Any fears in selling large $ items on ebay?

[savedfrommyspokes]

Originally Posted by glchen

The tax authorities could easily use ebay in addition to paypal to come after a business. They wouldn't have to "prove" anything. They would just tell the business that your numbers don't match what ebay or paypal are reporting, and you need to explain that to us. If you can't give a proper justification, then you'd better look into hiring a good lawyer. Sure, ebay does not give those 1099's to individual sellers, but I'm sure if the authorities asked ebay for the information, they could get it easily. For every item you sell on ebay, you set up the tax table in ebay, so that item is readily available and stored in their system if the item is won by an in-state bidder. As the seller, you are responsible for getting the proper forms completed by the buyer if they claim they are a reseller. If you are audited, these would be what you need to show the tax authorities to justify why sales tax was removed.

I agree that tax authorities would certainly use paypal records to verify tax compliance, but not ebay records. I have been selling on ebay for years, and NEVER have the "sales" numbers provided by ebay ever been remotely close to the actual numbers derived from my paypal tax forms that have been forwarded to my accountant each year. Please explain EXACTLY how ebay can confirm IF a transaction was actually completed or not? Ebay can't, bottom line.

As an example, I had a lower priced item returned back to me recently. Ebay, due to some system glitch, would not allow me to request a FVF credit or provide a refund through their system because the buyer opened and then closed a return request before the item arrived back. I simply wrote off the very small FVF credit and refunded the buyer through paypal. This item is still marked as paid with ebay, however, I refunded the buyer. I clearly would not rely on ebay in this situation if I was faced with a tax auditor as the sale would still be showing as "completed". I would however, show the auditor my PP refund(which is linked to the original transaction).

What matters to auditors in regards to an ebay business is the paper trail that is created in either paypal or a bank account that shows an actual payment received thus creating a taxable "transaction", as I am pretty sure that no state is not going to impose a tax on a "commitment to buy" made through ebay that may not ever be paid for. I also highly doubt that an auditor is going to waste their time pouring over ebay records of commitments to buy, but instead they will review actual payment transactions made through paypal and deposits into bank accounts.