IRS Wants eBay to Disclose User Earnings For Tax Purposes

Filed as News on February 26, 2007 9:06 am

Repost This

Nate Anderson of Arstechnica reports that the US Internal Revenue Service (IRS) is planning to require auction site eBay to disclose how much money its individual sellers make in a year. This is to ensure that those who make significant amounts of money off eBay transactions correctly report these in their tax statements, and therefore pay the corresponding income taxes. Government estimates that this move will rake in as much as $2 billion annually–not a paltry amount.

In short, the US government wants to treat eBay as a “broker” who would then be required to file notices with the government about how much money its traders have made. The US proposal calls for this reporting to take place only when people sell more than several thousand dollars worth of merchandise in a year.

Government wants to tax sellers who make at least 100 transactions or $5,000 annually from eBay. A report on SFGate cites some important statistics that might be useful in justifying such a move.

Virtually all tax filers — 96 percent — pay what’s owed on income that is reported to the IRS by a third party, such as when a bank reports interest earned on a savings account, according to the IRS. However, when a third party doesn’t tip off the government, compliance drops dramatically, to below 50 percent.

eBay sellers report their income derived from the service to the IRS on a voluntary basis. Therefore, it is likely that a majority of concerned users does correctly report earnings.

The issue is not about new taxes, since the money that the IRS is going after is after all a tax that is already required, being derived from income from transactions. However, the issue here is that eBay claims the IRS is being selective in requiring only eBay and not other similar services. This, eBay claims, would put the company at a competitive disadvantage, since sellers who would rather not report their actual income from auctions and eBay sales might move elsewhere. For instance, in a Financial Times report, eBay cites other online services like Craigslist serve only as classified ad listings, and transactions are done off-site. Therefore, these do not necessarily fall under the type of service that the IRS is looking to go after.

eBay claims that it cannot be classified as a broker, because it never handles the merchandise that users sell. Also, eBay may not be able to authoritatively report whether a transaction has indeed been completed (items sent, payments paid, and all) and this might result in inaccurate reporting to the IRS. However, definitions/classifications can be changed by law.

For now, eBay believes that it’s a seller’s responsibility to report earnings from transactions made through the service, and pay the corresponding income taxes.

Tags:

This post was written by

You can visit the for a short bio, more posts, and other information about the author.

Submissions & Subscriptions

Submit the post to Reddit, StumbleUpon, Digg or Del.icio.us.

Did you like it? Then subscribe to our RSS feed!



  1. By HART (1-800-HART) posted on February 26, 2007 at 12:09 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    Hear! Hear! It’s about time. Ebay should be reporting 100% of the gross sales in the year for everybody. I would suggest that everybody get a standard offsetting tax credit (maybe $500-$1000) to compensate for items that may be of personal nature. People should be glad that do this – as it could legitimize hobbyists into small businesses and actually benefit taxpayers by allowing additional deductions to be made, as a SOHO business etc.

    In that SFGATE article .. “Every professional seller I’ve ever talked to pays their taxes and has no problem with anyone finding out about the level of business they’re doing,” Yaskulka said. .. Well – of course professional sellers are going to claim 100% of their revenues .. because they are a business and know they can utilize claiming other expenses (home office, auto, etc)

    I just don’t think that people who are on welfare, or unemployment or even disabiity should make more than me .. and keep thinking it is tax-free earnings .. or, if they withdraw the amounts by using the Ebay debit card that it “doesn’t count”. But that’s just me. I prepare tax returns, and if people don’t want to claim it – I don’t do their tax return.

    I just noticed that an article I wrote about how to get all your Ebay transactions .. seems to get dugg a little bit more each time one of these type of stories surfaces in the news.. the only thing is that I think my code is screwed up and they are “digging” something non-existant. In my profile @digg it shows at 1 only. I think my plugin needs an update.

    Reply

  2. By Eric Carlson posted on February 27, 2007 at 2:53 am
    Want an avatar? Get a gravatar! • You can link to this comment

    I agree that Ebay sellers should be reporting their income anyway, that is if they are selling on ebay as a primary or secondary source of income. Also, if they do report their income and create a sole proprietorship they will also be able to write off a lot of expenses, ebay and paypal fees, driving to post office, new computer/scanner/camera.

    But Hart, How many examples do you know of where people on welfare are selling on ebay as their only source of employment?

    Reply

  3. By George W posted on March 3, 2007 at 9:50 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    I am a devoted, long time stamp collector (50+ years). I have spent at least $300,000 building it in long ago dollars. Now I am selling off some surplus stuff and using the proceeds to buy other stamps (sometimes stamps I do not own and sometimes stamps in better condition). I am sure that 95% of my sales are for less than my cost in those long ago dollars — so there is absolutely no profit and certainly losses. However, there is no way to document what a couple of stamps cost me as part of the thousands in a collection I may have purchased 20 years ago. I certainly didn’t document where they came from and what the cost of the larger lot was.

    To me, this is not a source of income. It is just a hobby. It is like trading stamps with a fellow collector. eBay is the facilitator and they collect a fee for the service. If the IRS looks at this, will they say it is taxable because of the total dollars or number of transactions? Can I offset income with the cost of my new purchases?

    If I have a tag sale at home, is the “income” taxable even though the cost of each item is more than the selling price?

    Reply

  4. :- BlogWize -: » IRS Wants eBay to Disclose User Earnings For Tax PurposesJune 13, 2007 at 1:45 am
  5. By David posted on June 13, 2007 at 8:53 am
    Want an avatar? Get a gravatar! • You can link to this comment

    This should all be a mute point since there is no LAW requiring any of us to pay federal income taxes. NONE-NADA-ZIP

    If you don’t believe me then research it. Better yet-ask the government to show you proof of any kind of law that states you must pay federal income taxes.

    Reply

  6. By DragonMasterNYC posted on June 13, 2007 at 8:57 am
    Want an avatar? Get a gravatar! • You can link to this comment

    Man the government just wants there hands in everything today, taxes here taxes there. People pay so much just in taxes and put it this was if you make over $90,000 a year well until a bill is past you only pay for taxes on the $90,000 the rest is untaxed. You know what just tax the rich no matter what they make a year so that we don’t have to see things like this happen. Think about all the cash the government has been missing out on over the years especially off of Bill Gates.

    This is all I have to say to the IRS get away from our hard earned money.

    Reply

  7.   IRS Wants eBay to Disclose User Earnings For Tax Purposes by Aplastame >June 13, 2007 at 10:34 am
  8. By noel vandal posted on June 13, 2007 at 1:36 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    The government is not unlike a prostitute.
    At least the prositutes make an honest living

    Reply

  9. By Jim posted on June 13, 2007 at 1:45 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    “… being derived from income from transactions.”

    How appropriate that you have butchered the meaning of “income” with your placement of the word “derived” just as done in the Internal Revenue Code. Is this particular wording in the IRC intentional and intended to confuse? I believe so. Is YOUR wording intentional and inteded to confuse? I doubt it. I think you are just ignorant and tried to mimic the wording in the IRC or from some tax form instructions.

    Reply

  10. By Valerius posted on June 13, 2007 at 5:17 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    It is well enough that the people of the nation do not understand our banking & monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” – Henry Ford. Though I must only add, if people knew how our tax system worked, there would be a revolt today.

    Reply

  11. By joe mom posted on June 14, 2007 at 6:22 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    im voting for whoever is going to get rid of the IRS,

    Reply

  12. By Motorcycle Guy posted on June 17, 2007 at 3:10 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    kind of funny how our government never downsizes, it only grows. i don’t think the irs should go away though i mean they do need to make sure people are paying their share, and without them it would basically not happen.

    Reply

  13. By Shopping Cart Guy posted on June 21, 2007 at 1:06 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    Taxes, taxes, taxes. Man, there’s are only two sure things in life… death & taxes. Well, I hate death but at least I only die once. I have to pay taxes every single bloody year! :-)

    Reply

  14. By Mick Russom posted on September 18, 2007 at 2:45 am
    Want an avatar? Get a gravatar! • You can link to this comment

    I say this with all seriousness. The country will probably disintegrate and be carved up the Chinese if Ron Paul does not win. It will take time, but we are on the road to perdition.

    America needs Ron Paul more than ever, and everyone who supports Ron Paul loves him as he is the closest thing to family we have ever seen in government.

    Ron Paul, for what is just, what is right, and what is our Nation’s root modus, the Constitution and Freedom and Liberty for All.

    Reply

  15. IRS Wants eBay to Disclose User Earnings For Tax Purposes « Us ElectionsOctober 8, 2007 at 9:17 am
  16. By eBay Suspended Account Guide - eBay Stealth posted on January 26, 2008 at 1:09 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    This is why you make fake identities for use on eBay and Paypal. That way you wont have to put up with IRS. I have a pretty in depth guide up for free!!! on how to make anonymous ebay and paypal accounts using totally fake information, and then even get them fully verified. This is great if you want to keep your identity safe not only from the irs but from the paypal workers who are very likely to steal your identity when you are faxing them all your life’s documents.

    Reply

  17. By fred posted on January 31, 2009 at 9:11 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    Why do we even pay taxes if they spend double or triple the amount the government receives? Why is the United States feeling alot more like Russia or China then a free country?

    Reply

  18. By Web Design Pakistan posted on May 23, 2009 at 5:49 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    im voting for whoever is going to get rid of the IRS,

    Reply

  19. By Deneen posted on February 3, 2010 at 5:58 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    To the dummy that talks about federal tax and we shouldn’t pay. Where would you get your free medical and food stamps from? I think ebay sellers need to claim what they made and be taxed because these people are getting free medical and food stamps even though the economy is hurting. NOT FAIR!!!!!!!!!!!!!!!!!! They wouldn’t even get the medical and food stamps if it wasn’t for knowing how much they make onEbay. Right there the state would be saving. Do you all work for Ebay or what? I know we pay too many taxes , it is easier said then done to rid of the IRS.

    Reply

  20. By Mick Russom posted on February 3, 2010 at 6:18 pm
    Want an avatar? Get a gravatar! • You can link to this comment

    When the commies fail, they destroy business. If there are businesses still alive, they go after them for money. This is like the Hugo Chavez show, in the USA, with the last free republic at stake!

    Reply

  21. By David Begum posted on July 3, 2010 at 3:41 am
    Want an avatar? Get a gravatar! • You can link to this comment

    Food Stamps are nice and handy if you want some fast meals.,;*

    Reply

  22. By Double Headboard posted on December 13, 2010 at 5:31 am
    Want an avatar? Get a gravatar! • You can link to this comment

    food stamps are great because it is instant food and you can consider it also as free lunch ;–

    Reply

    Your words are your own, so be nice and helpful if you can. If this is the first time you're posting a comment, it might go into moderation. Don't worry, it's not lost, so there's no need to repost it! We accept clean XHTML in comments, but don't overdo it please.

    Current day month ye@r *