New paypal problem..what do you think?

[jturner]

So I signed on to paypal the other day, and I have to sign a new service agreement. Basically, Paypal has to report all of my financial transactions to the IRS, as if I were a business.
I don't keep a profit loss statement for my hobby
I feel like I should only do Money order or cashiers, but...dang, paypal is convenient.

What do you guys think?

[kturock]

Wow.. another reason to not use paypal.
Go figure.

There must be something dealing with the banking industry & the IRS.

MM usually has some insight into it.

[Asif Chaudhry]

What a pain in the.....

I just did a quick google search and found this article as the first hit:

http://www.ethicalim.com/internet-marke ... s-in-2011/

For most casual gamers/B-towners, the relevant part is:

" This does only apply to those who receive $20,000 or more in gross sales volume AND 200 payments or more, but if you don’t fall into that category I still highly recommend you report it all! "

So unless you are getting lots of payments (and I assume Personal/Gift payments don't count, since several articles explicitly mention "merchant accounts", but don't quote me on that), you should be ok with PayPal.

From another article, some good advice:

"Individuals who sell casually online should probably not get an EIN, since once you declare yourself a business, there may be other ramifications. If in doubt, consult an accountant or wait until more is known about the kind of information companies will start collecting."

-Asif Chaudhry

----------------------------------------------------------------------------

Other interesting links on this info:

http://www.auctionbytes.com/cab/abu/y21 ... bu0258/s03

IRS web page (this is an advance draft form of the new 1099-K form that PayPal/Google Checkout/other online payment processors will be sending to merchants AND the IRS for income reporting purposes)

http://www.irs.gov/pub/irs-dft/f1099k--dft.pdf

[MagickalMemories]

I'm really not surprised. It's been coming for a long time, now.
Just from the rumblings I've heard/read over the last 10 years, let me tell you what else I expect to see in less than 10 years:

ALL online transactions by a business must be charged a sales tax. There will be specifics about what to charge (charge by the seller's home state or the buyers home state or a national "average" when in different states), but it will be charged.

Even International buyers will pay.

You will have to report all feebay sales over a certain amount. Like PayPal, feebay will be required to divulge these numbers. I suspect they'll REALLY crack down on oversharging shipping to alleviate fees (and taxes) at that point.

The US, UK, AU or France will lead the charge with this, with other nations falling swiftly in line.

It's all about the all-mighty dollar, folks. The US government is seeing a piece that they're not getting. Make no bones about it. If they're introducing it for 2011, they've been working on implementation since 2008, at least.


Eric

[jturner]

I was listening to a discussion on the sales tax thing, MM. The general discussion was how an online merchant can send income tax to 50 different states (or in some cases, countries)? I can understand, for example, IL charging IL businesses income tax, but what happens when CA, WY, CO...etc...are charging a business in IL? this just can't be good for businesses. Small businesses won't be able to afford the administration costs of such an unwieldly system.

Maybe the Federal government will be benevolent and set up a collection/disbursement system for states...for a small fee

[Asif Chaudhry]

I suspect they'll REALLY crack down on oversharging shipping to alleviate fees (and taxes) at that point.

Eric

This has already happened Eric - Here's the official Ebay notice:

"Starting April 19, Standard Auction-style fees will be changing. You'll be able to list FREE at any start price--up to 50 items a month. Plus you can add the Buy It Now option FREE to grab those buyers who don't want to wait for your listing to end. In short, you can now list even your higher priced items free--pay only if it sells.

Also, we know online buyers pay attention to shipping costs when deciding what and where to buy. That's why, to encourage low-cost shipping, Final Value Fees for all sellers will be applied to the total amount of the sale, including shipping. Just keep your shipping costs low to get the lowest overall fees. "

The days of sellers posting something for $0.99 and charging $20 shipping are over - they are paying fees on that whole $21 bucks instead of just the $0.99.

And while it does stop this kind of behavior, it also makes small sellers like me want to just not bother with Ebay anymore - it's just MORE of a money grab, while they can, because Ebay can see the writing on the wall, and they know that a lot of their online stores of smaller size are going to simply close up shop once the new laws kick in...

Personally, I'll be interested to see what this kind of crackdown on online sellers will do to storefront/retail business - theoretically, it should be a big shot in the arm for stores that previously couldn't compete with stores that had no building overhead AND also didn't charge tax. For buyers, the idea of going online, when they have to pay for shipping and sales tax, suddenly makes the idea of supporting a FLGS more appealing. At least, that's my theory...

-Asif Chaudhry

[jturner]

The problem with the local gaming stores is that GW has so effectively shut them down in our area. I actually worked for GW in 2001 for a short time. I went to a managers meeting where they came out and said that where they are putting in GW retail stores, they are doing everything they can to shut down anybody who retails GW...that killed alot of the LGS's in the chicagoland area...now the local GW stores don't even carry their own stuff! I haven't been able to get a commisar in the local GW for months.

[MagickalMemories]

I was listening to a discussion on the sales tax thing, MM. The general discussion was how an online merchant can send income tax to 50 different states (or in some cases, countries)? I can understand, for example, IL charging IL businesses income tax, but what happens when CA, WY, CO...etc...are charging a business in IL? this just can't be good for businesses. Small businesses won't be able to afford the administration costs of such an unwieldly system.

Maybe the Federal government will be benevolent and set up a collection/disbursement system for states...for a small fee

Where was the discussion?
From my POV, whoemever was discussing it was looking at it wrong. Sales tax isn't charged (currently) based on where the buyer lives. It's based on where the purchase is being made (where the item is). If I do on vacation to FL, I get charged their sales tax, not the MO tax rate.
Same theory applies.
If I decide to go into business painting minis & you contract me for a $100 commission, I charge you $104.50 & end the $4.50 to MO (Note that the # is made up. I don't know MO exact sales tax off the top of my head & don't feel like looking it up).
Perhaps they'll have a different "interstate" rate that's less... I don't know.

That is what I expect to happen.

I suspect they'll REALLY crack down on oversharging shipping to alleviate fees (and taxes) at that point.

Eric

This has already happened Eric - Here's the official Ebay notice:

"Starting April 19, Standard Auction-style fees will be changing. You'll be able to list FREE at any start price--up to 50 items a month. Plus you can add the Buy It Now option FREE to grab those buyers who don't want to wait for your listing to end. In short, you can now list even your higher priced items free--pay only if it sells.

Also, we know online buyers pay attention to shipping costs when deciding what and where to buy. That's why, to encourage low-cost shipping, Final Value Fees for all sellers will be applied to the total amount of the sale, including shipping. Just keep your shipping costs low to get the lowest overall fees. "

The days of sellers posting something for $0.99 and charging $20 shipping are over - they are paying fees on that whole $21 bucks instead of just the $0.99.

So it is written, so shall it be.
I had no idea that was coming down the pike. In all honesty, I didn't expect them to hose sellers like that. I expected them to incorporate some sort of algorithm into the site that found a way to approximate shipping fees for an item, based on... something.
People will say they're NOT, but *I* am surprised. With the way they screwed themselves (and sellers) with the previous changes they made, I totally didn't expect them to hose people on shipping. I mean, it's going to -rightfully!- catch a whole lot of people abusing the shipping rules, but the majority of sellers are going to be even further in the hole, now, having to pay fees on shipping (which is presumably "at cost").
That kinda blows. I'm sorry for the legit ones out there.

Eric

[jturner]

I was watching PBS....it was show on after my kids cartoons, not sure which

I think what you are saying makes a lot more sense, and I am trying to recall now why they were saying it wouldn't work even if they instituted it, but now I am at a loss. They were definitely saying they didn't think it would work, or that people would comply.
Aside, I think you will see even more movement of business out of states with High sales taxes (IL... they just raised ours). I think MN doesn't have a sales tax on clothing, I don't know about other goods.

I was listening to a discussion on the sales tax thing, MM. The general discussion was how an online merchant can send income tax to 50 different states (or in some cases, countries)? I can understand, for example, IL charging IL businesses income tax, but what happens when CA, WY, CO...etc...are charging a business in IL? this just can't be good for businesses. Small businesses won't be able to afford the administration costs of such an unwieldly system.

Maybe the Federal government will be benevolent and set up a collection/disbursement system for states...for a small fee

Where was the discussion?
From my POV, whoemever was discussing it was looking at it wrong. Sales tax isn't charged (currently) based on where the buyer lives. It's based on where the purchase is being made (where the item is). If I do on vacation to FL, I get charged their sales tax, not the MO tax rate.
Same theory applies.
If I decide to go into business painting minis & you contract me for a $100 commission, I charge you $104.50 & end the $4.50 to MO (Note that the # is made up. I don't know MO exact sales tax off the top of my head & don't feel like looking it up).
Perhaps they'll have a different "interstate" rate that's less... I don't know.

That is what I expect to happen.

I suspect they'll REALLY crack down on oversharging shipping to alleviate fees (and taxes) at that point.

Eric

This has already happened Eric - Here's the official Ebay notice:

"Starting April 19, Standard Auction-style fees will be changing. You'll be able to list FREE at any start price--up to 50 items a month. Plus you can add the Buy It Now option FREE to grab those buyers who don't want to wait for your listing to end. In short, you can now list even your higher priced items free--pay only if it sells.

Also, we know online buyers pay attention to shipping costs when deciding what and where to buy. That's why, to encourage low-cost shipping, Final Value Fees for all sellers will be applied to the total amount of the sale, including shipping. Just keep your shipping costs low to get the lowest overall fees. "

The days of sellers posting something for $0.99 and charging $20 shipping are over - they are paying fees on that whole $21 bucks instead of just the $0.99.

So it is written, so shall it be.
I had no idea that was coming down the pike. In all honesty, I didn't expect them to hose sellers like that. I expected them to incorporate some sort of algorithm into the site that found a way to approximate shipping fees for an item, based on... something.
People will say they're NOT, but *I* am surprised. With the way they screwed themselves (and sellers) with the previous changes they made, I totally didn't expect them to hose people on shipping. I mean, it's going to -rightfully!- catch a whole lot of people abusing the shipping rules, but the majority of sellers are going to be even further in the hole, now, having to pay fees on shipping (which is presumably "at cost").
That kinda blows. I'm sorry for the legit ones out there.

Eric

[kturock]

On the sales tax issue;
I don't know how it works in other states, but Florida has a different sales tax rate in each county. Same for gas taxes. MY county, Palm Beach County, just lowered the tax after a special increase was removed. It was for some special project and after the 2-3 year time period, they removed it. [which surprised me.]

When I buy online at say Barnes & Noble, which has locations in Florida and my county, I get charged based on my shipping zip code.

There was a LGS in Broward county, about 1 hour away. If you bought online you didn't pay tax. If you bought in the store, you did. But you had to live at least 50 miles away from the store to buy online.

[Haight]

So I signed on to paypal the other day, and I have to sign a new service agreement. Basically, Paypal has to report all of my financial transactions to the IRS, as if I were a business.
I don't keep a profit loss statement for my hobby
I feel like I should only do Money order or cashiers, but...dang, paypal is convenient.

What do you guys think?

Just one more reason to only take money orders or certified cashier check.