Anyone else receive this "ebay"warning?

[sylbry]

This is something that I've never understood. Why should taxes be paid on both ends -- when buying and selling? If an item is going to be treated as an investment and taxes are paid on the gain, why should sales tax be paid up front? Sales tax isn't paid on the original purchase price of a stock.

If you are purchasing "tangible personal property", state sales (or use) tax is collected/paid on the purchase (unless an exemption exists) and federal and state (if applicable) income tax is due on the sale if a profit is made.

[PwKw13]

Thanks guys for clarifying.

Two more questions: Is sales tax considered part of the initial purchase price? Can losses on sales be duducted for tax purposes?

[sylbry]

Thanks guys for clarifying.

Two more questions: Is sales tax considered part of the initial purchase price? Can losses on sales be duducted for tax purposes?

Yes, sales tax is part of the purchase price if you are a hobbyist. If you are a business, you would provide the seller with a resale certificate and buy it sales tax exempt.

Business losses can be deducted. Hobby losses can not.

[xpress34]

If you are purchasing "tangible personal property", state sales (or use) tax is collected/paid on the purchase (unless an exemption exists) and federal and state (if applicable) income tax is due on the sale if a profit is made.

Sales Tax cannot be collected on an item sold to an individual in another state per the US Commercial Code regulating Interstate Sales which is why eBay and on-line sites are popular with many consumer's.

Same reason almost all Credit Cards are run out of CT - Texas and other states have very restrictive laws that limit the annual fees and APR that Credit Card issuers may charge - CT does not. Some of that may be changing soon with new Federal Guidlines on Credit Practices.

However, every purchase I have ever made on eBay from someone else in the State of Colorado HAS had Sales Tax added to the final sale price.

This is similar to how people use to buy cars in Texas (my home state). They would drive from Dallas to Seagoville so they could pay Seagoville taxes on the car, not Dallas taxes. I believe Texas adopted the same system Colorado uses to eliminate that loophole - you now only pay STATE sales tax on the purchase at the dealership - the City, County, Local taxes are paid at the DMV when you get your plates and Registration based on YOUR HOME ADDRESS. That way cities aren't losing dollars from their tax coffers if residents buy their car in another city.

Just some FYI

- Chris

[sylbry]

Sales Tax cannot be collected on an item sold to an individual in another state per the US Commercial Code regulating Interstate Sales which is why eBay and on-line sites are popular with many consumer's.

Beyond the fact that the Congress does have the authority to regulate interstate commerce via the Commerce Clause, this statement is completely false. I already took the time to explain why and offered some practical advice but the website timed me out and I lost my post. You will have to forgive me for not re-typing it.

[sylbry]

Beyond the fact that the Congress does have the authority to regulate interstate commerce via the Commerce Clause, this statement is completely false. I already took the time to explain why and offered some practical advice but the website timed me out and I lost my post. You will have to forgive me for not re-typing it.

Let me add that for the most part collectors really never have to worry about taxes on the sales side.

The area that should concern collectors is on the purchase side. Sales/use taxes are transaction taxes. One or the other is due on the transaction (unless an exemption exists). If you do not pay sales tax at the time of purchase you owe use tax. Just because you (generally speaking) bought it on ebay or from someone who didn't collect sales tax doesn't mean the purchase is not subject to taxation.

Just know you do have a tax liability to your home state. However the likelihood of that coming back to bite you is very remote.