Overpriced cards on ebay -- Are they part of a tax scam?

[paul]

It's another dump day on ebay. Over 130 pages of cards in the pre-war category, most of them with a starting bid that is more than double full retail. These same cards are listed time and again by the same dealers with the same results -- no bids. We've all wondered what's going on. I may have an answer. It's a bit of a conspiracy theory, but let me know what you think.

Suppose you're a dealer that has paid $50,000 this year for his inventory, and had $150,000 in sales. You have $100,000 in profits that you must pay taxes on. You also have a personal collection, and you've spent $20,000 on cards for your personal collection this year. It sure would be tempting to tell the IRS that those $20,000 worth of cards are part of your commercial "inventory". Then, you could tell the IRS you spent a total of $70,000 on your inventory, and your taxable income is only $80,000 instead of $100,000.

How do you convince the IRS that your personal collection is actually part of your inventory? Easy, offer it for sale every few weeks on ebay. You don't really want to sell the stuff, so you price it ridiculously high. But you've accomplished your goal of turning your personal collection into part of your inventory and reducing your taxes.

What do you think? Could this really be going on?

[calvindog]

Paul, the idiot dealers in our hobby are not concerned with the IRS. The cards are overpriced because they're idiots.

[the-illini]

there is one seller on there, i think his ebay ID is yepbg, who has hundreds if not thousands of cards listed for 3-4x of what they would get in an auction and he steadfastly refuses to come down in price on anything.

I don't know what the purpose of listing cards like that is, but it sure seems weird. Maybe he sells some cards, but I simply cannot believe that someone is running a profitable business with 90% or more of their inventory sitting on the shelf for months and years.

[HRBAKER]

Originally Posted by the-illini

there is one seller on there, i think his ebay ID is yepbg, who has hundreds if not thousands of cards listed for 3-4x of what they would get in an auction and he steadfastly refuses to come down in price on anything.

I don't know what the purpose of listing cards like that is, but it sure seems weird. Maybe he sells some cards, but I simply cannot believe that someone is running a profitable business with 90% or more of their inventory sitting on the shelf for months and years.

He's one among many I could list of similar fashion.
I can't imagine that this is these folks primary source of income.
It seems to me that many use ebay as a way to showcase their collection and if smeone comes along that is willing to pay the excess freight charge then they will sell a card or two.
I will hand it to him, he does have a stellar inventory.

[batsballsbases]

Chris,
Dont get me started on certain sellers .The gods of high prices. As I dont buy many cards but I do buy pins.a certain seller sells graded pins at 3-5x the value of what they are worth. And god for bid if you question a certain seller about his prices he puts you right away on his blocked bidder list! I believe the certain seller doesnt sell much because anyone who is anyone is on his blocked bidder list! The certain seller is a real gem

[Runscott]

I think you guys are missing out on a tremendous opportunity (if you are seriously interested in any of the cards in question.)

I regularly make offers and get them accepted. I simply offer fair market value. Sometimes I get rejected - so what?

There are at least two sellers I can think of who you guys complain about all the time - you used to complain about the high prices on their websites, before they were heavy into the internet. I used to contact those guys all the time and get great discounts on their cards. I'm not giving names out, as I still do it.

I once contacted one of these sellers you describe on ebay, and asked him what his strategy was, since he had a caramel Cobb priced at 2X VCP price. He sent me a link to one that had recently sold for 2X VCP price, so that pretty much shut me up. These sellers may be idiots, but there are buyers out there who are just as idiotic.

[pgellis]

First of all, inventory is not your only expense when figuring out your business expenses. You may have rent, office supplies, postage, electricity, telephone, etc., etc. It is not so simple as deducting purchases from sales. You also pay a large percentage on inventory.

I know. I own my own business and you would be shocked at what you have to pay on your year end inventory.....that is why you see so many "inventory reduction sales" at the end of each year.

People need to understand what it's like to run a business of their own before they make assumptions.......

[ValKehl]

Paul - The purchase of inventory for resale is not a business expense; in other words, purchsing inventory for resale does not create an income tax deduction. Rather, a business expense/tax deduction occurs when an inventory item is sold. If the item is sold for more than it cost, the resulting gross profit would be taxable, unless it is offset by other business expenses (such as selling costs).
Val

[egbeachley]

Originally Posted by ValKehl

Paul - The purchase of inventory for resale is not a business expense; in other words, purchsing inventory for resale does not create an income tax deduction. Rather, a business expense/tax deduction occurs when an inventory item is sold. If the item is sold for more than it cost, the resulting gross profit would be taxable, unless it is offset by other business expenses (such as selling costs).
Val

True. This also includes "personal collection" buying. The only tax event is when an item is sold and you pay taxes if you had a profit, and you don't if you had a loss (simple example ignoring rent and other overhead).

As for why sellers do this, it's simple. You can sell 20 items every day at 5% profit and you won't do better than selling 1 item a day for 100% profit. Plus preparing 1 package instead of 20 is a lot easier. The problem is that occasionally someone bites and pays the high price. They are keeping the prices unreasonable.

[calvindog]

Originally Posted by the-illini

there is one seller on there, i think his ebay ID is yepbg, who has hundreds if not thousands of cards listed for 3-4x of what they would get in an auction and he steadfastly refuses to come down in price on anything.

I just did a check on ebay; over the past 15 days yepbg has sold 6 of his highest priced 1000 cards for sale. That's actually a good 15 day period for him.

[batsballsbases]

Jeff,
Look out you quoted his ebay handle , I feel a PM coming!

[brianp-beme]

Originally Posted by calvindog

I just did a check on ebay; over the past 15 days yepbg has sold 6 of his highest priced 1000 cards for sale. That's actually a good 15 day period for him.

Remember, selling six cards at his price is like selling 12 to 18 cards at normal prices. Maybe this guy doesn't financially need to sell or is retired...to me it would be a perfect way to bring in some cash without working too hard at it (fewer trips to the post office, not to mention the assurance in knowing you got absolute top dollar for your cards).

Of course as a collector on a budget I hate this business model.

Brian

[bobbyw8469]

over the past 15 days yepbg has sold 6 of his highest priced 1000 cards for sale

It's a shame that collectors can't wait until his cards come up for auction from other sellers. That way they can pay around $200-$300 for the cards that they bought from him for $1,000+!! It is not like he has anything THAT rare!

[egbeachley]

Originally Posted by brianp-beme

Remember, selling six cards at his price is like selling 12 to 18 cards at normal prices.

From a sales (revenue) perspective, yes. From a profit perspective, selling 6 is probably like selling 50 at normal prices.

[Runscott]

Well, when someone figures out how to sell vintage cards on ebay, whether it's offering 3X VCP-price BIN's, or something else, please let me know.

I've put BIN's up for 1/3 of what inferior examples sold by the guys you mention are being offered for. So I have no idea. I put five very nice T205's up on ebay a while back with 'make an offer' and BIN's about 2/3 of what the average dealer had....no offers - not even one.

And when I started my auctions at $9.99, I got my @ss handed to me.

So I'm throwing my hands up in the air as far as ebay is concerned. These guys are doing something right, but it must be completely behind the scenes.

[dog*dirt]

Paul,

Very interesting take on the subject and well thought out. Trying to search for cards in prewar is just becoming worse and worse. The majority of items are reprints or buy it now, or as I say buy it "never."

As a side note I wish sellers would realize that 1960 is not prewar.

[atx840]

Originally Posted by BlueDevil89

I don't begrudge the seller. Perhaps he is a collector content to hold onto his cards until someone takes him up on his premium prices. If he has the financial resources to do so, then good for him. In fact, he is in some respects preferable to me to the true collector who purchases cards and then keeps them for decades without ever naming a price for which they can be purchased by others. If I want to buy the eBay seller's cards, at least I know what the price is, and I can take it or leave it.

Nice try eBay seller who's handle I won't mention

[BlueDevil89]

Originally Posted by atx840

Nice try eBay seller who's handle I won't mention

To be clear, I do not regularly sell items on eBay. My handle is not so secret (cassidys_sportcards). I haven't completed a sale transaction on eBay since 2008 (---and the only reason I completed that transaction on eBay is because a Net54 member asked me to so they could take advantage of one of eBay's special offers).

[WhenItWasAHobby]

Texas has a business tax based on the business assets including business inventory as of January 1st and that has to be filed by April 15th. So if a sportscard business lists their entire inventory on eBay on New Years Day, it in essense publicly displays their inventory value and if the value of the inventory doesn't jive with what's reported on their Rendition Form then that could prove very troublesome in an audit. The idea of listing 3X market value during this time would also not be a prudent move either in my opinion.

It wouldn't surprise in the least to find out that most small businesses in Texas who sell on eBay try to fly under the radar and don't even report anything year-in and year-out regarding their business asset taxes. Some I've heard write-off a substantial part of their home as business, their furniture, computers, motor vehicles as an expense for Federal Taxes, yet never report the same items plus their card inventory on their Rendition form for Texas business asset taxes.

Hypothetically, this could be a problem for a seller in some different ways. For example, lets say a Texas dealer has been running a high dollar baseball card business on eBay and never paid his Texas business asset tax in 7 years and then some disgruntled customer makes disparaging remarks on the internet regarding the seller engaging in unethical business practices. If the seller decides to sue that disgruntled customer, the seller better make sure he has all his business asset tax records paid and in order since it would be rather embarrassing to pay for some lengthy litigation only to come to the realization that you're going to have to admit to the court that you've been a brazen tax cheat.

One other way is by running for public office. It would be rather embarrassing, for major eBay seller to say for example, run for mayor of a town near Dallas and run on a platform of integrity and then be exposed as a tax cheat. Voters tend to frown upon stuff like that.

Here's more if anyone is interested

http://www.hcad.org/pdf/forms/RenGuide.pdf

[calvindog]

Name names!