue

[Pendersempai]

If you're an average person selling off unwanted stuff on ebay and buying the junk you want instead, then you aren't going owe income tax. You already paid income tax on the money you made to purchase your junk years ago. Most of it has not appreciated, to put it bluntly. If the IRS were to start playing hardball and try to tax you on the sale as Capital Gains, you would play hardball right back and show them your original basis and then the IRS would owe YOU for your loss.

No, that's only for investment property. Most of the stuff that people buy and sell is personal property. If you buy a car for your own personal use and then five years later sell it at a lower price, you're not entitled to deduct the difference. And even if you were, things would be complicated by an anti-shelter rule called the Passive Activity Loss rule, which caps the amount of loss from passive sources (e.g. investments) that you can deduct to the amount of passive income that you made in the year. So if you sell a stock at a loss, you can only apply the deduction to gains that you made from selling other stocks that year. Since most people aren't making money from passive sources, most people wouldn't be able to claim a loss from this sort of thing even if it weren't purely personal property.

Re:I support the IRS on this issue

[140Mandak262Jamuna]

Because PayPal is "Not-a-Bank".

That is why is neccessary to amend or create a law to make EBay id the sellers and report the gross proceeds. If sellers made profit they will pay tax, if the made loss they will take a deduction.

In North America the desire to save money (regardless how high the price of the item) frequently trumps common sense

I am sure it does. But not as frequently as in Pakistan, Bangladesh or Surinam. See the post by a New Zelander about parcels being left on the porches of USA.

Re:I support the IRS on this issue

[ari_j]

I know little about taxes. Do you mean that the IRS assumes a basis of $0 in any property you sell unless you have a receipt for the original purchase, and thus that any sale you make without a purchase receipt on hand is fully taxable as income? That sucks.

Re:I support the IRS on this issue

[Kymermosst]

I should really not write first thing after waking up.

At least my grammar errors don't make my post unintelligible.

Re:I support the IRS on this issue

[larry bagina]

Your arguments are intellectually dishonest.

• The fact that you pay up to 50% income/state/fica tax has no effect on the "simple transaction." You'd be paying that amount whether you buy a laptop or not.
• The cost of goods sold is a deductible expense.
• If you're a legitimate business, you don't pay sales tax when you bought the laptop. If you're not a legitimate business, then sales tax/use tax is exempt (my state's use tax includes exemptions for casual sales (items purchased from someone other than a business or dealer).

So that leaves just the sales/use tax (only paid once) and income tax from any profit.

Re:I support the IRS on this issue

[cpt kangarooski]

The 16th amendment is an invalid amendment, because it contradicts, without accounting for, both section 8 and the 10th amendment.

You're wrong, of course. There is no constitutional requirement that amendments be written as you suggest. The way laws are interpreted is that two contradictory laws at the same level (here, the Constitutional level) are read such that the later enacted one is the supreme one. Further, whenever at all possible, no law is ever interpreted to be ineffective, since it is always assumed that the enacting authority intended to pass that law, worded that way. Courts will and do go through hoops looking for valid interpretations following this principle. If the 16th Amendment can arguably be said to function as written as opposed to being non-functional following your interpretation, then your interpretation is wrong.

I don't mind people being upset about taxes (though I don't really understand it much, given how low our tax burden is in the US and how much it gets us: "Taxes are the price we pay for civilization" -- Justice Oliver Wendell Holmes, Jr.) but I loathe the inane nonsense that so often seems to crop up in these sorts of discussions.

Re:I support the IRS on this issue

[cpt kangarooski]

But it would also be more regressive than we have now. To a person who barely makes enough to scrape by, 15%, say, is a lot. To a person who makes a million dollars a year, 15%, while a larger dollar figure, is far easier to pay. I'd prefer a more progressive system that paid attention to the marginal utility of one's income. It's fairer.

True, it's more complicated, and it results in some people paying proportionately more than others, BUT the burden (i.e. the effect of your taxes on you) is proportionate, which under your proposal, it is not.

The Tax Code is more about power and control than it is about money.

Meh. It's often used in policy when it shouldn't be. E.g. we should do something nice for war widows, so let's reduce their taxes, or we should encourage exercise, so let's reduce taxes on athletic equipment and increase taxes on fattening foods. I don't think that the tax system has become convoluted out of malice, just that it gets fiddled with too much.

Re:I support the IRS on this issue

[cpt kangarooski]

It strikes me that your argument boils down to 'I didn't ask to be born.' This is the world we inhabit, and complaining about what has gone on before and how it imposes on you is of little value to anyone. I suggest that you either 1) shut up, 2) do something about it instead of bitching so much (at least become personable enough to convince others to bitch too -- right now you are grating), or 3) leave, and do something about it there, and so lead by example.

I would point out, however, that it's probably impractical to create a new government every time someone is born, and that it probably wouldn't matter anyway, since most infants aren't all that well-equipped to get involved in politics and make good decisions, and meanwhile things need to be done, and we can't all wait around for all the kids to grow to maturity.

While I recognize that there is value in complaints alone, I expect that you will have no success in anything related to governmental reform until you can suggest some sort of solution for your complaints (the big-bad government that oppresses children who had the misfortune to be born and who are lazy enough to not vote, or whatever) that is halfway realistic and not some anarchistic, libertarian, cloud-cuckoo-land.

Re:I support the IRS on this issue

[fyngyrz]

There is no constitutional requirement that amendments be written as you suggest.

Yes, of course there is. That's why the 21st amendment had to repeal the 18th in order to mean anything. Having contradictory, non-repealed content is nonsensical. The 16th is invalid. Period. Not that the government follows the constitution anyway.

Re:I support the IRS on this issue

[XchristX]

|I was amazed to see how much of the expensive stuff is left around the homes completely unsecured

That's mostly in relatively affluent suburban communities. If you so much as leave your car out in some parts of New York, it'll get stripped for parts and disappear in the black market in a matter of minutes.

|I have lost one tiny bottle of coconut oil left on the sill of an unlocked window in my hostel back in India

Again, in the opposite vein, that's because you were in a hostel, where everything from coconut oil to your underwear is fair game. I have experienced the opposite in the Indian state of Goa, where I left my expensive and unlocked samsonite suitcase full of jewelry and antiques out in the streets of Panjim for 20 minutes and nobody so much as came near it.

Re:I support the IRS on this issue

[cpt kangarooski]

Yes, of course there is.

If you're so smart, then please feel free to quote the portion of Article V which supports your claim.

That's why the 21st amendment had to repeal the 18th in order to mean anything.

It didn't have to. It was just a convenient way of returning to the status quo ante Prohibition.

Meanwhile, please feel free to note how the 12th and 17th Amendments totally rewrite how the President, Vice-President, and Senators are elected, yet don't even bother to refer to, much less repeal, the portions of the Constitution that they replace.

Frankly, if you have this much trouble with something as simple as the last-in-time rule, then I can't imagine where you get off thinking that you are ever going to have anything reasonable and persuasive to say on tax reform.

Having contradictory, non-repealed content is nonsensical.

The later enacted rule overrides the earlier. It isn't nonsensical, it's standard operating procedure, and has been for many centuries, most likely. Legislative bodies often aren't tidy. So what else are courts to do? You can't say that the earlier law is off the books, because it is not. You can't say that the newer law is ineffective, because that runs contrary to the intent of the legislator to legislate. What you can say is that the legislator presumably knew of the conflict, and passed the newer law anyway, and therefore has overridden the earlier law. If the later is taken off the books, the older goes back into effect. Otherwise, the older is ignored to the extent overridden.

Hell, it's not difficult to construct regular expressions that accomplish the same thing. Why would it be difficult in law?

Re:I support the IRS on this issue

[fyngyrz]

If you're so smart, then please feel free to quote the portion of Article V which supports your claim.

The entire thing supports my claim. Section 5 describes the procedure we are required to follow to (a) change its previous meaning, in which case any reasonable person would expect the change(s) to be described (and indeed, this is precisely what we find in those places where the changes were competent) or (b) add new meaning, in which case any reasonable person would expect no effect upon, and be unwilling to presume effects upon, other parts of the constitution. Things would be fine if either one of those was what they did, but that's not the case here: They did something else entirely: they added contradictory text. Which makes it nonsensical, not somehow magically valid because it is dependent upon non-intuitive parsing rules that aren't even in the document. No one can possibly interpret section 5 as authority to add random text to the constitution. If added text doesn't comply with the mechanism described in the constitution to precisely delineate a change, or to create an addition of new, non-interfering concepts, then it must be meaningless. "Changes" that don't describe what they change are the work of incompetents. In the case of this very important constituting authority, we the people have every reason and authority to ignore such works of imprecision and unreason, just as we have every reason to ignore laws that have no authority underlying them, and take remedial action against those who would attempt impose such laws upon us.

It didn't have to. It was just a convenient way of returning to the status quo ante Prohibition.

Such an approach would also be a "convenient" (cough) way to indicate which portions of other declarations no longer apply. Documents that contain no directions as to how to parse contradictory material, and contradictory material, are well along the road to becoming meaningless. You, as a lawyer, may indeed be aware of some method of parsing them that can twist them around to make sense to you, but each level of invisible implication that a law or the constitution requires to be meaningful degenerates its usefulness as a tool that a citizen can be made to understand without knowing the hoops and pitfalls that legal tacticians use to turn black into white and night into day. That is part of what is wrong with the entire legal system today, and to use it to argue that the 16th is "right" is purest drivel.

For example, I've watched your peer group try for literally years to argue based on similar external invisible implications only they could imagine that the prefatory clause of the 2nd amendment somehow limited the operative clause; it was all sophist nonsense, of course, but it took until this decision before someone actually pointed out in detail what anyone with any sense already knew - the language of the document itself - the constitution - is more important than any "implicit" hoop jumping lawyers are wont to do by their very natures.

note how the 12th and 17th Amendments totally rewrite how the President, Vice-President, and Senators are elected, yet don't even bother to refer to, much less repeal, the portions of the Constitution that they replace.

That simply makes them illegitimate, it doesn't magically make them sensible. This is no surprise; the government routinely ignores those parts of the constitution that it hasn't bothered to cause to be contradictory (commerce clause, inconvenient portions of the 1st, 2nd, 4th, 5th, 6th, 8th, 9th 10th, and 14th amendments, ex post facto punishment, etc.) - why should it be any news that it is being unforgivably and incomprehensibly sloppy about how it attempts to implement changes? You see, you argue from the premise that the laws and the mechanisms in place ar

Re:I support the IRS on this issue

[fyngyrz]

You can't say that the newer law is ineffective, because that runs contrary to the intent of the legislator to legislate.

I can't believe I missed responding to that. I plead having been overwhelmed by the level of needle-threading in the rest of your post.

Look, the whole point of the constitution is to limit the ability of the legislator to legislate both by virtue of enumerating the powers they are permitted to exercise, and by forbidding or handing off other powers entirely. I mean, really... as a lawyer, while I'm not quite ready to follow the advice of Shakespeare's character Dick the Butcher, I expect you to cheerfully play the sophist, but the presumption that because a "legislator has an intent to legislate", a law or constitutional amendment must have an effect is entirely too much for even another lawyer to swallow, isn't it? You do recall those inconsequential little bits of drivel called the 10th amendment, as well as article 1, sections 9 and 10, do you not? You do know why the bill of rights was even added on, right? It was because they knew that attempts would be made by the unscrupulous to legislate matters that the authors of the constitution, in no uncertain terms which are in fact the bill of rights, were not willing to allow. That is why, for instance, when your cronies have "intent to shut down free speech", their intent is absolutely irrelevant. We can say that unconstitutional law is irrelevant, and the only criteria for doing so is that it isn't within the authority of the government to enact or enforce such a law, regardless of the "legislator's intent."

You write as if "the legislator" was god's own infallible right hand. Legislators, going strictly by the evidence mind you, at best appear only to be those people who have by and large no understanding whatsoever of what it is they are authorized by the constitution to do, but by god, they're going to do something anyway.

Re:I support the IRS on this issue

[cpt kangarooski]

Which makes it nonsensical, not somehow magically valid because it is dependent upon non-intuitive parsing rules that aren't even in the document.

The Constitution does not exist in a vacuum. The framers wrote it in light of their existing legal traditions, and AFAIK, the last in time rule was among them. They didn't feel a need to spell that out. In fact the very idea of a codified constitution was something of a novelty; the framers had been Englishmen, and the English Constitution is uncodified, and consists of the combination of many documents, precedents, traditions, etc. that have accumulated over centuries. The new governments in the United States represented a break from some traditions, and so new laws were needed. But we didn't completely abandon our legal history. Even today, some English laws that predate the Revolution, and which often aren't even still on the books in England, remain laws here, are cited, etc.

The fact that you didn't know the rule, and that you don't find it intuitive, is irrelevant. More on your personal failings later, though.

No one can possibly interpret section 5 as authority to add random text to the constitution.

If by "no one" you mean everyone: all the Congresses, all the states, all the courts, etc., only then would you be right. You are the first person I've ever even heard of who had a problem with this.

You probably think that because the USSC said so, it's perfectly OK for this to be the law of the land.

No. The S.Ct. is often unwise, sometimes wrong (sometimes admittedly so, see e.g. Lawrence v. Texas in which the Court itself wrote that Bowers v. Hardwick, an earlier contradictory case, was wrongly decided), and I often disagree with them. But I do recognize that while they, like all of us, are fallible, they do have legal authority. I wonder if you think that they do.

I say that what they have done is unconstitutional and therefore not the law of anything - we're looking at pure coercion here, not legal authority.

Ooh, it's like a zen koan: if someone acts coercively toward you, but you believe that in fact they have legal authority and thus your responses to them are not founded in a response to their coercion, but is instead merely abiding by the law, does it really matter much in the end?

There is no "last in time" rule described the constitution.

So? Along with what was above, lots of things aren't described in the Constitution but are present in it nevertheless. For example, the First Amendment protects the right to free speech. It does not protect the right for people to freely listen. Assuming that it was otherwise clearly within Congressional authority to regulate (e.g. the listening is going on via a means of indisputably interstate commerce, such as an interstate telephone call), could the listener rely on the First Amendment to protect him? The answer is that he obviously could: the framers could not have been so stupid as to expressly protect a right of free speech without implicitly protecting a right for people to listen to that speech. Without protecting the latter right, the former would be useless, and it is nonsense to assume that the framers went through the trouble of passing the First Amendment with useless provisions in it.

There's all kinds of stuff like this. Remember, lawyers are trained to read and interpret documents very carefully. Everyone writes with varying degrees of looseness; every author makes certain interpretative assumptions which carry through to his writing. If he's careful, he tries to spell them out so as to guide the interpretation of readers. But no one's perfect. (Not that a perfect author seems to count for much: try reading the Talmud some time)

the common man's sensible understanding

I don't recall that the Constitution says that it gives any weight whatsoever to what the common man sensibly understands about anything. Sounds like you should deal with your beam before my mote.

You are

Uh oh!

[libkarl2]

How long before the same fate befalls the folks who make a living working the Massively Multiplayer secondary markets?

Some people just can't handle the fantasy, and they retreat to reality; where the tax man awaits! Ha ha! Big mistake! Your magic missiles are of no use here! This is a foe beyond any of you! Fly you fools!!!

Re:Not surprising

[sixxi]

hhmmm no comment

People will find alternatives

[Anonymous Coward]

New websites will pop up, with legal loopholes, or just shady business practices.
Or just sell on craigslist.

Re:People will find alternatives

[KDR_11k]

Ebay is not a legal loophole, people just don't report their income from it which is a felony and the IRS wants ebay to help them with identifying and catching the criminals.

Re:People will find alternatives

[Anonymous Coward]

You mean eBay doesn't have shady business practices?!

Re:People will find alternatives

[Anonymous Coward]

FYI, people are required to list how much they make from garage sales as well.

And Ebay may be given requirements, but new sites may establish a "hands-off" approach, and not collect or store sales info, just collect a monthly fee for using their site. Then they can avoid the same mess as ebay.

Re:People will find alternatives

[KDR_11k]

Yes but why would a new website bother to establish a "tax evasion zone"? Tax evasion is not legal anyway and the only people who benefit from it are the criminals. In fact I'd say it hurts the legal people since the govt needs a certain amount of money and if the illegals withhold some the rest has to make up for it.

Re:People will find alternatives

[Anonymous Coward]

You can point out what is legally wrong or right. But if there is a demand for it, there will be a solution. People want to sell items without tax, buy items without sales tax, and calling them criminals matters little.

In the larger scale of right and wrong, perhaps avoiding paying taxes is a form of protest towards the way the money is being spent (war). Although that is doubtful.

Re:People will find alternatives

[KDR_11k]

People want to sell items without tax, buy items without sales tax

And I want a pony.

Re:People will find alternatives

[Thomas Shaddack]

And I want a pony.

You can buy one. If you buy from a neighbor for cash, you may even get it without tax.

Over Reactions.

[jellomizer]

That is what I call an over reaction. Put it plane and simple if you make money the Irs wants to know abut it. If you make your money working in a 9-5 job or as a criminal. If you make money on EBay they are going to tax you if you make your money selling weapons for Online video games you should pay taxes for that. No the IRS Will not probably go after you if you make say $1000 for selling something you didn't need heck most of the time you could record it as a net loss. But for people who buy and sell on ebay like stock and make money at it should pay taxes just like everyone else.

Oh Please

[dreamchaser]

They'd be doing this regardless of who is in office. It's what the IRS does...it goes after people who avoid paying taxes on income. As for your gratuitous statement about who will and won't pay the taxes, you do know that 79% of the tax burden is carried by the top 20% of income earners, right?

Maybe for once we should stop being partisan and take a good honest look at these issues rather than using them as a soapbox to attack one side or the other on the political spectrum.

As for the topic...as long as our tax code doesn't get fixed this is entirely correct of them to do. And as for those selling MMOG goods, I hope they all get audited. I pay my taxes, and a healthy amount of them. Why should some guy making $50,000 a year selling Ultima Online gold (for example) not pay any?

Re:Oh Please

[timmarhy]

right on. i make a decent income, you wouldn't class me as "rich" but i work long hard hours and sacrifice family time and personal time to try make a contribution to society and to increase my wealth and the well being of those around me. why the fuck should some asshole have the right to avoid paying what i have to pay just because he's doing business online?

Re:Oh Please

[jafiwam]

Maybe for once your partisan republican ass should stop making blatant lies?

Here's an analysis of your "% burden % income earners" statement that shows it is clearly propaganda or ignorance at best with that prattling truism.

On Taxes

That said, there needs to be a way to collect from the ever increasing proportion of economic activity that does not fit into what used to work in the 50's. However, it should be a discourse free of likes like the parent poster offers above.

Re:Oh Please

[dreamchaser]

That's funny, last time I checked I was a registered Independant who has voted Republican, Democrat, and Libertarian in his life. Maybe you should save the ad hominem attacks for where they are most deserved.

Re:Oh Please

[ScentCone]

Maybe for once your partisan republican ass should stop making blatant lies?

You're actually saying that, and then linking to an "analysis" that cites a fictional town with a flat tax rate as an example of why he's wrong?

Income, property, and other tax rates are NOT flat. They are largely "progressive," which translates to "punitive." Here are the numbers, released by the IRS, based on last year's taxes:

84.6% of all federal income taxes are paid by the top 25% of earners
96.7% of those taxes are paid by the top 50%
The top 1% pay over a third of those taxes.

And just to flesh out the picture: the lowest-earning fifth of the citizenry receive over $8.00 in government spending for every $1.00 in taxes paid. Middle income households receive $1.40 for every dollar paid, and the high end people receive $0.41 for every $1.00 they spend. Government spending aimed at the lowest-earning 60% exceeds that which is collected from them. It's simple redistribution, and the more you make, the more it tilts away from you. Your flat rate fantasy example is complete BS (but, you knew that).

Re:Oh Please

[Snorpus]

I'd hardly call a hypothetical example, made up by someone I never heard of, "proof" of anything.

Re:Oh Please

[LaughingCoder]

Blatant lies!?! You cite a blog for your "proof"? How about a reputable site like http://www.taxpolicycenter.org/TaxFacts/Tfdb/TFTem plate.cfm?DocID=457&Topic2id=20&Topic3id=22 ?

I'll save you the time of reading all those complicated tables of numbers you'll find at that site. In 1979 (the earliest date in the table) the top 20% paid 56.4% of total federal tax liabilities. In 2004 (the most recent data in the table) the top 20% paid 67.1% of same. More interestingly, as for the share of individual income tax liabilities, the top 20% paid 64.9% in 1979, and paid a whopping 85.3% (more than the 80% cited by the OP) in 2004. And guess what? In both cases these percentages have gone *up* during the Bush years, contrary to popular belief that the Bush tax cuts were "for the rich".

One last statistic that is also interesting. The bottom 40% now "pay" a negative precentage of individual income taxes. And the bottom 60% combined pay less than 1%. That means the top 40% pay over 99% of individual income taxes.

I think these inconvenient facts show that your statements are the real propaganda, ignorance and prattling truisms.

Re:Oh Please

[Rob the Bold]

As for your gratuitous statement about who will and won't pay the taxes, you do know that 79% of the tax burden is carried by the top 20% of income earners, right?

But did you know that 40% of all sick days are Mondays and Fridays? I don't know if your statistics are correct or not, but assuming they are: so what? If the top 20% of the earners made 79% of the income, then even with a "flat tax" you could get figures like that.

What would you want, a regressive tax scale? A wealth deduction? If someone makes $100k a year, and pays somewhere around $25k in taxes, do they have a right to bitch about the guy making $26k and paying $1000 or so? Should the $26k guy also owe $25,000 in taxes to be fair?

Re:Oh Please

[Rob the Bold]

I'd hardly call a hypothetical example, made up by someone I never heard of, "proof" of anything.

And yet, that's exactly what that is, in a mathematical sense. Don't agree with their math? It's just arithmetic, do it yourself and see.

Re:Oh Please

[DarkSarin]

I doubt that it is the arithmetic that is what bothers him. It may be mathematically valid, but that doesn't mean that it has jack to do with the way the world, especially the USA or the IRS is actually structured. In this case, unless the numbers are derived from available data, the 'proof' in a mathematical sense is absolute worthless.

It is NOT a matter of 'agreeing with their math', but a matter of whether or not their assumptions are valid, which, as other posters have demonstrated, is not not necessarily the case. I make up any numbers I want to 'prove' that we should only tax the bottom 60% of wage earners, but that would be stupid.

The truth is, the largest burden of the tax will ALWAYS be supported by top wage earners, even if we go to a fixed 10% tax (or something similar). I personally support such a move, or the Fair Tax plan (I'm not picky), because, if for no other reason, it would reduce the complexity of the tax code, and make it very easy to reduce the amount of money spent on the business of collecting taxes.

Is it 'unfair' to tax those who make more money more heavily (e.g., a progressive tax)? Perhaps, perhaps not. Of course, there are some individuals who get around this--the classic example being Steve Jobs with his infamous $1/year salary (yes, it's true). Such individuals are massively rich, make plenty of money, but not in salary, so their income tax is not very large. Yet if they paid a national sales tax on their goods, they would end up supporting a much larger portion of the taxes than they currently do.

Re:Oh Please

[zacronos]

What the previous poster's link points out is that statistics such as those will *always* provide numbers that look warped, because the statistic itself is inherently slanted. Even a flat tax rate will yield similar numbers (and they'll be more extreme the more disparity there is between the top earners and the bottom earners). If, instead, we saw statistics such as:

the top 1% of earners pay 1% of all federal income taxes
the top 50% of earners pay 50% of all federal income taxes
the lowest 1% of earners pay 1% of all federal income taxes
... etc.

That would be indicative of a flat tax (not a flat tax rate, but a flat tax -- as in "everyone pays the same amount of money to the government"), which can also be called a regressive tax. You know what that translates into? "If you start out poor, or at any point find yourself poor, you're probably going to stay there." Economic mobility is one of the great ideals of America, and a regressive tax hurts the economic mobility of those who need it most -- the bottom earners.

I also disagree with your characterization of "progressive" income taxes as "punitive". Progressive taxes are based on the idea that individuals don't need the second half of their income as much as the first half. For example, one year say I make $50k and it gets taxed at some rate X. The next year, say I make $100k. The first $50k will probably get taxed at rate X, just like the year before; the second $50k will get taxed at a higher rate, let's say $2X. I would be more inclined to agree with you that it would be punitive if they taxed my entire $100k at $2X, but even then it depends on the exact implementation. In the end, here is why I disagree with you: when all else is equal, if you make more, you will keep more. If there were times when earning an extra $5k in the year would be worse than not earning it (in terms of net income after taxes), then it would be punitive. While this may be true in specific circumstances due to tax credits that only apply if you have income under a certain threshold, that is the fault of those tax credits, not the progressive tax rate.

Progressive tax rates do not discourage people from earning money. Progressive tax rates are not intended to discourage people from earning money. They do not punish people for earning more -- or at least if they do, they don't do a very good job of it, since in mind mind the primary objective of punishment is to discourage the act (either in the once committing the act, or others considering committing the act). Therefore progressive tax rates are not punitive, and personally I feel that it is either ignorant or intellectually dishonest to say so.

> It's simple redistribution, and the more you make, the more it tilts away from you.

Yes, but it never tilts away enough that you'd prefer to earn less than more, does it?

Re:Oh Please

[Snorpus]

It's not the arithmetic that I disagree with, it's the assumptions of population and income distributions.

... but the real world will have people making A LOT more that 500k, and A LOT more people at the lower two income brackets.

In the United States, at least, the income distribution is roughly normal, with admittedly a long (but very low probability) tail in the higher incomes. The blog's example has 150 people making $30K or less, and 11 making $30,001 or more.

Re:Oh Please

[tiny-e]

If I sell a used item on eBay, to my neighbor, at a yard sale, etc.: Sales tax (most-likley) has already been paid on the item at the time of the original sale. Charging sales tax again is double-dipping --like they do to you when you buy/sell a car, boat, etc.

If the IRS wants to count my selling of an old pair of skis on eBay as income, then I should be able to write off their original purchase price (or the difference between the two) as a loss.

People that are using eBay as a business and selling a lot of product should have a tax ID # like any other business, or be prepared to file profit & loss statements on their personal taxes.

As far as working long, hard hours to try to improve your station in life to only see others gaming the system and getting ahead: Don't be mad.. no matter how hard you work there will always be somebody who skates by you making more, doing less, possibly "cheating" the system. It's the way things work. Some would call it innovation.

Re:Oh Please

[Rob the Bold]

You're actually saying that, and then linking to an "analysis" that cites a fictional town with a flat tax rate as an example of why he's wrong?

The "flat tax" example just illustrates that you can make the "20% of taxpayers pay 80% of the taxes" argument even with a flat tax. That it's not an artifact of the progressive tax code.

Let's rewrite Bumfuckville's income tax code to something more "fair": The town budget is $200,000. So to meet the budget we need to collect that much in taxes. But everyone in town must pay the same amount, right? To be fair? There are 161 people in Bumfuckville. So let's divide the town budget by 161: Thats $1242 per person. Fair, right? Here's Bumfuckville's new tax table:

Income bracket/Old tax rate/New tax rate

$10,000/5%/12.4%

$30,000/5%/4.1%

$100,000/5%/1.2%

$500,000/5%/0.25%

Now there's none of this commie "progressive tax" or socialist "flat tax". Now we've got a tax code that even Jesus would be proud of: The Fair Tax. Tax rates are kind of high on the lower income folks, but that's because the town has just been wasting most of that budget on gold plated drinking fountains for city hall and the pinko mayor. Let's cut the budget in half to $100,000. That'll provide some much needed tax relief:

Income Bracket/Original Tax Rate/Fairer Rate (after budget cuts)

$10,000/5%/6.2%

$30,000/5%/2.1%

$100,000/5%/0.6%

$500,000/5%/0.13%

Now we're reduced waste and made the tax code "fair". Can I get an "Amen"?

Re:Oh Please

[Anonymous Coward]

Yes, true, but these numbers mirror the change in income and wealth distribution to the very top over that same time period as well . . . Just look at CEO compensation in 1979 vs 2007.

Re:Oh Please

[adam613]

In order for your numbers to demonstrate your point, you'd have to assume that everyone made the same amount of money, which completely invalidates your point unless you live in a socialist society. The problem is, you can't infer anything from the percentage of total taxes paid by a NUMBER of people. You could make your point by saying that X% of all federal taxes are paid by those making Y% of the total income. However, I suspect that X would be far too low for the likings of you, or Rush Limbaugh, or anyone else I've heard cite numbers in that fashion.

Re:Oh Please

[Rob the Bold]

In the United States, at least, the income distribution is roughly normal, with admittedly a long (but very low probability) tail in the higher incomes. The blog's example has 150 people making $30K or less, and 11 making $30,001 or more.

Fair enough. And it's Saturday, so I'm game.

I took the mean income of Bumfuckville of just under $25,000 and I normalized US census data to match. Then I divided Bumfuckville into 10 bins with percentages matching US Census income data (normalized to Bumfuckville's average income). I got this:

People/Income

14/$2,682
21/$8,045
20/$13,408
18/$18,771
15/$24,134
13/$29,497
11/$34,860
9/$40,223
7/$45,586
6/$50,949
16/$67,038
5/$93,853

This raises Bumfuckville's total income to $4.47 million from $4 million. That's because I actually used Bumfuckville's mean income instead of median (which would have been $10k) due to their small size and relative poverty -- a fact you had noticed in the income distribution. That does indeed depress the median. With these changes, Bumfuckville approximates the distribution of income in the US more closely. You pointed out the long tail of income at the top end. Bumfuckville is really too small to be statistically likely to have any superrich people . . .

At the flat 5% tax rate, the top 20% of earners of Bumfuckville pay about 35% of the taxes, and the bums at the bottom 20% pay only 4.5% or so.

Re:Oh Please

[miskatonic alumnus]

As for the topic...as long as our tax code doesn't get fixed this is entirely correct of them to do.

Then every person who sells on ebay should be entitled to deduct the cost of the item sold, just like any other business. If I buy something for $50, then turn around and sell it for $75, I should be taxed on $25 income, not $125 (having at some point being taxed on the $50 I earned to pay for it). Furthermore, if I buy something for $100 and sell it for $5, I should be able to write it off as a loss, right? Paperwork reduction my ass.

I'm surprised the IRS doesn't come around to pick the peanuts out of my feces so they can get their cut.

Re:Oh Please

[fyngyrz]

Charging sales tax again is double-dipping --like they do to you when you buy/sell a car, boat, etc.

The entire system is based on multiple dipping, and the lower you are, socioeconomically speaking, the more dips you pay.

Say a corporation pays an employee $20000, and he pays $500 in taxes of which, 100% comes from its customers. So the customers are paying the salary and the taxes for the corporation's employee. In the meantime, the customer is paying those costs with what is left over from his income, after tax. So the customer in every case pays his own taxes, and then those in the economic pyramid above him from what remains after his taxation.

Here's another one. Some company - say the gas company - decrees, for whatever reason, to have medical coverage for its employees. Where does that money come from? Why, from the gas company's customers, of course. So as a customer, you pay for the gas company's employee's medical coverage out of your income before you can pay for your own. Same for the bank employee and so forth.

You don't get to say, for instance, that you spent all of your income ($20000) and of that, 27% went into paying other people's taxes, so you shouldn't be taxed on that part of what you spent. Oh no. You pay your taxes, the taxes of the guy who hauls fuel for your car, the taxes of the guy who sucks the oil out of the ground, the taxes of the guy in the convenience store where you get your fuel, and the taxes of everyone else from whom you purchase a good or service, and you pay this out of your taxable income. Nice, eh?

So the fact is, the people at the bottom of the pyramid have everyone else's costs built into their incomes.

But it is actually worse than that. Unlike taxes, the progression is reversed, percentage wise. Got a lot of phone business to do with the phone company? Then they'll reduce your rates, special deals, good customer, yadda yadda. Percentage wise, you're now paying less for the medical care and taxes of the phone company employee than is some single mother who has a phone on the basis of the services of the phone company you actually receive. That leaves more for you to pay your own costs both on a percentage basis, and on a real basis.

Our economy literally sits heaviest on the shoulders of those at the bottom. It is designed to do so, or at the most optimistic, has evolved to do so.

Re:Oh Please

[Junior J. Junior III]

That's an excellent point, but not everything sold on eBay is used. It's going to be very complicated to sort this stuff out. People selling used, depreciated goods at a loss over their original purchase price shouldn't be taxed, but people selling used appreciated goods (collector's items, antiques, etc.) and new stuff at a profit should be. The accounting for eBay selling should reflect the costs of doing business as well as the income -- people should be assessed based on their net profit, not their gross income. And small-time sellers who don't move a whole lot should probably be exempt altogether.

Re:Oh Please

[Anonymous Coward]

And you do know that 79% of the wealth (after taxes) is in possession of the top 20% of income earners, right?

While I am obviously alone in this (at least I think so because that kind of crap you just wrote is consistently modded up to +5 both on slashdot and in real life), I consider it more sensible to look at who has how much money remaining after taxes instead at how much taxes are paid if one wants to make a comparison.

And to push an even more lone point of view, I don't think that the rich should have more rights than the poor by virtue of being rich. Taxes should be a means of redistribution so that everyone can live. Of course, this is absurd idealism, because taxes are only to enrich the rich (think of the kings of old). Indeed, today we don't need taxes anymore as we got credit cards, who distribute the wealth from the poor to the rich ever more efficiently.

Also I, for one, don't give a shit about the political spectrum as they are all the same, be it "left" or "right". It is, by the way, very interesting to observe how all political parties consistently and rapidly travel to the right by serving the interests of big business and in the same way become more and more authoritarian to secure their power (except that aberration going by the name of communism where the business was controlled by the state - we really need to amend the concept of seperation of powers).

As for the topic, I wholeheartedly agree that if one receives actual dollars, even if the goods sold are virtual, one should pay his taxes.

Re:Oh Please

[larry bagina]

Perhaps you should take a look at schedule C (profit or loss from a business) sometime.

line 1: Gross receipts or sales
line 4: Cost of goods sold

(hint: line 4 is subtracted from line 1)

Re:Oh Please

[Copid]

If I sell a used item on eBay, to my neighbor, at a yard sale, etc.: Sales tax (most-likley) has already been paid on the item at the time of the original sale. Charging sales tax again is double-dipping --like they do to you when you buy/sell a car, boat, etc.

That's why they call it sales tax and not the tax on tiny-e's stuff.

Re:Oh Please

[Xman73x]

Its an outrage Screw the IRS. they steal from the poor and give it the greedy fat pigs the rich people!..America is an how going to hell..I predict the next thing they will force everyone in this so called land of the free to require a ID chip under your skin! Ridiculous!! Thats the mark of the Devil 666..Evil Democratics!..

Re:Oh Please

[Xman73x]

This will put Ebay sellers/and buyers out of business! And its an outrage to us Sellers man screw you I.R.S its enough you tried to force parents in the 80's to sell there house's you bastards!..I hope that are Congressional people/Or staff memebers stop it from happening!.Otherwise America is Fuked up!....I still think this all predicted in the BB and 666.Its coming soon and I mean soon.I predict by 2010 the government will force all to get an ID chip in there hand or forehead.Or maybe I'm over reacting but thats just me..Peace..

Re:Oh Please

[wilec]

"you do know that 79% of the tax burden is carried by the top 20% of income earners, right?"

You mean those folks that hold the vast majority of the assets? Sure just cherry pick a single statistic from a single source and proclaim 'look what I know, you dip shits didn't know this did you, huh, huh?'. Look the issue here is just how out of balance things can get EITHER way before it breaks the system. The balance right now grossly favors those at the top of the economic food chain. If it continues to the point of breakdown just what do you think the fate of the top x% will be? In the end it is in everyones interest to not break the frickin system.

"Maybe for once we should stop being partisan"

Yea, thats rich, considering the drivel to from the "conservative" party I have listened with great restraint, and admittedly often with amusement, for most my life. Can you make a clear argument just using common sense instead of falling back on a single cherry picked statistic form BillO's list of "facts" to throw at a liberal---remember you have to use this word in with a dirty slur pretext or voice. Don't take this to mean I am a just another sheep in the Democratic flock, which in contrast to the Republican flock, is actually more like a herd of cats anyway. I will say I like many others are sick of the "good cop - bad cop" routine the two parties have used so successfully for so many years. So exactly whose drivel is it you like best? Oh thats right you like to quote the "fiducially conservative ones", hehehe, yea.

Wabi-Sabi
Matthew

read...

http://www.federalreserve.gov/boarddocs/speeches/2 007/20070206/default.htm

http://www.ft.com/cms/s/f5e905ce-69d8-11db-952e-00 00779e2340.html

http://neweconomist.blogs.com/new_economist/povert y_and_inequality/index.html

http://www.chicagofed.org/economic_research_and_da ta/wp_abstract.cfm?pubsID=732

http://multinationalmonitor.org/mm2003/03may/may03 interviewswolff.html

http://www.economist.com/world/displaystory.cfm?st ory_id=7055911

http://ideas.repec.org/a/ecj/econjl/v112y2002i478p c68-c73.htm

http://dollarsandsense.org/archives/2004/0704tilly .html

http://www.nybooks.com/articles/18995

http://online.wsj.com/public/article/SB11418244330 8492484.html

http://www.ft.com/cms/s/71954e1a-ad43-11da-9643-00 00779e2340,Authorised=false.html?_i_location=http% 3A%2F%2Fnews.ft.com%2Fcms%2Fs%2F71954e1a-ad43-11da -9643-0000779e2340.html&_i_referer=http%3A%2F%2Fne weconomist.blogs.com%2Fnew_economist%2Fpoverty_and _inequality%2Findex.html

http://ksgnotes1.harvard.edu/Research/wpaper.nsf/

Re:Oh Please

[wilec]

Hey you know what by your logic we should just kill off the bottom 80% and everything would be just lovely.

Wabi-Sabi
matthew

Re:Oh Please

[ScentCone]

Hey you know what by your logic we should just kill off the bottom 80% and everything would be just lovely.

My logic? All I'm doing is telling you what the numbers are, and making sure that no one confuses the GP's assertion about "partisan lies" when we refer to where the tax burden in this country really is, and where the money goes. I'm reporting it, and you're the one assuming it's some sort of call to arms rather than just a simple refuation of someone else's spin.

What's so strange about it?

[Gadzinka]

I don't understand what could be wrong with it.

I don't know about eBay, but I know for a fact, that there are people in Poland using local auction service that move tens if not hundreds of thousands $ worth of stuff monthly, without paying any taxes on that. Polish revenue service lately started monitoring it closely and collecting from those people, reassuring all the time, that they are not interested in people using internet auctions for a garage sale. As far as I know, that is true.

Whether you believe in taxes, is another matter, but I don't see why certain individuals should get a tax break just because it is difficult to hold them accountable. It's within a power of the state to levy taxes and create the law to help with it. And sometimes the state forces some reporting duties on some entities in order to help the state. Take for example your salaries: in most countries employers are forced to report the salaries of the employees to regulatory and/or revenue agencies, and I don't see anyone screaming bloody murder.

Robert

Re:What's so strange about it?

[Ash-Fox]

but I know for a fact, that there are people in Poland using local auction service that move tens if not hundreds of thousands $ worth of stuff monthly

Would this be Allegro or Ebay Polska?

Re:What's so strange about it?

[Gadzinka]

but I know for a fact, that there are people in Poland using local auction service that move tens if not hundreds of thousands $ worth of stuff monthly

Would this be Allegro or Ebay Polska?

The only Polish auction site to speak of is of course Allegro. As far as I'm concerned Ebay Polska is a joke. No category managment, tons of pirated/counterfeit stuff, no support staff helping with anything... Sometimes I think that they created Polish branch just to be able to show to their shareholders that they are expanding, no matter what it means to them financially.

Robert

Re:What's so strange about it?

[iamnafets]

Presumably "online marketplaces" could easily be extended to Amazon.com, Buy.com, etc... not just auction sites.

Whiners

[John-D]

Why all the outrage over this? Auction houses (on and off line) should have to follow reporting rules just as stock brokerages do. And people who make real income from online auctions should pay income tax, just as I do on stock sales. I get a 1099 every year from my brokerage that lists each sale I made. What 90% percent of people don't realize is that you are only taxed on the gain from the sale. Ie I sell a car on ebay motors for less than I paid for it. There is no gain, thus no tax. Most casual ebayers will never pay a dime of tax from their ebay actions.

Same old news

[davef139]

Hasn't the IRS been pushing this for a year now? Where are we? The same damn place. I got the feeling that whenever this goes through people better run and hide since they will go after everyone just to prove a point, sorta like suing 10 year olds for downloading mp3s.

Re:Same old news

[Detritus]

The IRS isn't stupid. They have limited enforcement resources and generally apply them where they will get the highest return. Remember that moron who won $1 million on the Survivor TV show and tried to skip out on paying taxes? He's now inmate #05559-070.

No cause you're not a business

[brunes69]

There is a big difference between a business who does thousands of dollars a week in businesses son eBay, and a consumer who sells a cell phone/Xbox/etc once in awhile.

They only want to tax businesses. Consumers do not have to pay tax on goods they sell because of the reasons you just stated - they already paid tax on that object. Businesses do have to pay tax because they get to buy these objects tax free.

Profit

[nurb432]

Sooo if i sell everything as an 'official' loss, i guess their tactic will backfire.

Re:Profit

[pla]

Sooo if i sell everything as an 'official' loss, i guess their tactic will backfire.

Actually, you make a damned good point!

If the IRS wants to classify EBay as self-employment income, you get to deduct your costs. For those using EBay as a primary source of income, that would have the desired effect; For those who just want to get rid of trash in their attic however, selling at a considerable loss compared to the original purchase price, this could really come back to bite the IRS hard.


Of course, that would presume we actually have a fair system (don'tcha just love all the lines on your tax forms that say "If negative, enter a zero"?).

Re:Profit

[Dachannien]

I'm pretty sure that if you were selling stuff you had used rather than goods that were strictly inventory, you would have to claim the depreciated value of the stuff rather than what you originally paid for them. In the case of much of the stuff in your attic, this would be zero.

Re:Profit

[KDR_11k]

Ebay falls under the exact same rules as normal sales, of course you can deduct your costs provided you do the proper procedures (and I once heard that you can only deduct for your primary source of income which means if you make 20000$ p.a. at your job and 2000$ p.a. on ebay you don't get to deduct). You can do the same with garage sales or flea markets or whathaveyou.

Re:Profit

[gnasher719]

'' I'm pretty sure that if you were selling stuff you had used rather than goods that were strictly inventory, you would have to claim the depreciated value of the stuff rather than what you originally paid for them. In the case of much of the stuff in your attic, this would be zero. ''

If you run a business, bought an item and used it for a few years, you probably deducted the deprecation from your profit. In that case you had tax benefits from the loss of value; obviously you should pay tax on the money you gained from the sale because your loss has become less. On the other hand, if you bought an item privately, you were never able to deduct any loss through deprecation from tax, so any profit is calculated from the original purchase price.

Re:Profit

[KDR_11k]

Why? Noone's stopping you from reporting that already.

Re:Profit

[nurb432]

As a business, if you keep doing that every year ( up to 5, then you have to dissolve your company ) you better have something to back it up when you get audited.

As a home user selling stuff on ebay, its not a big issue i agree. ( and is often the case.. selling off your old stuff for much less then you paid when it was new )

What information would you trust to eBay?

[PartPricer]

I would think that eBay would put up a big fight over this. For eBay to properly report the transactions to the IRS, they would need to know either the Social Security Number of the individual or the Tax ID if it is a business. Would you be willing to provide eBay with your SSN? If this were made a requirement for continuing to sell items on eBay, I could see people leaving in droves.

Re:What information would you trust to eBay?

[KDR_11k]

No, they only need the name and address, the IRS most likely has records showing the rest of the data. If filing a proper tax report is too difficult they'll just get a list from ebay of the biggest sellers, match it to their own records and look if any of them reported too little income. Of course this will also affect those who drive up their own auction values by bidding with a dupe account since the IRS won't know they only pretended to sell it.

And???

[Anonymous Coward]

How is requesting that an online company who in essence acts as an agent /. worthy?

Wouldn't you expect real estate agents to have records or stock brockers or any professional who sells good or purchases good on someone elses behalf?

Seems like common sense

Why?

[ScentCone]

wow. The war in iraq must be getting dicey if we are chasing after the income of less than a million people.

Why should that surprise or amuse you? All of the talk about how the "rich" should pay more taxes is talk about a lot less than 1 million people. And, um... why focus on DoD spending? What about people who buy their blood pressure medicine with money that was taxed from you, rather than just eating fewer cheeseburgers and giving up smoking (especially since the cigarettes cost more than the dose of statins anyway!)? Taxing income is taxing income. People who specifically look for a way to run a retail business that will, at least temporarily, get them around paying taxes are deliberately trying to get away with skipping something the rest of us aren't. Why would it make you "chuckle" to see the government trying to keep up with an obvious, and very huge, segment of the evolving economy? I just bought something from an eBay-centric retailer the other day, and the company had completed over 50,000 auctions. Would you rather that that person's income tax obligations were just pushed over onto someone else who just happens to be running their own shop in a more traditional format?

If you're just for lower taxes in general, then why aren't you arguing for completely universal tax enforcement so that your share (and mine, and everyone else who does the right thing) of taxes CAN be lower, as they then could and should be? Anyway, nice flamebait. I'm sure you had to go to a special school to perfect that really smooth disengenuous, ironic tone. Were you able to write that cost off your taxes?

Re:Why?

[Sj0]

A small note, a lot of it isn't your tax dollars, it's your great grandkids' tax dollars. I mean, it's not like there's a balanced budget.

Who gets to decide?

[Anonymous Coward]

But who gets to decide if it's a primary or secondary income?
If someone sells a car on ebay as a one-time deal, is it really income or a net loss by depreciation? All the IRS sees is dollar signs without understanding the meaning behind them.
a) It can be someone trying to stem losses.
b) It can be someone trying to liquidate a deceased family member's estate. (Do you believe someone should pay a tax on another's death?)
c) It can be someone in the bay area who can't even afford any roof over his head on a six figure income in the first place and is really and truly just trying to scrape on by. (Money simply isn't worth the same everywhere in this country, which already makes IRS taxation unfair.)

Why should I have to explain to the IRS my transactions on ebay and why I shouldn't be considered a business? And what happens when the IRS inevitably decides ALL ebay transactions are taxable income? Why does the government deserve a take every time money changes hands? Doesn't that mean even more inflation in the long run? Isn't layers of taxation (between income, sales tax, and corporate taxes between every factory worker and end buyers) making the cost of U.S. goods too high to compete already that we have to add another tax on used goods too?

Also just as big a question, why does the IRS deserve to know everything that happens on a particular website? Doesn't the government have enough spying on us? Should ebay extend the same privilege to every country on earth as well?

Re:Who gets to decide?

[zentec]

I'm not in favor of more taxes, and I understand your umbrage over this proposal.

It simply is not fair for me, who was self-employed, to shoulder a burden of $38,000 a year in taxes on income and taxes for social security and medicare, when someone who is a professional eBay seller to make that kind of money tax free. It isn't fair; we live in the same country, we enjoy the same infrastructure and yet they are able to game the system into a free ride.

Our government, through continued ineptitude and bad money management, has to figure out a way to collect more money to dig itself out of the huge hole we find ourselves. So the options are that I (and you) get to pay even MORE money in taxes while the professional auction site people skate free, or they force these people to start paying the taxes they should be paying anyway?

Unfortunately, the honest people are going to get taxed anyway. There is no choice but for us to pay more taxes in general, and the costs of eBay managing the 1099 reporting will be passed along to everyone using eBay.

As far as the particulars of the taxation, I'm certain that the first few thousand dollars will be exempted. Then of course, that cap won't be raised to index with inflation and eventually everyone will be subject to the tax (see above, we all get taxed anyway). Liquidating an estate will fall under other IRS rules, and since you're just getting a 1099 and not having eBay collect the tax, this should be a fairly easy situation to remedy. Well, unless you're Paris Hilton. Then again, Paris Hilton is the poster child of why this country needs an estate tax.

Re:Who gets to decide?

[KDR_11k]

But who gets to decide if it's a primary or secondary income?

Same as always, the law. The IRS won't do automatic prosecutions of those who show up, they'll only see noteworthy cases that get investigated. If someone e.g. sells a car at a loss they have to report the income normally. If they want the loss to be recognized as such they have to file the cost as expenses. There are procedures for all of this and plenty of professionals who will be able to explain to you in detail how this works.

Why should I have to explain to the IRS my transactions on ebay and why I shouldn't be considered a business?

Because it is your duty as a citizen.

And what happens when the IRS inevitably decides ALL ebay transactions are taxable income?

Decides? The law clearly states they are taxable income, the IRS just says they aren't going to bother with small fry.

Also just as big a question, why does the IRS deserve to know everything that happens on a particular website? Doesn't the government have enough spying on us? Should ebay extend the same privilege to every country on earth as well?

Because the IRS is investigating crime there. Either the IRS gets that data anyway through your tax report or they'd be able to put you in jail. Therefore there's no real net loss for you provided you aren't doing anything wrong. This is unlike normal surveillance since you're already required to report everything anyway (so you're not losing any privacy, you never had it) and only the criminals avoid that reporting.

Re:Who gets to decide?

[russotto]

Because it is your duty as a citizen.

ROTFL. Who says, Congress? George Bush? They can impose _legal_ duties on me, but that's just might, not right. There's no answer to "why" there.

Decides? The law clearly states they are taxable income, the IRS just says they aren't going to bother with small fry.

Certainly not all eBay transactions are taxable income. From the IRSs own website:

If your online auction sales are the Internet equivalent of an occasional garage or yard sale, you generally do not have to report the sales. In a garage sale, you generally sell household items you purchased over the years and used personally. If you paid more for the items than you sell them for, the sales are not reportable. Losses on personal use property are not deductible, either.

Furthermore, except for the eBay fees (income to eBay), nothing occurs on eBay which the IRS is entitled to data about. The close of the auction on eBay isn't the income-producing event. I've had auctions close on eBay where no money at all changed hands (because the winning bidder was a fraudster).

So, what we have here is:

1. Many if not most sales on eBay are the equivalent of a garage sale and are _not_ required to be reported in any way shape or form.
2. The auction itself is not an income-generating event; there's no income until the bid is collected
3. For business sellers who buy at garage sales and sell on eBay, there's no way to verify their costs, so in this case even the collection data would be insufficient

Yet the IRS wants reporting of every sale on eBay anyway. It's a massive invasion of privacy (granted, in a field where privacy has already been heavily eroded), and for fairly little gain.

Re:Who gets to decide?

[LocalH]

It simply is not fair for me, who was self-employed, to shoulder a burden of $38,000 a year in taxes on income and taxes for social security and medicare, when someone who is a professional eBay seller to make that kind of money tax free. It isn't fair; "Not fair"?

"Not fair"?

Life's not fair, son. Trying to force it to be fair through laws and taxes and government intrusion is never a winning proposition.

Re:Who gets to decide?

[Mobster75]

b) It can be someone trying to liquidate a deceased family member's estate. (Do you believe someone should pay a tax on another's death?)

You haven't heard about the Estate Tax in the US when someone dies, have you? (Applies to the overall value of their estate at the time of their death for the amount greater than [I think] $1,000,000. The tax is about 50% of that overage).

Paying the Real Bills

[Doc Ruby]

How long before the same fate befalls the folks who make a living working the Massively Multiplayer secondary markets?

Why shouldn't they pay their taxes like the rest of us do, if they live in the US? They also count on the cops protecting their house and their jogging girlfriend (or sister), the firemen saving them and their cats from their careless neighbor leaving the iron on. They need the gas station attendant to read well enough that they don't damage their car while changing the oil. They want the courts to stop the chemical factory upstream from poisoning them. They want that border protected with at least the threat of reprisal in case China doesn't stop at Taiwan, and invades Alaska.

I know the rest of us do, and we pay for it. Why should we pay for them to be safe, too, just so they can work in a game in their pajamas?

What we should change is what we're paying for. We shouldn't pay the government for the money we earn, income taxes. We should pay the government for the services we consume, which benefit is just about proportional to what we consume. So we should pay zero income tax, and maybe about 25% sales tax: a $16T economy should support a $4T expense at Federal, state and local budgets. Easier to collect from fewer points, easier to shut down violators' business, and encouraging savings instead of wasteful unnecessary consumption, with a built-in "tax break" bonus. Just a few tweaks to make essentials like raw food, raw cloth, median primary rent/mortgage tax free, and equities at a nearly negligible rate.

That is reality. Just working in a virtual world doesn't mean your body isn't consuming services with a cost in the real world. Ducking the taxes is a losing game for the rest of us subsidizing them.

Re:Paying the Real Bills

[Anonymous Coward]

cops protecting their house and their jogging girlfriend

You must be new here.

Re:Paying the Real Bills

[UbuntuDupe]

Aha! You're the guy I was thinking of when I said this:

Oh, I basically agree, but this opens up a new can of worms: it commits you to:

a) separating businesses based on how much government they use, and taxing them differently (at least to a coarse approximation)

b) taxing the economy *only* at the rate required for the government to provide the services needed for the economy to exist.

a) isn't so bitter a pill to swallow, but b) means much, much lower taxes, since very little tax revenue is spend on ensuring the necessities for the modern economy to exist, at least when honestly appraised. For virtually every government program, you can find a country that does without it, or has much less of it. (I can't sell items on ebay unless the government has a presence in Iraq? Come on!)

In your case, those things are all great, but a) most of them aren't even paid for through IRS-collected moneys and b) make up a sliver of all tax revenues.

Hey, I would *love* to only pay taxes that cover defense, violent/property crimes enforcement, and courts. Where do I sign up.

(One exception is your bit about the gas station attendant being able to read. Aside from being a double-counting, one trick is to only use competent oil changers ... you know, like you do with every other product.)

Re:Paying the Real Bills

[Anonymous Coward]

None of the services you mention are paid for by revenue derived from federeal income taxes. They are provided for by state and local taxes. Indeed, the annual sum total of all personal federal income taxes have not exceeded the interest on the national debt since the early 80s. In effect, we get nothing for our federal taxes.

Re:Paying the Real Bills

[Anonymous Coward]

Sales taxes don't work. When you increase the local cost of goods what happens? People buy stuff where it's cheaper! If you doubt this look no further than Washington state. There is only sales tax there and people routinely go to neighboring states to buy cars etc so the state doesn't screw them. State makes lots of whacky laws to close these loopholes, but it's a losing game.
It's silly to think that increasing the cost of all goods will increase the tax revenue. When tax is greater than the margin a seller receives, say bye-bye to both the business and the jobs there. When you say 25% tax that means anything that has a margin of profit lower than that is cheaper to order overseas or other states. Then we got to get import taxes to offset this "loophole" don't we? And I won't even go into the food is now twice(no income tax, remember) as expensive for people who can barely afford it...and what about the opportunity cost of that money...

Re:Paying the Real Bills

[Doc Ruby]

Doesn't the Federal sales tax I mentioned mean everything you just said doesn't matter?

Re:Paying the Real Bills

[Doc Ruby]

You are lying. Everything I just mentioned is paid for at least in part (education has more local funding, not the rest) by Federal income taxes. Corporations don't pay nearly as much, per income dollar, as real people. The interest on the debt is large, but we have to pay for that, too, so we can pay for all the corporate welfare and warmongering (for the corporations), and of course it's paid by the people.

We get quite a lot, though it's not woeth the $3.5 TRILLION we're paying. Who do you think does pay for it?

Re:Paying the Real Bills

[Doc Ruby]

How does paying different amounts of tax on different incomes not "separate [people] based on how much government they use"?

And who said we'd "tax the economy *only* at the rate required for the government to provide the services needed for the economy to exist"? Although "pay as you go" sounds like fiscal discipline, so long as we can pay for occasional investments that exceed our income, in debt.

I didn't say we'd pay for only the services I itemized. I just named those to remind the story publisher some of the things we obviously have to pay for.

Oil changers, like everyone else, will get hired for the lowest possible wage. Like now, where reading and speaking English even at basic is required, but often not found in the workers. Without the government educating people without exception (at least that's the rule), it would be a lot worse.

Re:Paying the Real Bills

[CodeBuster]

Please mod the parent up, he is exactly right on the abolish the income tax and levy the sales tax point. The United States could certainly use more saving and less spending (the average savings rate in the United States right now is actually negative...meaning most households are not only NOT saving anything but are sliding ever more deeply into debt). Unfortunately, the spenders among us far outnumber the savers among us and the spenders scream whenever the Fed raises the interest rates and the pain of those massive debt loads is ratcheted up a notch. The two million plus people currently working in the tax preparation industry have a vested interest in keeping the income tax system and making it as complicated and byzantine as possible. The retail sales industries, especially those that sell discretionary and luxury products, would also lobby heavily against this. The parent is right and the consumption tax makes tons more sense than the income tax, but the special interests aligned against change are powerful so I wont be holding my breath.

Re:Paying the Real Bills

[dkf]

So we should pay zero income tax, and maybe about 25% sales tax: a $16T economy should support a $4T expense at Federal, state and local budgets.

The problem with such a tax is that it is highly regressive, i.e. would hit the poor excessively hard. Doing that is a bad idea (unless you're a big fan of widespread food riots; I'm not.) Start exempting things from sales taxes and whoops! you've got the complexity back again, particularly as the things you have to exempt are often quite a large fraction of the total economy.

In reality, the middle classes are likely to continue to pay the majority of the overall tax take for the foreseeable future. This is because that's where you maximize the product of "income per head" and "number of people with that income". The rich have lots of money, but there's not that many of them. There are plenty of poor, but they've hardly any income. Guess who's in the middle? (No, I don't like being part of the majority-tax paying part of society either, but it makes mathematical sense. Damn you, mathematics!)

Re:Paying the Real Bills

[Doc Ruby]

I said that basic expenses, like the food that would cause food riots, should be exempt from tax. The point of progressive taxes isn't to let everyone live the same lifestyle, regardless of income. It's to protect people from not having enough after taxes to pay for what they need, and also what they want if they have some discretionary income. That's what exempting only the necessities, including not much more than raw food, raw cloth (to sew into clothing), median utilities and rent/mortgage on primary home, should not be taxed. If that's all you can afford in this rich country, then you're not getting any real return like the people earning enough for luxuries are.

Though if you think the poor would riot over not getting tax-free McDonald's, I think you're probably right. I just think we should let them riot over that kind of BS, and get it over with. Those people don't have much stamina, anyway.

So can I write off losses on stuff I sell?

[financialguy]

I don't have a problem with people getting taxed in principle- as some here have already said, some people make a living doing this and why shouldn't they pay their taxes like the rest of us?

BUT, unless you got the stuff you're selling for FREE, your income is only your profit.

My point is that if they're going to tax you for your profits, they should also tax you for your losses, just like with sales of stocks, bonds, etc.

In reality the IRS is NOT fair (but neither is the tax code in my opinion). Their mandate is to collect enough money, fairness be damned. For instance, when you sell your car at a loss, you can't report that, while if you sell your care for a gain, you have to pay tax on the gain.

Now arguably the loss you normally take on a car is depreciation, but as far as I know, there's simply no allowance to take a loss on your car that is faster then true economic depreciation.

Anyway, beyond my tangential discussion of fairness, I think they'll focus their efforts on those above $X in revenue, and those people will have to start recording their cost basis on each item they sell, just like any other seller of goods.

Re:So can I write off losses on stuff I sell?

[Mockylock]

You're exactly right. You have too many people that are cashing in on this, and running with it. And most of the time, they're charging you extra for shipping on top of that. You buy a pair of earrings for $2, they charge you $8 for shipping and send it with a $2 stamp. There are even "mystery" auctions that are basically lotteries that steal money from people as well.

Those who play poker for a living get the shit taxed out of them... those who win the lottery get taxed major bills. You even get taxed if you win a vehicle. Granted, it goes back to the "write-off" situation... but, people who enter in a poker tourney can't write off their entry fee.

I can see it coming about as a regular business tax, in some way. Whereas, you have to make X amount of dollars before you actually have to pay taxes. I know with design work I wasn't taxed until over $5,000... which would make sense. Either way, something would have to be done. Unfortunately, the decision would open a pandora's box of problems with future internet tax voting.

Re:So can I write off losses on stuff I sell?

[russotto]

If you play poker for a living, you can deduct the entry fees as an ordinary business expense. If you don't, you can deduct entry fees up to the amount of any gambling winnings for that year as a miscellaneous expense not subject to the 2% (of adjusted gross income) limit.

If you win the lottery you can deduct the cost of the ticket, but it's probably not significant.

Re:So can I write off losses on stuff I sell?

[Jonny do good]

Now arguably the loss you normally take on a car is depreciation, but as far as I know, there's simply no allowance to take a loss on your car that is faster then true economic depreciation.

You seem to be mixing personal and business tax rules. A business can report a loss on the sale of a car if it is sold below it's cost basis. The cost basis is caluculated by taking the original price and subtracting any depreciation claimed. As an individual people don't get the option of claiming depreciation. Any loss in value of personal assets doesn't matter. If you make a profit on personal assets they do tax you because the gain is seen as a form of income. It can be treated as a capital gain if the asset was held long enough or as regular income if is was held for a short period of time.

If you take a loss on a car, it should be based on true economic depreciation, unless you are in a real hurry to unload it or never bothered to look at a blue book. The government has a set depreciation schedule that has little to do with economic depreciation. It's essentially a double-declining balance method based on a half-year convention. It is not likely that any asset actually loses it's value on such a schedule.

Re:So can I write off losses on stuff I sell?

[Mockylock]

Awesome.. I did not know that.

Re:So can I write off losses on stuff I sell?

[financialguy]

You raise a good point and obviously know more about taxes than I do.

However, I also think you confirmed my primary point, which is that as individuals we get shafted with regards to selling things like cars. What's good for the goose in this case is not good for the gander (that is, you have to pay on gains but don't get to write off losses).

But at the same time, if they made it "fair", then they'd have to do something else to the tax code to collect the same measure of taxes. This is one reason why I'm scared to see what becomes of AMT reform, assuming it ever happens. With something as huge as reforming AMT, there are always winners and losers, and I'm afraid I may be a loser, but then again you never know.

Re:So can I write off losses on stuff I sell?

[Jonny do good]

I also think you confirmed my primary point, which is that as individuals we get shafted with regards to selling things like cars.

I think that you don't really understand what the tax code has become, a way to encoruage certain activities while discouraging other activities. I would also have to disagree with your idea that we get shafted, because it is not really the same as you think. Yes, we do have to pay on gains, but in essence a gain is income which should be taxed as long as we have an income tax. We don't get to deduct a loss because we, as individuals, don't have the right to claim things such as depreciation.

But at the same time, if they made it "fair", then they'd have to do something else to the tax code to collect the same measure of taxes. This is one reason why I'm scared to see what becomes of AMT reform, assuming it ever happens. With something as huge as reforming AMT, there are always winners and losers, and I'm afraid I may be a loser, but then again you never know.

I don't know what you know about the AMT, but it is a sham. It was originally written bacause of something like 22 millionairs that managed to avoid paying federal taxes by using legal deductions. Because of certain changes in it over the years and a failure to index it to inflation it has now managed to get 2.6 million people. If it isn't changed it will get something like 22 million people for the 2007 tax year. The democrats are blaming Bush's tax cuts for this, but in reality the tax cuts they cite and force certain people to subscribe to the AMT are actually fine with those effected because they would have paid more without the tax cuts. I personally feel that the AMT should be abolished, or rewitten because it is now going to hit the middle class. One other option is to drop the changes made during the early Clinton years to the AMT that are actually causing the AMT to hit these people, but since anything Clinton did is considered to be perfect to those Democrats in congress (and since the biggest proponets of those changes were Pelosi and Rangel), this will never happen. I don't trust congress to fix this, particularly the Democrats because their idea of fixing the tax code is to raise taxes for everyone (since taxes on the rich usually get passed on to the poor through other means). I wouldn't trust the Republicans either because they have lost their sence of fiscal responsibility. I feel for you since it is inevitable that you will eventually be hit with the AMT since it is the only way for congress to finance their proposed budget and it will bring in about $1 trillion over the next decade for congress to spend on more pork barrel projects.

I have spent a lot of time looking into things like the "fair tax" and there are several problems with it. Personally I don't really agree with the idea of redistribution of wealth, which should encourage me to want something like a national sales tax or a flat tax, but they all have certain problems. A national sales tax program would cause all prices to rise, which if offset by the increased disposable income, would be fine, but it causes a problem for people with low incomes. They already struggle to get by and how would this impact their lives? A refund for them doesn't work very well either, because most of people living in this category have a hard time living month to month and a refund would postpone this source of money. A flat tax is also unfair to people with minimal income. Now one could implement a flat tax where people with low incomes (say

Lets simplify the tax code

[G4from128k]

Perhaps if more people are exposed to the unpleasantness of taxes on their de facto small businesses, then more people would vote for candidates that include tax simplification as a key goal. The current U.S. tax code is a Byzantine mess that is great for accountants, tax attorneys, and tax software companies who add no value to society other than to comply with artificially enacted arcana.

I have no problem paying my fair share (and think everyone should), but I hate that I have to spend so much money and time dealing with all the rules, forms, and administriva of compliance.

Re:Lets simplify the tax code

[Adult film producer]

and on top of that the accountants have to be sure they're not infringing on patented tax strategies :-P

Re:Lets simplify the tax code

[Anonymous Coward]

The current U.S. tax code is a Byzantine mess that is great for accountants, tax attorneys, and tax software companies

And the rich. That which looks like a mess to you looks like a nice, big hole to others.

Re:Lets simplify the tax code

[miskatonic alumnus]

Hear, hear. I owned and operated a retail store with my wife for a period of time. Do-it-yourselfer that I am, I decided to run the gauntlet of figuring our taxes for the business. In the end, I succeeded --- but it was a nightmare.

Re:Not surprising

[mikerubin]

why was this flamebait?

Little House On The Prairie

[QuantumG]

I don't care who knows it, I loved LHOTP. Every episode was social commentary of the finest.

In episode 42, Centennial (first aired 17 March 1976) people are celebrating Independance Day, as you do, when the festivities are interrupted by news that taxes are to be raised. People are kind of upset about this, being that they only have a few days to come up with the extra money to pay their taxes for the year.

One farmer is heard to remark to another farmer, "I swear, one day land taxes won't be enough.. they'll start to tax a man's income too!" and everyone has a good laugh at the silly old kook.

People start talking about not paying the extra money. Other people start talking about not paying any taxes at all. Thankfully a Russian immigrant takes the time to explain how even though he lost his land back in Russia for not paying his taxes, and that's why he came to America, it's still the best place in the world to live.

And as you watch this peaceful show with its idilic scenary, you just can't help believing it really was.

Re:Little House On The Prairie

[140Mandak262Jamuna]

Tell me what you did not see in LHOTP. How many black land owners? How many native americans? How easy/difficult they found it to integrate with that period setting? I will admit I dont know naything about LHOTP. It is possible that it is a hard left show tht portrayed the blacks and native Americans as victims of the greed and rapacity of the settlers. Even if it is, let us just remember that almost all shows are created to make their target audience feel good. They are not designed to provide a fair and balance portrayal of multiple view points.

Re:Little House On The Prairie

[QuantumG]

LHOTP touched on racial inequity many times. I remember an episode where a black kid runs away from his family to live with the Ingalls (that's the white family the show focuses on) and everyone learns some life lessons about racial equality and love for your fellow man (the usual thing). He goes back to his family in the end.

There was another episode where the blind school shuts down and the town decides to start a new one, turns out the new teacher is black, the blind kids don't know why some people seem to dislike the new teacher - everyone liked the last teacher. It's a big literal lesson about the virtue of being "color blind".

There was another episode where everyone got together and colluded on what price to sell their wheat at.. but one guy broke ranks and they decided to shun him.. when asked why he wouldn't go along he said he saw no reason why black people should get the same price as him for their wheat. Of course, rather than exposing the difficulty and danger of manipulating market prices, the moral of the story was that black people and white people can produce as good wheat. In a similar vein, there's another episode where the town doctor places an ad to hire a new doctor.. a black doctor answers the ad. He only gets given minor cases until he saves a baby that was being born strangely. The white doctor realises the black doctor is just as good as him.

The shows were made in the seventies.. racial issues were a hot topic.

And yeah, there were more episodes about how great indians are and how badly the colonials treated em than I care to remember.

Re:Little House On The Prairie

[140Mandak262Jamuna]

Hey, Looks like I am part of the target audience for LHOTP and never knew it!

Re:Little House On The Prairie

[k1e0x]

So having all men free means we should pay an income tax???

I don't understand.

Furthering the death of eBay

[gearmonger]

As if eBay doesn't have enough problems these days with Nigerian scammers and Chinese counterfeiters, now the IRS wants to remove the last shred of joy from selling on the auction site. Not that it's inappropriate -- sales are sales and income is income -- but I'm curious to see if eBay is even around in its current form by the end of 2008.

Radical Idea?

[CokeBear]

Instead of taxing work, which is something to be encourages, or a sales tax, when sales should also be encouraged as a benefit to the economy, why doesn't the government *only* tax things it wants to discourage, like fuel consumption and energy use? How much would you be willing to pay for a gallon of gasoline if you had no income tax or other sales tax? Of course solar and wind power would be tax free, and it wouldn't take long (maybe a few years) for most industries to make the switch. It doesn't have to happen all at once, but a gradual shift over a 10 year period from income tax to a tax on pollution, and consumption of non-renewable resources would go a long way to not only dramatically reducing the carbon dioxide output of the country, but also the pollution generated. (yay! breathable air in our cities again)

Re:Radical Idea?

[BCW2]

They want to tax everything they can so they have more money to waste. Depending on where you are the tax on gas (Fed and State) is already 50% - 65%. Smokes only cost around $.35 a pack to produce and about $1.00 to put on the shelf, the rest is tax. To produce and market a bottle of booze is only about $6.00, how much do you pay above that? It's tax! I do agree that there should be a bigger break for solar and wind generation but our congresscritters killed most of that in the 90's. They will never give up an existing source of funds and don't have the common sense to change. It's really our money not theirs but nobody holds them accountable, it's time to vote against all incumbants for 5 or 6 elections, throw them all out and elect people who have had "real" jobs, if you can find enough willing to go into that sewage pit. Not just Washington, but state and local too! Since we are stuck with income tax they need to change to a flat tax with no exceptions, every person and business pays the same. They would collect more money than they ever have, and most of us would pay less.

Re:Radical Idea?

[Crazy Taco]

That's what I've been wanting to do for years, but you can't get people to wise up. We will forever have career politicians in both parties (especially the democrats) voting to further complicate the tax code in a power play. They vote to raise taxes on the rich (because that's a small group with few votes) and lower taxes on the "working class" (as though others don't work) just because the "working class" has more votes. Its an attempt to buy votes and everyone knows it. Once you start decreasing taxes and giving benefits to a group, they will always vote for you. The most insidious thing about this though is that the politicians don't even buy the votes with their own money, but with OTHER PEOPLE's money (take money from wealthier people, give to others, others vote for you). They ought to be thrown in jail for robbery, not repeatedly reelected to a posh job. You can see the same thing in local governments too. In Saint Paul, Minnesota, the democrats are voting to increase property taxes to pay for welfare programs. The welfare roles in this state are full of able bodied adults with NO CHILDREN!! Explain to me why we increase property taxes rather than kick those people off the roles and make them get jobs? Oh yeah, they wouldn't vote for you anymore. That's just sick. 1 person = 1 vote = same percentage of taxes. That's fair, that's how it should be. If we are going to tax a certain group more, they should get more votes per person, because it was their money and they ought to have a say in how in gets spent. Note: I am not wealthy, own no property, and barely have enough money to get to go out to eat. But blatant unfairness and thievery in my own government disgusts me, and I'm sick of laziness, sick of confusing and worthless tax codes and sick of the worthless beauracracy that supports them. Throw it all out and bring on the flat tax.

Re:Radical Idea?

[sonofagunn]

I would happily pay higher taxes on gasoline if I received an income tax break to offset. Like you suggest, this would "even out" for most people but it would actively discourage fuel use which would be a good thing.

Re:Radical Idea?

[BCW2]

"They vote to raise taxes on the rich (because that's a small group with few votes) and lower taxes on the "working class" (as though others don't work) just because the "working class" has more votes."

There is only one problem with that: in the last 35 years, every time the Dems talk about raising the taxes on the rich, mine go up. I have never made $50,000 in a year! The bank and I own a house. My oldest lives here with her family because life is a bitch at times, no assistance needed, we take care of each other!

Regardless of party, if you are not in the same tax bracket ($155,000) you have NO representation in Washington!

This is wrong.

[Anonymous Coward]

If I don't get taxed for having yard sales then I shouldn't get taxed for using online auctions. It's just more money for the U.S. government to give away to poorer nations.

Re:This is wrong.

[QuietLagoon]

It's all in the degree. If you make your living off of selling items in your yard sale, then I suspect your town would want a selling permit, and the IRS would want a cut.

However, the here and there, once in a while yard sale does not need to give the IRS a cut.

Re:This is wrong.

[John-D]

>However, the here and there, once in a while yard sale does not need to give the IRS a cut.

If you make a profit, yes you do need to pay income tax on that amount.

Re:This is wrong.

[KDR_11k]

You do get taxed for yard sales, the IRS just can't be bothered to go after you for not reporting it.

Re:This is wrong.

[toddestan]

For most people, a garage sale is tax-free. The reason is that the stuff at their yard sale consists of stuff that they paid tax on when they bought it new, using income that had been taxed when it was earned. So there is little reason to make them pay tax on it again. Now, there are some people I call "professional garage salers" in this area, who seem to get a hold of wholesale lots of stuff and sell it out of their garage for a profit*. Like their counterparts on eBay, these are the kind of people that the IRS are more interested in.

*I can't see them making much money on this, but some people do have a lot of time on their hands.

One big difference

[HangingChad]

You can run your eBay store from Bermuda, Antigua or Grenada just as effectively. Avoid paying US taxes, live near the beach and enjoy a comfortable living in a place that doesn't ask a lot of questions where money is concerned. Same thing with any other online venture. It raises an interesting point to consider when thinking about taxing online enterprises. If the taxes get out of hand in the US or UK, what's to stop the owners from moving to a more tax friendly country?

It's a lot easier to move an eBay store than Wal-Mart. And you can still use UPS to send your shipments in most countries. How convenient.

I'm not sure the IRS is the right organization to be making that decision, but it's probably faint hope expecting Congress to address the issue. Keeping the US friendly to business from a tax standpoint to keep us competitive. The same body that can't even agree on when to pull our troops out of Iraq.

Re:One big difference

[Ph33r th3 g(O)at]

. . . what's to stop the owners from moving to a more tax friendly country?

You mean besides extradition and prison? Unless you mean the owners intend to physically move and renounce their citizenship.

Re:One big difference

[Symbha]

An Inc. shelter's you from this.

You may recall, that Haliburton, the #1 contractor we pay to screw up Iraq, just moved the company to Dubai.

Re:One big difference

[Ph33r th3 g(O)at]

Yes, it escapes corporate income taxes, but eventually the income accrues to U.S./U.K. citizens as capital gains from the sale of shares, salaries, consulting fees or what have you. Then those people not paying can be punished (if caught, and in the case of Haliburton, if not politically well-connected as well).

Re:One big difference

[DerekLyons]

If the taxes get out of hand in the US or UK, what's to stop the owners from moving to a more tax friendly country?

If you are an eBay seller whose livelihood depends on reselling knick-knacks found at garage sales... it's a bit hard to visit them from that more tax friendly country. If you are an eBay seller whose livelihood depends on reselling stuff you've bought elsewhere... you've just increased your shipping costs.
 
When you deal in physical goods, physical location matters.

Re:One big difference

[foniksonik]

Hmmm I seem to recall that Haliburton Inc. is still a US company... they just moved their main office closer to the action is all.

Re:One big difference

[Anonymous Coward]

Not if you are a seller who deals entirely with dropshippers. You pay wholesalers for the goods who also handle the delivery of the item. These days one can sell lots of goods without ever handling/seeing them yourself.

Re:One big difference

[Spy Handler]

You can run your eBay store from Bermuda, Antigua or Grenada just as effectively.

No you can't. At least not if you're selling $20 widgets - the ncrease in shipping costs will eat you alive.

HAW! HAW! Your own cite simply shows...

[msauve]

just how unfair taxes are.

The unstated, and invalid, assumption on that site is that a flat percentage tax is somehow "fair." It is not. That one person at the high end, who pays $25,000 in taxes, does not receive significantly more government services than a person on the low end, who pays $500 in taxes. That's extremely unfair. The person on the high end is bearing 50x the burden.

Admit it, you're not concerned with "fairness," but are a socialist who wants income redistribution ("From each according to his abilities, to each according to his needs." - Karl Marx)

Re:HAW! HAW! Your own cite simply shows...

[Rob the Bold]

The unstated, and invalid, assumption on that site is that a flat percentage tax is somehow "fair." It is not. That one person at the high end, who pays $25,000 in taxes, does not receive significantly more government services than a person on the low end, who pays $500 in taxes. That's extremely unfair. The person on the high end is bearing 50x the burden.

Are you seriously arguing for a regressive tax table, like 20% taxes on the first $10k, then 10% taxes on the next $20k, then 5%, then 1% then 0%. Like that? Just checking.

Two inaccuracies in parent

[G4from128k]

1) You can sell an object for less than you paid for it and still owe taxes.

If you buy an item for your business, and deduct that purchase from your taxes, and then sell that item later, you owe taxes on it. You can't buy a $2000 laptop, deduct $2000 from you income, and then sell the laptop for $1500 and still retain the $2000 deduction. Beyond this basic fact, the exact tax effects get more complex because it depends on how you are deducting the original purchase of the laptop (either as a Section 179 expense, as purchased inventory in the laptop reselling business, or depreciated on a multiyear schedule).

2) You can't have a "business" that generates losses year after year

If you have a "business" that loses money too often, the IRS will start to get suspicious and they will try to declare the business as a hobby. The exact rules are unclear, but you need to be able to show the IRS that you really are trying to make a profit, are dependent on that income, etc.

As an aside, there is no fixed limit on the deduction of ordinary losses from a business (other than you other income sources). The $3,000 limit applies only to losses on purchases of capital assets.

Re:Two inaccuracies in parent

[enmane]

If you have a "business" that loses money too often, the IRS will start to get suspicious and they will try to declare the business as a hobby. The exact rules are unclear, but you need to be able to show the IRS that you really are trying to make a profit, are dependent on that income, etc. This is EXACTLY what is wrong with our system. If you make money then you are a business or hobby and get taxed but if you lose money then it's a different game. You can't be a business and STILL have to pay taxes as they want to tax anything over $600. Let's just be fair - If I make a profit on Ebay and that is going to be taxed then I should be able to show that the costs of Ebay, Paypal, my camera, my time (as a paid consultant), etc nullify any such profit. This is crap and I lose money on just about everything I sell on Ebay if I'm to account for anything other than how much I paid and how much I sold it for. Here's a monkey-wrench - WHAT ABOUT REBATES?! I can show the IRS that I paid $100 for an item and sold it for $50 but still made a profit after a $70 rebate. So is it a $50 loss or a $20 profit?

Re:Two inaccuracies in parent

[DougWebb]

If you have a "business" that loses money too often, the IRS will start to get suspicious and they will try to declare the business as a hobby. The exact rules are unclear, but you need to be able to show the IRS that you really are trying to make a profit, are dependent on that income, etc.

The last time I checked, the rules were pretty clear: you had to have a net profit in two or three of the past five years, or something like that, in order to claim the activity as a business rather than a hobby. That seems fair to me; it gives startups a few years to become profitable, while benefiting from the tax break of deducting losses, without letting anyone get that tax break year after year on money they spend for fun.

If you buy an item for your business, and deduct that purchase from your taxes, and then sell that item later, you owe taxes on it. You can't buy a $2000 laptop, deduct $2000 from you income, and then sell the laptop for $1500 and still retain the $2000 deduction.

Of course you still retain the $2000 deduction, but now the $1500 sale is all income, because from the IRS' point of view the laptop has a $0 cost. Assuming your tax rate is 30%, you'll wind up owning the laptop for a total net cost of just $350 between the time you buy it and the time you sell it. That's not bad.

From your point of view:

1. Buy $2000 laptop Net Cost: $2000
2. Deduct $2000 laptop as business expense Net Cost: $2000 - $2000 * 30% = $1400 (you get $600 in tax savings due to the deduction)
3. Sell laptop for $1500 Net Cost: $1400 - $1500 = -$100 (a profit)
4. Pay taxes on sale Net Cost: -$100 - $1500 * 30% = $350 (The $1500 is added to your gross taxable income)
5. Final Net Cost of laptop: $350

Sure, it would be nice for the taxes at step 4 to be based on either the $100 profit (relative to your actual net cost) or $500 profit (if you ignore the tax savings from step 2) but neither of those options would be fair; you'd be double-dipping. As an alternative, you could not take the deduction:

1. Buy $2000 laptop Net Cost: $2000
2. No deduction Net Cost: $2000 (you're paying $600 more in taxes now)
3. Sell laptop for $1500 Net Cost: $2000 - $1500 = $500
4. No taxes on sale Net Cost: $500 (no tax because you sold at a loss)
5. Final Net Cost of laptop: $500

The laptop winds up costing you more, plus you're paying additional taxes; if you count that the laptop has cost you $1100 instead of $350 with the first approach. That's still not bad, considering that most people would buy the $2000 laptop and wind up burying it in a closet or throwing it away, never recouping any of the cost. But you can see how businesses (included self-employeed individuals) manage to lower their overall taxes.

Re:Two inaccuracies in parent

[Anonymous Coward]

2) You can't have a "business" that generates losses year after year

If you have a "business" that loses money too often, the IRS will start to get suspicious and they will try to declare the business as a hobby. The exact rules are unclear, but you need to be able to show the IRS that you really are trying to make a profit, are dependent on that income, etc.

In part after five years of losing money it will be declared a hobby, used to be a bar owner in this town that would close his bar briefly every four years and reopen after closing the books on the previous name and filing a new DBA and getting a new license for the sell of alcoholic beverages. Can't say whether or not he was ever in trouble with the IRS with it or not but he was in the bar business in the same location with at least six different names over the years. He would change the format slightly each time too and alternated between being a private club and an open beer and wine bar. And yes he did state to me that his reason for switching every few years was to avoid having his business declared a hobby or having to show a profit.

Re:Two inaccuracies in parent

[russotto]

The last time I checked, the rules were pretty clear: you had to have a net profit in two or three of the past five years, or something like that, in order to claim the activity as a business rather than a hobby.

Nope. There is in fact no hard and fast rule.

Re:Two inaccuracies in parent

[gnasher719]

'' This is EXACTLY what is wrong with our system. If you make money then you are a business or hobby and get taxed but if you lose money then it's a different game. You can't be a business and STILL have to pay taxes as they want to tax anything over $600. ''

You haven't thought this through. So you think anyone with a money losing business should be able to deduct their losses from tax. Well, apart from my normal job I run a few businesses. One business is selling reviews of CDs, DVDs and videogames. Had a lot of cost for buying all those CDs, DVDs and games, spent lots of time listening to the music and watching the DVDs, and didn't make one cent from selling the reviews. My second business as a restaurant reviewer makes losses as well, and so does my third business as a holiday resort reviewer.

Re:Two inaccuracies in parent

[alphaFlight]

don't forget that a laptop probably needs to be depreciated over a few years and not counted as the full $2000 in the first year.

Re:Two inaccuracies in parent

[DougWebb]

Not true; Section 179 allows equipment like laptops to be fully deducted the year they're purchased.

Craigslist?

[Anonymous Coward]

Isn't this really beyond the IRS control? If you post to craigslist or classified ads, you could achieve some of the same situations. As others have mentioned, it isn't income if you are selling items at a loss, but doesn't that mean we would all have to start using the depreciation tables to figure out how much stuff is worth after 'x' number of years? Is selling my car on ebay an income, if I sold it below the current depreciated value? The IRS should be trying to make taxes simpler, not trying to make the tax code more difficult.

That said, I bet the IRS loses more money from waiters and waitresses under reporting their tips on their tax returns. I have known a few people working in those areas who loved their cash tips because they basically equated to tax-free income, since there is no real way for the IRS to track them.

Time for EBay to setup a

[Organic Brain Damage]

server farm in the Caymans or Bahamas or Macao or some other off-shore tax haven?

No, flat tax...

[msauve]

like, $5000 per person. That's only "regressive" in socialist-speak.

Re:No, flat tax...

[Rob the Bold]

like, $5000 per person. That's only "regressive" in socialist-speak.

"Regressive" and "progressive" WRT to rate tables are not social judgments. It's mathematical. It just means that the rates decrease or increase (respectively) with the amount taxed.

Re:No, flat tax...

[gnasher719]

'' like, $5000 per person. That's only "regressive" in socialist-speak. ''

I agree one hundred percent. We also fix the amount of income to $40,000 per person per year. Surely if the amount of money someone has available doesn't matter for the amount of tax they pay, then the amount and value of the work they do doesn't matter for the income.

3rd party seller

[ianchaos]

My Grandmother (89 years old) is quite net savy: email, instant messaging, and ebaying almost daily. The vast majority of the items that she sells on ebay however are for other people who live in her massive assisted living complex. Last year over $12,000 worth of goods went through my Grandma's ebay account. She only charges the people a dollar per posting (on top of the normal ebay posting charges). For her it's just a fun hobby, so her net income off of that amount was almost nothing. With this kind action by the IRS my Grandma would be held liable for the taxes on that $12,000, regardless of the fact that she didn't really make any kind of profit from it.

I'm sure that there are many people who sell an item here or there for a friend on their ebay account. There is no way for ebay to distinguish a personal sale from a 3rd party transaction, so for ebay to report this information to the IRS as profit could be wildly inaccurate.

Re:3rd party seller

[Oligonicella]

Simple. Your grandmother needs to start keeping very detailed records. She must prove to the IRS she didn't make $12K. I don't see the problem, other than her hobby became more detailed.

Re:3rd party seller

[Shadowlore]

She must prove to the IRS she didn't make $12K. I don't see the problem,

So you are OK with the government making allegations and the accused has to prove them false?

Well if that's your belief so be it. But when the government crashes down your door and accuses of oh say rape, murder, or treason and you have to prove your innocence instead of them proving your guilt, don't whine about getting screwed.

Re:3rd party seller

[CodeBuster]

Have you ever tried to convince the IRS that what they say is a business is actually just your hobby or the other way around? Whether you are trying to avoid paying income tax on income from your hobby (which the IRS sees as a business) OR you are trying to write off expenses on your business (which the IRS sees as a hobby) they make it tough to defend in an audit. If your grandmother wants to continue with her "hobby" then she must keep very detailed records indeed (every last receipt, check, and bank statement and preferably separate bank accounts for her eBay hobby). The IRS auditors remind me of the Agents from the Matrix, cold, cool, and calculating (I'd imagine that that type of work mostly appeals to that type of personality).

TFA says it kicks in after 5K

[DinZy]

Many of the posters have clearly not read this article. Further, the last time this was posted it was stated that this 5000 was a monthly limit. If someone is generating over 60K a year in ebay sales they are certainly running a business and should be taxed like everyone else

Re:TFA says it kicks in after 5K

[nystul555]

The limit isn't $5000 a month, it's $5000 a year. Plenty of people can sell off $5000 worth of stuff in a year and not be running a business. I'm not sure where you got that it is $5000 a month but whoever wrote that was mistaken.

That's my concern, $5000 in sales for a year is really low. Thats a few pieces of equipment, maybe a couple of collectables, some stuff laying around in the garage, etc. And unless you kept your receipts (if you even got them) you won't be able to prove that you didn't make money on those sales. You could clear out a bunch of old stuff you paid $20000 for over a course of many years, get $5000 for it, and owe $1500+ in taxes.

Sick of the tax code (probabily off topic)

[Anonymous Coward]

Honestly, how much goods and services did you get from the US government last year? Was it worth the huge dent in your salary? Instead of trying to collect more, why don't they REMOVE SOME BULLSHIT PROGRAMS AND COLLECT LESS! Fire worthless, lazy people that are not producing.

Actually, I'd be very interested to learn how much of the total tax revenue the IRS consumes simply by the act of collecting taxes.

If its more then 1%, they should all be fired and replaced by a simplified tax code that contains 1 sentence:

Everyone who makes a profit in the year, regardless of how much that profit is, pays 15% tax.

What about your garage sale?

[YoungHack]

It seems tricky to me. On the one hand, it is clear that some people are making income selling on ebay. On the other hand, it isn't income every time you sell something. If you have a garage sale and sell off your extra junk it isn't income.

If someone gives you a gift which you turn around and sell, that doesn't make a gift income. It is still a gift. Who's to say what you are selling on ebay were not gifts that didn't work out?

Re:What about your garage sale?

[k1e0x]

The thing is you have already payed taxes on that junk of yours.. This is a way to re-tax your property twice. Actually... its 3 times because tax was paid on the materials and manufacture of that item, causing a hidden tax in the form of higher prices for it.

So unless you intend to keep a recipt for everything, and intend to risk an audit.. your going to pay twice. Hell, they may even do you a "favor" and make it automatic for you.

I think a lot of people are afraid that there might be people out their making huge profits on e-bay and that they should pay their fair share.. well the income tax is not fair its theft.. and I don't support theives in their aim to rob people.. so if you get away from the thevies.. good job. I don't support the tax at all and pay it not because I feel it is my part.. I pay it because I'm afriad of the thieves and what they will do to me if I don't.

The IRS can truely ruin a persons life.. if you dont believe that look at Joe Louis. The man gave everything to his country.. and his country took absolutly everything from him leaving him to die in poverty.

Just be fair & a monkey wrench

[enmane]

Let's just be fair - If I make a profit on Ebay and that is going to be taxed then I should be able to show that the costs of Ebay, Paypal, my camera, my time (as a paid consultant), etc nullify any such profit. This is crap and I lose money on just about everything I sell on Ebay if I'm to account for anything other than how much I paid and how much I sold it for. Here's a monkey-wrench - WHAT ABOUT REBATES?! I can show the IRS that I paid $100 for an item and sold it for $50 but still made a profit after a $70 rebate. So is it a $50 loss or a $20 profit?

Re:Just be fair & a monkey wrench

[russotto]

If you make a profit on eBay, you can certainly deduct the costs of eBay and Paypal. You can deduct the cost of your camera; You can depreciate the fixed costs over some period of time, or take it all at once as a Section 179 deduction. That's assuming you treat it as a business. If you treat it as a hobby they can screw you into a wall, taxing your gross hobby income but not letting you deduct the expenses unless they are more than 2% of your total income.

Re:Just be fair & a monkey wrench

[enmane]

Just to be clear, that's 2% of my TOTAL income... not 2% of the total income from Ebay? If it is the former then the IRS needs to get out on ebay and buy these http://cgi.ebay.com/VINTAGE-80S-MULTICOLORED-SKI-M ASK-ROBBER-MASK_W0QQitemZ320103166688QQihZ011QQcat egoryZ28022QQssPageNameZWDVWQQrdZ1QQcmdZViewItem

Re:Just be fair & a monkey wrench

[russotto]

Yes, 2% of your TOTAL income. And the IRS doesn't need ski masks; suits, ties, and ledgers are quite sufficient.

Re:Just be fair & a monkey wrench

[enmane]

sounds like someone is a little too close to the IRS

Answer

[ScrewMaster]

How long before the same fate befalls the folks who make a living working the Massively Multiplayer secondary markets?

Not long at all, I'd say. When money changes hands the IRS is always interested in a piece of the action.

Uhhh MMO tax?

[Anonymous Coward]

Go the government is going to charge me 7%GST and 7%PST now on all my copper/silver/gold/platinum transactions at the broker or a city merchant? Yeah sure, its not real money anyways, it would be just as useful as ifthe government charged people tax while playing monopoly ... now whats the government gonna do with monopoly money?....honestly.

mod down?

[k1e0x]

In this country, sometimes you can't even talk about the legitimacy of the income tax without being called un-American.. as if hi-way robbery has anything to do with being American.

All while the happy tax payer who "supports the IRS" (OP) is moded +4 for his "insight". People are so cowed by this government.. and I say that to mean.. like a domesticated bovine just grazing away in the field unbeknownst of its fate.

Re:mod down?

[pla]

In this country, sometimes you can't even talk about the legitimacy of the income tax without being called un-American

Well, in fairness, I did (accidentally) overstate the sales tax. And I probably shouldn't have mentioned payrole/SE taxes, since most people don't even realize (or want to know) that they pay them.

Even so, ignoring sales tax and at the "average" tax rate for a single filer in the US - 29.1% according to Wiki - Uncle Sam gets $1164 off the movement of a $2000 laptop from point-A to point-B. And people would actually defend that as somehow a "good" thing?


Ah well... I probably still would have gotten modded down. Most people really do seem to prefer ignorace of the fact that, on average, after less than two transactions a given dollar usually ends up back in the government's coffers.

No biggie, my karma can stand it, but thanks for the word of support. :)

AMT

[Anonymous Coward]

I'm right at the cusp of the alternative minimum tax, so a minor raise I just got will likely cost me about $2000 in increased taxes next year. Leading to a net loss. Sigh.

Re:AMT

[hansonc]

That's the problem with the fact that AMT isn't pegged to inflation at all. I've seen stats that show 60+% of people could be in an AMT situation in a few years time just based on annual cost of living raises.

If you want to bitch about some part of tax law AMT would be a great place to start.

The Tax Code is about power and control

[Anonymous Coward]

Yes, you're right, The Tax Code is about power and control. It's not really about money at all, except to the extent that money allows it to be quantified. The next discussion then has to be about who really holds the power and to what ends they (i.e., the federal reserve) are using the power.

Maybe someday we'll have such discussions here as are taking place across the Net. Then again, maybe not. We'll see.

mail, too...

[Animaether]

that's always amazed me about the U.S...

In NL, if you get a package, they come to your door, ring.. if you're not there, they come back a second time - having left a notice the first time when they would be back - and if you're still not there, they leave the package at a post office. This is for safekeeping, to make sure the right household gets it, etc.

In the US, if you're not home - tough luck, the mailman leave it on your porch. Amazon book? Porch. Laptop? Porch. That giant new plasma TV? Porch. Just walking around in some of the neighborhoods while I was on vacation in Houston I was seeing all kinds of stuff on porches... and nobody stealing it. I came to realize that for all of the flaws in America, it must be rather nice to be able to have that sort of faith in fellow man.

( I'm sure stuff does get stolen off of porches, but apparently not significantly enough for the population to demand packages be stored at post offices instead. )

Oh Please, my aching ass

[fyngyrz]

As for your gratuitous statement about who will and won't pay the taxes, you do know that 79% of the tax burden is carried by the top 20% of income earners, right?

You do know that 54% of all income is earned by the top 20% of income earners, right? And that at these incomes, it is trivially easy for these people to live? And that while you complain for them, the tax rate they pay has no possible reasonable effect on how they live whatsoever? And that the tax rate that the lowest two - or even three - brackets pay not only has an effect, but in many cases means the difference between medical treatment or not, college for the kids or not, and a host of other basic choices? So that your statement, even if 100% accurate, is basically a sop to people who have no need of your empathy whatsoever?

There's nothing annoys me as much as the presumption that a 1/3-million dollar or higher income is 10% different (that's the difference in tax rates) from a 50,000 or 20,000 dollar income and that those in the 35% bracket deserve sympathy, empathy, tax breaks, or thanks. Under any general circumstances, but certainly in our current economic mess, where both the fed and the states have expanded to take on many unconstitutional roles. Since those people can live the same life as a middle income earner without any stress, perhaps they should be paying all of the tax burden. Seriously.

I'm a lot more inclined to account for how stress-free you can rationally maintain your family than I am for the total dollars earned as a metric for how much tax one should pay. Once I've got enough funds to reach a certain standard of living, my tax rate should climb quite steeply as far as I'm concerned. Perhaps there should be no incentive at all to earn more than a million dollars or so a year - anything anyone would earn over that goes into taxes by a flat rate until the national debt is paid and all tax resources required are met. I'd be perfectly fine with that. You'd see the government get out of a lot of places it shouldn't be, too, because rich people have a lot of clout. If you can't live comfortably on a million bucks a year in the current US economic environment, you should probably be taken out and shot.

I know a lot of families here in Montana who still wouldn't be able to live what most of the readers here would consider a reasonable lifestyle (small house, health insurance, one car) if you removed the entire state and federal and use taxes tax burden from them. Comparing them on any kind of equal field with some wag who makes 349,000 (the 35% bracket for singles) or more per year is the act of a lunatic, no matter how reasonable it sounds to declare that they pay 79% of the tax burden.

About negative five days

[Deadstick]

http://games.slashdot.org/article.pl?sid=07/04/09/ 1417254

rj

Great...

[crossmr]

That $60 regular, ground post shipping price on a thumb drive, just went to $80, plus the seller expects half of that in cash.

I don't want to give my SS to e-bay

[goombah99]

Well in addition to the sociological problems there are going to be implementation problems. For example, if E-bay must report my gross income then they will need by Taxpayer ID number (aka social security number). I'm not giving that to e-bay. THe practical way to do this woul dbe as a sales tax but the US does not have a national sales tax. THis would also be a drag on marginally profitable transactions.

That's actually good, for me

[melted]

If this means that I can deduct the losses from my taxable income - that's great. I usually sell stuff I bought but didn't like on ebay for less than its purchasing price.

International sales?

[GnuDiff]

I wonder how would that work for those?

Let's say I am from Europe, and I post items on e-bay.
E-bay can report my sales to IRS np, but how is IRS going to try to do something about me?

You're lying, the rich pay LESS taxes

[raehl]

You might have a point, if the only taxes people paid were income taxes.

Income tax is progressive. But social security tax is not.

So, someone making $1 million a year may be paying 35% in income taxes, and someone making $35,000 a year may be paying 25%.

But social security tax maxes out at about $90,000. How much is social security tax? 12.4%.

So, if you're making $1 million a year, your marginal tax rate is 35%.
If you make $35,000 a year, your marginal tax rate is 37.4%! (I've left out the 2.9% for medicare that everyone pays)

And that's not even the limit of federal taxes!

For example, I have a bare-bones phone plan that I pay $8 to the phone company for. But my phone bill is $18/month! Where does that extra $10 go? THE GOVERNMENT! The tax rate on a basic phone line is over 100%.

$120/year in phone line taxes is nothing for someone who makes $1 million, but a significant expense for someone who makes the minimum wage.

There's another problem - the income tax is only on EARNED income. If you make $35,000 a year, chances are you got that income by actually WORKING. But if you're making $1 million a year, chances are a good chunk of that you made from capital investments. How much tax do you pay on capital investments? 15%!! And you also pay NO Social Security and NO Medicare taxes on it! So while the guy who actually WORKS for a living is paying 40.3% taxes on each additional dollar he earns, the people who are ALREADY rich and make their money in the stock market pay well less than half of that.

Then you have to factor in things like mortgage interest deductions. If you're making $35,000 a year, you're probably paying rent. Rent isn't tax deductible. But if you're making $1 million a year, you probably have a loan on your house - tax deductible!

And god forbid you live in a state with sales tax!

Anyway, I've determined that I'm going to become rich as soon as possible - it'll really help my tax bill. Problem is, it's really hard to become rich when the government is taking half of my money.

Anyway, point of the matter is that even though the top income earners pay the vast majority of income taxes, people who make less than $90,000 a year pay almost *ALL* of the social security taxes!

Re:You're lying, the rich pay LESS taxes

[ScentCone]

Anyway, point of the matter is that even though the top income earners pay the vast majority of income taxes, people who make less than $90,000 a year pay almost *ALL* of the social security taxes!

You're forgetting the entire HALF of the FICA bill, which is paid by their employers (frequently, those very "rich" people you're talking about). The other HALF of it.

Re:You're lying, the rich pay LESS taxes

[dgatwood]

For the most part, you are correct. However, most of those phone "taxes" actually go to the phone company. There was a lawsuit just a couple of years ago because of the phone companies mixrepresenting as tax what is really just a fee the phone company charges.

Telecom Firms Pile on Extra Fees Under Official-Sounding Names.

For example, the phone company is required to pay money to the federal universal service fund. The FUSF Cost Recovery Fee is money that you pay to the phone company. The claim is made that this is to defray the amount that they pay to the FUSF, which may be true, but it is disingenuous to call this a tax; the government is not charging you a fee, and the phone company is not required to collect the fee from consumers, nor is it required to collect it as an add-on.

The phone companies CHOOSE to collect the Federal Universal Service Fund CRF as an add-on so that they can fraudulently advertise low teaser rates that are substantially lower than your actual cost. By any reasonable ethical standards, this practice is wrong. However, it is, sadly, legal.

Re:You're lying, the rich pay LESS taxes

[Anonymous Coward]

people who make less than $90,000 a year pay almost *ALL* of the social security taxes!

And they're also the same people who will be using social security as their retirement program.

Re:You're lying, the rich pay LESS taxes

[Anonymous Coward]

[quote]You're forgetting the entire HALF of the FICA bill, which is paid by their employers (frequently, those very "rich" people you're talking about). The other HALF of it.[/quote]

They don't tend to pay those FICA contributions out of their own pockets, but rather they are paid by the companies that they might be the CEOs of. They don't tend to employ people directly (apart from perhaps the au pair or the maid).

Re:You're lying, the rich pay LESS taxes

[raehl]

And they're also the same people who will be using social security as their retirement program.

Correction: Nobody will be using social security as their requirement program.

Re:You're lying, the rich pay LESS taxes

[Copid]

And they're also the same people who will be using social security as their retirement program.

Do I hear somebody calling for means testing social security payments? I think that sounds like a great idea!

The Main Problem With This

[fwr]

I think everyone is missing the main problem with this idea by the IRS to require E-Bay and similar companies to report "income" or sales of their customer/vendors. HOW would E-Bay report such information? They would require your Social Security Number or Tax ID. I don't E-Bay, but I don't believe they collect that information now. Can you imagine the attacks and inevitable loss of SSN's by E-Bay due to this proposed requirement?

I can understand the IRS' motive, but their method is misplaced. E-Bay is not paying the sellers directly, they are a distant third-party when it comes to the actual transaction. They can't actually confirm how much each taxable individual is paid for sales. If the IRS wants to go after those who basically make their living on E-Bay, then it can open investigations on a case-by-case basis. I can see it legitimate to ask E-Bay to provide a list of individual sellers that supposedly closed deals over $50,000 in the last year, and then open cases on each one and go after them.

Or something else, but don't make E-Bay obtain and report on every users' SSN and the "income" each users is supposedly receiving (which E-Bay can't really prove anyway).

Oregon.....

[axia777]

....has no sales tax. So what is the IRS going to do about that? And how are they really going to track all the sellers on eBay that make a living there? Are they going to force all of these companies to pay for the expenses needed to execute such an action? To the Feds, good luck on all of that.

Re:Oregon.....

[larry bagina]

The IRS isn't concerned with state sales/use tax. They're concerned with people that resell items for a profit. Especially when they're doing it on a large scale and bringing in a significant income from it.

Re: Very funny

[140Mandak262Jamuna]

You dont recognize the constitution. You dont recognize any law passed by people who you did not vote for. Further you discount the foundation of Democracy, one man one vote. And you entertain violent about gravely hurting people who disagree with you.

Adam Smith in 1770s talked about the "invisible" hand. The stock market is the direct proof staring at you that shows that "Large number of people, acting independantly on their own self interest will make more intelligent and wise decisions". Very few fund managers have managed to beat the index funds. Someday when you are grown up think about it.

Then why have tax at all?...

[msauve]

You're not socialist, you're communist.

The Scum Quotient.

[Fantastic Lad]

Simple. Your grandmother needs to start keeping very detailed records. She must prove to the IRS she didn't make $12K. I don't see the problem, other than her hobby became more detailed.

The problem is that she has to keep very detailed records. Running your own swap-meet garage-sale thing on-line is fun. Keeping detailed records for the benefit of a bunch of pathologically corrupt, parasitic government scum is not just un-fun; it's infuriating.

-FL

Tax it once, then get off my lawn

[billcopc]

I get severely irked by the multi-taxing nature of certain governments. The way I see it, they've collected tax at the point of sale, when I bought the item from the retailer in the first place. I see no reason for them to get paid again for the private re-sale of a used item. The day I see tax collectors go after yard sales will be the day I drive down to the states to buy a gun.

They should quit fretting over "internet" businesses and just treat them like any other business. If a brick and mortar store doesn't pay their taxes, you revoke their licenses, shut them down and sue the owners until they fly back to friggin' China. If an online store doesn't pay their taxes, the same strategy should be applied. If some cocky bastard on disability is selling 200k worth of beanie babies on eBay, you take away their cripple pension and tax them on that 200k.

The obvious workaround is to use a foreign identity and a server located in different country. Then it becomes a case of international fraud and tax evasion... but good luck with the lawsuit! It's already hard enough to get two allied nations to cooperate, imagine the hoops to get server logs from a russian datacenter to an american tax bureau.

I say let the governments do what they can, while they can. Given another decade or two of mass screwups, they're going to be largely obsolete anyway!

Re:Tax it once, then get off my lawn

[Anonymous Coward]

"I see no reason for them to get paid again for the private re-sale of a used item."

I suspect it is those running it as effectively a business that they want to go after, not those selling off the odd bit of junk or an accidentally purchased second copy of a DVD you already had.

They're Taxing the GROSS, not the NET!!!

[Anonymous Coward]

I'm going through this right now. (My wife decided to sell a couple of tie-dyed Tshirts to her friends.)

IF it's a business, you have to file a schedule-C. (And you can deduct expenses.) But you also need to follow approved accounting systems, inventory management and year-end valuation, etc.

IF it's a hobby, the GROSS income goes on form 1040 Line 21. The costs of supplies goes on Schedule-A Line 22 -- IF you itemize! And those costs of supplies are subject to what exceeds 2% of your AGI (adjusted gross income).

So if my wife buys a shirt & dye for $9, and sells it for $10, we are taxed on the "gross" $10, NOT on the "net" $1 profit.

That's a really important distinction! (And yes, federal taxes do exceed our total profits by a wide margin!)

I'm sure a CPA could straighten it all out. But a CPA will cost us more than the taxes! (In this case.)

Put it another way: As US FEDERAL TAXES are figured right now... If you buy a laptop for $2100. And it doesn't do what you need so you turn around and resell it for $2000. You took a $100 net loss. But the US government still wants to tax you on that $2000 sale as income. That will be at 15%/25%/28% depending on your tax bracket. E.g. $300/$500/$560 in addition to the $100 loss you took reselling. (Plus another ~$100+ for state & local taxes!)

This is seriously fucked up. Back in the days of yard sales and cash-only transactions there were no records. Now that the IRS can get the electronic records, god help us all!

-Anonymous. Yes, I'm anon. Deal with it. I've got enough grief & audit-fodder with the IRS already without signing my name to this...

Re:They're Taxing the GROSS, not the NET!!!

[mink]

It helps small time people that they are not required to report inventory unless they make over one million dollars in the last 3 years (total I assume).

Re: Very funny

[fyngyrz]

You dont recognize the constitution.

I recognize it just fine. It is that document that our government largely ignores, the more so in recent years. I don't even have that much of a problem with the constitution, other than the 13th amendment, which gives the government the right to enslave anyone convicted of any crime, the 16th amendment, which is contradictory to section 8 and the 10th amendment both, and that portion of the 5th amendment that allows government to take private property against the owner's will under any circumstances. I'm just pointing out that I had nothing to do with it, and claiming that I did is a blatant lie.

The constitution, by the way, isn't directed at "me." It is a document that specifies how the government may be constituted. In that role, it has two indirect ways it can affect me; one, in that it should (but has been unable to) set the limits of the federal government; and two, in that it should (but also has been unable to) set the limits of state government, as per amendment 14 (which applies amendments 1...10 to the states.) So the question isn't even whether "I" recognize it, though I do. The question is if the state and federal governments will comply with it, which they obviously will not. From that arises the question of what to do about it.

You dont recognize any law passed by people who you did not vote for.

Again, you're wrong. I recognize those laws just fine. I even obey them, even the ones I object to vehemently. I am simply pointing out, without mincing any words, that I didn't have anything to do with creating, formulating, or passing them, and that consequently, the laws are a matter of dictatorial infliction, and enforcement via coercion. Since I was nowhere in the chain of authority for these laws, you cannot blame the manner and form of them upon me. These are facts; none of them in any way says I don't recognize the letter of the law, or the armored fist of coercion that drives them home. I certainly do.

Further you discount the foundation of Democracy, one man one vote.

Discount it? Hardly. I simply pointed out how it actually works. If you are uninformed, and your sister is uninformed, you are enabled to outvote your mom, who is informed. That is how it works. Most people are woefully uninformed; this tells you that the specific description I give here applies broadly. It isn't rocket science. It isn't even basic earth science.

And you entertain violent(sic) about gravely hurting people who disagree with you.

I would rather employ violence against people who dictate the laws to the rest of us, without any input from us, than talk to them. Yes indeed. No taxation or legislation without representation. The fact is, I don't have any representation. Just like the heroes who founded our country. Got anything to say about that?

The stock market is the direct proof staring at you that shows that "Large number of people, acting independantly on their own self interest will make more intelligent and wise decisions"

Is that what it shows? Or does it simply show that well funded corporations with more than minimal share value (the only ones allowed on the stock exchange) generally make profits, and investing in them such that you get a cut of that profit is in your self interest, assuming, of course, that you haven't been taxed out of your ability to do so? Doesn't it also show, specifically in the case of 1929, that large numbers or people, acting in their own self-interest but not knowing what the heck they are doing, will do the absolute wrong thing and force a bad situation to become an intolerable situation? Of course it does. Ditto democracy. There are no democracies that have survived very long. They become immensely corrupt, as ours is becoming as I write this. And then they fall. Film at 11.

the irs may be sorry if it does this

[The_Rook]

be a little realistic. the irs is not going to go after anyone selling off an old laptop or the flotsam and jetsam of everyday life. mailing the letter asking for the taxes on the sale of a pair of old sneakers would likely cost more than the taxes collected. and if they have even a small fraction of taxpayers substantiate their original purchase price and selling costs etc. the total effort won't be worth the tax collected.

more likley, the irs wants to capture taxes on income from undocumented businesses - that is, people who sell stuff on e-bay on a continuing basis by making things to sell (like soap, homemade tomato sauce, etc) or who buy things from local wholesalers for resale on e-bay.

the pitfall i see for the irs is that it's actually rather expensive to do business on e-bay. unless an e-bay seller's product has a huge markup, the actual profits are rather small, if there is any profit at all. the irs may create a hugely expensive documentation requirement for itself as well as e-bay to generate very little in the way of tax revenue. it would be a disaster if it cost more to collect the taxes than the tax revenue generated.

Re:the irs may be sorry if it does this

[mikael]

We have friends (who own an antique store) who go around the second hand stores and jumble sales looking for bargains. They know that some things (like turn of the century leather cover books) gain more value when placed together in a collection, even more so in a related collection. These can be sold internationally, as there is
particular demand from people who wish to decorate their studies with antique books. By shipping stuff to and
back across the Atlantic, other merchandise can gain a "history". Georgian cutlery sets from the UK can be
brought over to the USA and gain "pioneer era" description, then resold back to the UK.

Re: Very funny

[k1e0x]

Well, they fail.. but if the people of this nation do not understand freedom.. anything that would replace it currently would be worse. Can you imagine how large our new constitution would be if we were to write it today? Can you imagine the things people would try to litigate in it?

Welcom to Soviet Amerika Comrade a great nation where we provide for all!!

Income tax vs. sales tax

[Anonymous Coward]

I pay 17.5% 'state' income tax, 28.5% 'federal' income tax and 22% general sales tax.
Total tax burden: 68% of my income assuming I spend it all.
Nice place I live, don't you think?

With current trade balance, do you believe that a 25% sales tax would be enough?
Debts must be repaid someday, I predict that my tax levels will be very common to your children..

Re:Income tax vs. sales tax

[Doc Ruby]

Where do you live? And what amount do the rich people pay?

Like I said, in a $16T economy like the US, 25% should pay our $4T government budget bills. Especially if we weren't spending a $TRILLION on Iraq.

It would be interesting to see how much the intrinsic tax incentive to save rather than to consume would reduce that $16T production. And how much that savings increase in available investment capital would reduce the amount of government spending.

Re:Income tax vs. sales tax

[Anonymous Coward]

Gee, that's a very high overall tax rate. In the UK, I pay about 26% on income tax (after allowing for the fact that the tax rate here isn't flat) plus 17.5% sales tax (well, value added tax, which works out like a sales tax from an end-consumer's POV). That includes support for a health insurance scheme (well, again that's an approximation). I doubt I'd be able to get up to your sorts of level of tax rate without an income many times higher than it is at present...

Fraud

[rtechie]

I for one am in favor of this move. Not because I think people should be paying more taxes (When people are going to great lengths to avoid a tax, it's a sign that tax is unfair. Nobody should be paying income taxes that makes less than $100,000 per year.) but because this might do something to prevent the rampant fraud we see on eBay. The fraudsters aren't likely to want to pay taxes, and collecting taxes will probably require eBay to collect more information on sellers, which will reduce fraud. Especially if eBay faces financial penalties for not properly collecting tax revenue.

Here's hoping.

Actually, that's how it works now.

[The Rizz]

For example, some proposals suggest only taxing the final sale price to the end use; not the sale of goods required to produce an item. So a house, for example, would be taxed when it was first sold, but the lumber, etc would not be taxed when the builder bought it. While this makes sense on the surface - you only tax the items once; the goal then becomes to either:

You've never run a business, have you? This is the way taxes work now.

As for your examples, in case (1), you said it's already been outlawed in the tax code, and there is no reason to think that loophole wouldn't still be closed in any new tax code.

In (2), you need a sales tax license to buy anything tax free, and you need to affirm that you are purchasing that item for resale. If you put that item to personal use (for yourself), then you must "buy" it from the business - which means paying taxes. If you put that item to use in your business it is no longer being resold, so you either have to have your business "buy" the item from itself, or pay a use tax on it (identical cost to sales tax, just not collected by the seller but paid directly by the buyer).

A "Fair Tax" as some propose on consumption will not simplify the tax code; all it will do is cause smart people to find new loopholes that Congress will then try to close.

Yeah, except that it will be large, blatantly obvious cases of tax evasion like the ones you mentioned above (and therefore easy to spot and fix), instead of the current system with so many holes that you could (and most do) use it like a sieve. Besides, over the last hundred years or so, almost every method of "legal" tax evasion that doesn't require the exploitation of some minutiae of the tax code has been found and abolished - these minutiae will disappear in a simplified tax code.

A secondary effect is the impact on such things as home sales - new homes would have to sell for less than existing ones since they would be taxed and buyers tend to look at the final price, not the one "before tax" price.

Once again, you show that you have never run a business, and have no idea how people actually make purchasing decisions. You're acting as if buyers are logical - they most certainly are not. Trying to figure out the final price on something involves "math" - which makes most of the population's eyes glaze over and they just ignore it, take a guess at about how much it will end up being, and move on.

Also, new homes do not need to be cheaper than older homes - that's like saying new cars have to be cheaper than used cars or they'll never sell. Being "new" is considered a reason to pay more for an item, tax or no tax. I bought a house a few years ago, and I can tell you for 100% certain that old houses in better locations were selling for less than new houses, but new houses were still selling almost as fast as the local construction companies could build them.

Re:Actually, that's how it works now.

[Registered Coward v2]

For example, some proposals suggest only taxing the final sale price to the end use; not the sale of goods required to produce an item. So a house, for example, would be taxed when it was first sold, but the lumber, etc would not be taxed when the builder bought it. While this makes sense on the surface - you only tax the items once; the goal then becomes to either:

You've never run a business, have you? This is the way taxes work now.

As for your examples, in case (1), you said it's already been outlawed in the tax code, and there is no reason to think that loophole wouldn't still be closed in any new tax code.

In (2), you need a sales tax license to buy anything tax free, and you need to affirm that you are purchasing that item for resale. If you put that item to personal use (for yourself), then you must "buy" it from the business - which means paying taxes. If you put that item to use in your business it is no longer being resold, so you either have to have your business "buy" the item from itself, or pay a use tax on it (identical cost to sales tax, just not collected by the seller but paid directly by the buyer).

Having had a tax exempt certificate for a business I realize how sales tax is *currently* collected; my point was much of the "Fair Tax" argument centers around collecting the tax only on the first, non-business use transaction. That makes the goal of such a system to avoid that first sale or reduce the price as much as possible while still getting the desired cash. Proponents argue that will simplify the code; but to outlaw such things as I've described would require just as complicated a code after the rewrite.

A "Fair Tax" as some propose on consumption will not simplify the tax code; all it will do is cause smart people to find new loopholes that Congress will then try to close.

Yeah, except that it will be large, blatantly obvious cases of tax evasion like the ones you mentioned above (and therefore easy to spot and fix), instead of the current system with so many holes that you could (and most do) use it like a sieve. Besides, over the last hundred years or so, almost every method of "legal" tax evasion that doesn't require the exploitation of some minutiae of the tax code has been found and abolished - these minutiae will disappear in a simplified tax code.

Except that everyone would look for the holes in the new code and drive right through them. One of the reasons that a tax code is complex is it requires laws to close loopholes as they are found; and very smart people make a lot of money finding loopholes.

A secondary effect is the impact on such things as home sales - new homes would have to sell for less than existing ones since they would be taxed and buyers tend to look at the final price, not the one "before tax" price.

Once again, you show that you have never run a business, and have no idea how people actually make purchasing decisions. You're acting as if buyers are logical - they most certainly are not. Trying to figure out the final price on something involves "math" - which makes most of the population's eyes glaze over and they just ignore it, take a guess at about how much it will end up being, and move on.

Also, new homes do not need to be cheaper than older homes - that's like saying new cars have to be cheaper than used cars or they'll never sell. Being "new" is considered a reason to pay more for an item, tax or no tax. I bought a house a few years ago, and I can tell you for 100% certain that old houses in better locations were selling for less than new houses, but new houses were still selling almost as fast as the local construction companies could build them.

You example is not applicable since there is no "new house only" tax in effect - so there is no tax penalty for buying a new home - any tax applies equally to new or resale properties typically today.

You missed my point - any significant tax on the sale of a new home will result make comparable use

That isn't actually a progressive tax

[Rix]

Their plan mitigates the regressive nature of a sales tax, but it does not make it progressive. At best, it's a flat tax. Assuming everyone above the poverty level spend a similar percentage of their income on taxable goods, it would be a flat tax (everyone pays the same percentage of their income in tax). However, people tend to spend less of their income on taxable goods as their income rises because they have the basics covered. Higher income earners direct a larger percentage of their income into investments which would not be taxable under this scheme.

If this plan were implemented, the middle and lower middle class would end up bearing a far heavier tax burden.

"IRS is pushing Congress"

[Anonymous Coward]

"The IRS is pushing Congress" excuse me?

The biggest scam of all

[samantha]

The biggest scam is perpetrated by the IRS. Most "income" taxed by the IRS is not "income" by the Tax Code the IRS is bound by law to follow. The 16th Amendment was never meant to tax the salary, property sales (e.g., ebay), etc. of the vast majority of Americans. There is ample case law besides the obsfucated but decipherable wording of the code on these issues. The majority of Americans have been conned into paying 25% or more of all that comes in to the IRS. It is time for this great scam to end not for the scam to expand its reach in the name of some bogus "fairness". It is time for the purportedly free people of America to stand up and utterly refuse to be part time slaves for whatever the government dreams up. This is NOT freedom. It is servitude. Without this larcenous scam the government would not be able to run roughshod over the rights of the people. It would not be able to engage in vile and expensive adventurism around the world. It is time for the government to fear its people whom it is supposed to serve. It is time for the people to stop fearing the IRS or any other part of their government. Bind the Beast or be bound by it.

if they dont pay taxes.. they should be denied ..

[plasmacutter]

if they dont pay taxes for their secondary mmo incomes, they should be denied government services.

this would be rather ironic, considering there are no taxes in mmo's like WoW, and there are also no such government services.

now if only they'd have combat logs in real life

"burglar's eviscerate crits you for 3500"
"you are dead"

sadly, no corpse running for them after their random ganking in real life.

not true, it would only benefit the rich.

[plasmacutter]

the only thing a sales/consumption only "fair tax" would do is benefit the rich by further insulating them from paying taxes on their already rediculous six to eight figure incomes.

it would also penalize the poor for buying basic necessities when they would otherwise not be paying income taxes.

the only reason most of these people are advancing the ironically named "fair tax" is to satisfy their ulterior supply side ambitions.

it is yet another conservative scheme to erode the middle class for the sake of the moneyed elite.

As I Said, It Benefits Everyone

[Doc Ruby]

Who cares if rich people make more money, as long as they pay their share like the rest of us, measured by what measures the rest of us, buying stuff? If their incomes are ridiculous, that's a different kind of reform that increased labor organization (and its representation in government) is for.

As I said, basics would be tax free. But not just for the poor: everyone should have the basics protected, especially the middle class which today takes the whole burden of subsidizing the poor, as the rich and corporations don't pay their own share, let alone anyone else's. If the poor buy SUVs, as do hundreds of poor people in the public housing projects at the end of my block, they should pay for the system that offers them such gifts just like the rest of us. But when they cook their own food, make their own clothes, and pay rent and utilities below the median expense in their zipcode, like poor people used to do before the necessary welfare state got so huge, complex, abusable and mostly invisible to people not in it, they shouldn't pay taxes to run that inefficient machine putting a fraction of it (or a multiple of it) back in their pockets, making them dependent on a system that isn't helping them enough.

I am far from "Conservative". I am extremely progressive. I'm really mad that free-ride "Conservatives" like Steve Forbes got bait & switch Conservatives like Bush to start offering a sales tax to Americans. Because they'll just pervert it into exactly what you said. Real sales tax replacing the income tax is hated by supply siders, because it attaches the tax directly to their customers, unlike income tax which dissociates the tax from their sales.

Re:As I Said, It Benefits Everyone

[plasmacutter]

I disagree on multiple grounds.
first, With the system you propose the middle class still pay disproportionately into the welfare system compared to the rich, who also happen to be the same exploiters who make the welfare system necessary.
Additionally, the fact that the wealthy can afford to buy the highest of quality (read durable) goods means they can circumvent the system by virtue of not having to replace things as often as those who make less.

"basics" are also subjective, and you said it yourself, the wealthy have so much power that "clothes" will also include saks, education supplies will include those quad xeon woodcrest mac pro's, and food would include imported lobster sold in the premium districts downtown. Additionally, if you tried to start limiting it you become too close for my tastes to a command economy, dictating to the poor what they are and are not "allowed" to buy (through financial disincentive).

Finally, your proposed tax is by definition on final retail goods (sales tax), you run into issues with the definition of final good.
for instance, lumber is sold at retail as a final good, but it's also an input into a tremendous array of manufacturing, and many small businesses buy lumber from warehouses which can be considered retail.
It gets worse after that, because in order to insure equitable treatment of small businesses vs large, you either have to cut the fair tax on lumber, or you have to tax all lumber transactions, and once you start doing that you end up with a "tax multiplier" effect with each transaction in the same way we have a money multiplier effect with each deposit. this then depresses the economy (because this scenario applies to a lot more than lumber)

Re:As I Said, It Benefits Everyone

[Doc Ruby]

I think you're misreading me. I said "raw cloth", not "clothes", would be taxfree. The rich will pay the same tax on those items as anyone else, but less likely to avoid the tax by making their own clothes from raw cloth.

The other basics aren't really subjective in the sense of "anything goes". Food, shelter, clothing, utilities, all in the most economical form are statistically definable. It's actually pretty simple. Further, I didn't say "education supplies": protecting the poor from that means schools should provide the basics as the schools define them, including computers (as we are doing here in NYC). When a constituency defines something like "broadband" as a necessity, as we're doing here in NYC, it becomes taxfree. The current tax code defines a vast array of abusable items in a command economy. Compared to sales tax exemptions for necessities itemized in a legislative process, we'd be throwing away the command and its oppressive infrastructure. Not to mention throwing away the insane privacy invasion of tax reporting by individuals, rather than aggregated (anonymous, though auditable) sales.

Higher quality goods cost more. They last longer, so are often more economical (value over time), which also reduces waste (especially in trash, but also in work transactions). Poor people can invest in quality essentials the same as rich people do, as I have when I've been poor, and even better when they expect to be poor for long periods.

There is no solution to the improvement in life by being rich. The sales tax at least protects the basics, recognizing that there are two types of expenses, which is what all the tax systems claim to achieve, but don't.

My sales tax is certainly not defined as applied to only final retail. In fact, I explicitly said it would also apply to equities (though at a nearly negligible rate). Every sale, wholesale or retail, including commodities like oil, would pay the tax. People with gov't-registered wholesale IDs could pay a lower tax, probably closer to 5% (determined by gov't economists, programmatically in law). Those (by definition) businesses would no longer pay any income tax, either, also cutting their tax-preparation expenses and increasing their flexibility, distributing the economy better for more efficiency.

So it seems to me that sales tax is very fair, with its simple exclusions. Just by making its collectors (sellers) more controllable, but not a separate industry or large government bureaucracy, the amount of uncollected tax will plummet, which will make the system work better. The other ripple effects also strengthen the economy, especially the incentives for savings. And just putting tax on a rational basis, instead of arbitrary income tax, will increase respect and confidence in the system, as it is us.

Re:if they dont pay taxes.. they should be denied

[Doc Ruby]

It seems like poetic justice. But gov't services are important because they benefit whole communities, which means they protect the community from individual members private shortcomings. Like vaccinations preventing epidemics.

This is the difference between gov't and business that "Conservatives" (fascists) refuse to understand. It's an investment in other people for your own good, on a statistical aggregate basis, that acknowledges that individuals aren't rational enough often enough to do it ourselves often enough to survive in the long term. "Conservatives" scoff at it as "altruism". While they routinely collapse markets from greed.

If we leave the option for people not to pay so they don't get services, then the richest and the stupidest will opt out, and destroy the critical mass on which they will depend sometime, which will take them down before they can help the rest of us again. "What goes around, comes around" can be harnessed, or it can undo us all.

Exactly

[Anonymous Coward]

The fact that you sold it to pawn shop, or on the garage sale or on the flea market or Ebay makes no difference. Precisely. So, why should eBay, Amazon, and other online marketplaces suddenly be obligated to bear the burden of software development, tracking, reporting, accounting, error checking, angry user/merchant support, et al, when their off-line counterparts suffer no such requirements? It's an unfair trade advantage mandated by the government to artificially restrict competition by a) giving limited protection to off-line markets by excluding them from the onus and b) dramatically protecting the interests of eBay, Amazon, and other big giants who are all too happy to absorb these costs into their massive revenues streams, bitching and moaning all the while when in fact they are very happy to see expensive barriers prevent entrepreneurs from entering the space.

It's protectionism. Period.

People don't pay their taxes? Go after them; don't create industry protection by raising the entry fee. Ah, but all the important people with money and power will see this legislation enacted ftw. Who is John Galt?

Wow, you are quite the sucker.

[raehl]

The tax is on the worker's wage. Whether it is paid by the employer or the employee (or half and half) is semantics. And the semantics are intentional - by having the employer pay half of the tax, it doesn't show up on the worker's paycheck, and the worker doesn't realize just how much of their wage is being taken by the government - it LOOKS like only 7.5% is being taken, but in reality, 15% is being taken.

Any economist will include both the employer and employee paid portions of SS and Medicare taxes when calculating the tax burden of the employee.

SBC is especially sneaky about this....

[raehl]

They advertised $8/month local service. And for the first few months, it came out to $11 or so.

Now it's nearly $18. What happened?

They gave me a $5 credit the first couple months, so I'd think I was paying what I was supposed to be paying, then took it away.

Yep, even then...

[Omega]

It seems tricky to me. On the one hand, it is clear that some people are making income selling on ebay. On the other hand, it isn't income every time you sell something. If you have a garage sale and sell off your extra junk it isn't income.

Technically, it is. It's the same as any capital gain (or loss). If sell something, you have to report the difference between the amount you acquired it for and the amount you sold it for as a capital gain (or loss). If its a gain, you owe tax on it. If its a loss, you get to deduct it from your earned income. The IRS won't go chasing you down for every garage sale (unless you're selling Picassos) because it's not worth it -- also I believe there is a certain minimum you need to make before you're required to report it (disclaimer: IANAA).

If someone gives you a gift which you turn around and sell, that doesn't make a gift income. It is still a gift. Who's to say what you are selling on ebay were not gifts that didn't work out?

Actually, you're required to report the fair market value of any gifts you receive as income. You may (or may not) remember that Oprah Winfrey gave away a free car to everyone in her studio audience a while back. Many of these people were shocked to learn that they had to pay tax for the "gift" of the free car -- some couldn't afford the tax.

For small $ stuff, most people get away with not reporting the value of the gifts they receive (birthday, x-mas presents, etc). But larger gifts get more attention and are almost always reported for tax purposes (paycheck bonuses, sweepstakes winnings, etc). So a "gift loophole" doesn't really exist.

Income Tax!?!?!?

[Anonymous Coward]

WTF.. Show me the law stating that I have to Pay Income Tax... Last I checked it was a Voluntary Tax... Besides that, the IRS cant define Income to someone... The only thing I know that you have to pay taxes on is PROFIT and GAINS... Not Labor, So if your job is selling stuff on Ebay... I dont see how they can tax that...

Re:Income Tax!?!?!?

[jlanthripp]

See: United States Constitution, Amendment XVI

See also: United States Code, Title 26.

You don't have to like it; I certainly don't. You do, however, have to pay the taxes imposed under the above laws - or lose your belongings and go to prison.

Scarier Numbers

[Slashdot Parent]

I was floored to read that the top 5% of taxpayers pay over 50% of the tax revenue.

I hate taxes.

Eh

[Slashdot Parent]

The top 5% of taxpayers pay over 50% of the taxes. I think taxes are progressive enough.

Head Tax

[Slashdot Parent]

What you describe is actually called a "Head Tax" (i.e. $5,000.00 per head).

A flat tax just means a constant tax rate. Say, 5% or something.

In that case, they should be taxed at 70%.

[fyngyrz]

The top 5% of taxpayers pay over 50% of the taxes. I think taxes are progressive enoug

If that is the case - I don't have numbers that confirm your assertion - then, since we know that the top bracket is 35%, we can double the taxes of that top 5% to 70%, they will then be paying 100% of the taxes, and the rest of us can do trivial little things like be able to afford medical care. Of every million dollars earned by those top 5%, they'd still get to keep 300,000.00, which is about 5 to 10 times what your average citizen makes.

Sounds perfect to me.

Re:In that case, they should be taxed at 70%.

[Slashdot Parent]

If that is the case - I don't have numbers that confirm your assertion

You do now. The top 5% make only $137,500.00 and above, and pay 57% of federal income taxes.

since we know that the top bracket is 35%, we can double the taxes of that top 5% to 70%, they will then be paying 100% of the taxes, and the rest of us can do trivial little things like be able to afford medical care.

This is incorrect on many levels.

At its most basic level, the math is incorrect. Consider:

• At $137,500.00, a person with that income is only in the 28% tax bracket. Doubling his highest marginal tax rate would not yield 70%.
• More importantly, that person is not paying 28%. He is only paying $15,107.50 + 0.28 * 63,300 = 32,831.50 / 137,500.00 = 23.9% Bumping him up to 70% would be quite a shock!

Perhaps you would say that the actual rates are not relevant. Just double the final tax bill. We still get into issues of fundamental fairness. Is it fair that someone who earns $137,500 should pay $65,663.00 federal income taxes? I suppose we should double his state taxes as well, right? ~12% of 137,500 and you get another $16,500 in state taxes. So now our guy only gets to keep $55,337? Talk about a disincentive to get into that top 5%!

Also consider that poor people are poor for a reason. You might assert that the reason is a lack of money. But you do not know many poor people and their finances. I mean really truly know them. I work with them on a daily basis and do you want to know the difference between them and me? Between their finances and mine? They make poor people decisions, and I do not. It sounds harsh. It is harsh. But I cannot explain it any other way.

What are poor people decisions, you might ask? Let's stick with the most relevant to our discussion: Squandering your emergency Katrina aid on $200 bottles of champagne at Hooters, $600 at a strip club, etc. This, by the way, is exactly what would happen if you let poor people quit paying taxes. (Not that the truly poor pay any federal income tax, anyhow. They get money back.)

Lastly, let's say you fix your math so that the top 5%ers pay double taxes, and let's say you fix poor people to make them spend their windfalls wisely, your proposal still won't raise enough money. Why?

1. The rich will find loopholes. They always do when it's worth their while.
2. They'll quit working. Think about it. If you made $300,000 already this year, and it was September or so... would you really work the rest of the year for $0.30 on the dollar? Or would you just take a cruise to Tahiti?
3. Taxpatriates. It's extreme, but people more and more are renouncing their citizenship in high-tax countries and moving to low-tax countries and taking their wealth with them. Make it worth their while, and they'll move to Bermuda.

In summary, your idea would not work as intended.

Re:Oh Please - you break it you buy it!

[wilec]

"One last statistic that is also interesting. The bottom 40% now "pay" a negative percentage of individual income taxes. And the bottom 60% combined pay less than 1%. That means the top 40% pay over 99% of individual income taxes.

I think these inconvenient facts show that your statements are the real propaganda, ignorance and prattling truisms."

Unless objectively applied to a well defined and specific question statistics are less than useless, hence the colloquialism about there being "Three types of lies, lies, damn lies and statistics. Yea good old "earned income" otherwise known as "wages, tips, other compensation". This is why many business owners pay themselves next to nothing, and why many CEO's prefer to work for peanuts and stock options. How about capital gains taxes, since this is where the top % make their real gains in wealth? What is the top rate now, 15% or so? And the 15% only applies to the part that exemptions and loopholes have not excluded/hidden. How about the sleazy off shore corporate registration and banking setups? Either you are just a sucker for propaganda or part of the problem. Break the system and we all frickin pay, but those who are seen as the agents of causation are the ones who will pay the most, for a change. Kinda lends a different meaning to the term "you break it you buy it" doesn't it?

Wabi-Sabi
Matthew