Slashdot Mirror
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?
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?
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.
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.
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.
I am not a crackpot.
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.
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.
I'm a consultant - I convert gibberish into cash-flow.
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.