PayPal 24% tax hold

[Aquarian Sports Cards]

Actually Bob, Auction houses have a carve out and are specifically exempted from 1099'ing their consignors. There were questions about this with the new reporting but the NAA (National Auctioneers Association) got it directly from the IRS that auctions are not considered payment processors and our exemption holds. I gladly accept paypal and credit cards and report all my sales to the IRS and my payments to consignors are basically a deduction.

[BobC]

Originally Posted by Aquarian Sports Cards

Actually Bob, Auction houses have a carve out and are specifically exempted from 1099'ing their consignors. There were questions about this with the new reporting but the NAA (National Auctioneers Association) got it directly from the IRS that auctions are not considered payment processors and our exemption holds. I gladly accept paypal and credit cards and report all my sales to the IRS and my payments to consignors are basically a deduction.

Thank you Scott, I did not know there was a specific carve out for AHs. I'm assuming that they have to be properly licensed and/or members of a specified group such as the NAA to qualify for the exemption, right? In which case, what I was saying is still very applicable for someone like Howard, and other non-AHs in similar circumstances/situations.

My mistake, and apologies to everyone, for assuming they automatically applied these "nominee" reporting requirements to AHs as well. I've always admitted I don't know everything. But, given how everything else is going, I can also easily see the government possibly removing such an exemption in the not-so-distant future. Especially in the face of the lowered reporting threshold requirements for 1099-K forms, and the impact that is going to have on an awful lot of people. That ends up giving the AHs a distinct and somewhat unfair advantage over other consignment type sellers. And I am sure that they, and sites like Ebay, are not going to be happy with that advantage working against them, and thus exerting their own influence against/towards the government as well to correct this obvious inequity.

This is exactly why the Supreme Court finally ruled back in 2018 that online sellers were now going to be subject to sales tax on interstate sales, and to do away with the totally unfair advantage online sellers had over brick-and-mortar stores and businesses who were forced to charge sales tax, while online sellers weren't.

So Scott, I do have a very valid question for you. I assume then you do get a 1099-K for Paypal G&S payments, equal to the full amount of the sales through G&S and not just your commission fee on those sales, right? Paypal obviously wouldn't know how much your commissions actually are, so I assume they must still report the full amount of the sales you collected on behalf of your consignors in a 1099-K form then directed to you. Or are you able to send some kind of documentation, form, or something to Paypal in advance so that they do not send you any 1099-K form(s) at all? I am truly very curious for my own personal knowledge and reasons, as well as making sure you have the correct answer.

Or, is the exemption you're referring to based more on what I found in this accompanying link, from the NAA site itself, and only just recently confirmed with the IRS?

https://www.auctioneers.org/NAA/Advo...6-48f893f7a5b6

If the AH exemption you're referring to is based on this link and what it is saying, let me give you a word of caution then. This exemption refers solely to the designation of an AH as a Third Party Settlement Organization (TPSO), in other words treating the AH as though they are the same as Paypal or Venmo, and thereby requiring all AHs to report via 1099-K forms, ALL sales they collected for their consignors, and not just sales they got paid for through other actual Third Party Settlement Organizations (TPSOs). And I was already aware of this specific exemption whereby AHs are not considered as TPSOs. However, I don't think your AH not being designated as a TPSO automatically extends and exempts you from the "nominee" reporting rules and requirements, in regard to the IRS and 1099 reporting that I previously posted links to, either. That sounds and looks like an entirely different tax reporting issue and matter to me. You may want to do both of us a favor and contact the NAA for some clarification on this exemption they posted about, and specifically ask if it also covers and exempts AHs from possibly still being subject to the "nominee" reporting rules and requirements for valid 1099-K forms your AH does receive from other TPSOs you choose to do business through. This appears to be one of those "gray" areas that exist in the tax laws that aren't always fully known and clear right away, and may not ever be fully determined until someone takes the IRS to court over it, or the government changes the law somehow. I hope I am wrong and that the exemption you mentioned also covers "nominee" reporting rules and requirements as well. Please don't be mad at me if I end up being right though, and you do need to worry about 1099-K "nominee" reporting after all. As always, just trying to help and educate others on the forum as to possible issues that can possibly impact them in their various hobby activities.

[Aquarian Sports Cards]

Originally Posted by BobC

I can also easily see the government possibly removing such an exemption in the not-so-distant future. Especially in the face of the lowered reporting threshold requirements for 1099-K forms, and the impact that is going to have on an awful lot of people. That ends up giving the AHs a distinct and somewhat unfair advantage over other consignment type sellers. And I am sure that they, and sites like Ebay, are not going to be happy with that advantage working against them, and thus exerting their own influence against/towards the government as well to correct this obvious inequity.

That's why we (AH's) were so adamant about our National association getting a clear answer on the matter. As it stood we weren't sure without clarification. Ebay's "mistake" was in becoming a payment processor like Paypal. As for what AH's are covered, that I don't know. Many states don't require any licensing, and most sports auction houses are located in those states. Hunt, Wheatland and The Collector Connection are all in PA and all have a licensed auctioneer of record. Can't speak for any of the others.

[JustinD]

Originally Posted by Aquarian Sports Cards

Ebay's "mistake" was in becoming a payment processor like Paypal.

Very interesting take!

I did not realize that after the PayPal split they could have been just fine, but greed and going after the direct managed payments pie could cost them dearly. This is very intriguing as a historical business misstep.

[BobC]

Originally Posted by Aquarian Sports Cards

That's why we (AH's) were so adamant about our National association getting a clear answer on the matter. As it stood we weren't sure without clarification. Ebay's "mistake" was in becoming a payment processor like Paypal. As for what AH's are covered, that I don't know. Many states don't require any licensing, and most sports auction houses are located in those states. Hunt, Wheatland and The Collector Connection are all in PA and all have a licensed auctioneer of record. Can't speak for any of the others.

Scott,

I'm with you. This stuff can be confusing as hell. That is why I'm hoping you may have some better luck in re-contacting the NAA and finding out if the 1099 reporting exemption they got clarification on from the IRS extends to not just AHs not being considered as Third Party Settlement Organizations (TPSOs), like Paypal G&S is, but also extends and covers an exemption for AHs from being subject to the "nominee" reporting requirements and rules as well.

And I'm not sure that Ebay in any way just voluntarily decided to become a TPSO like Paypal G&S. I think they were faced with additional scrutiny from the governments and tax authorities because they are so big, and made a "lesser of two evils" type of decision and agreed to take on the billing, collection, and remittance of sales taxes for all their sellers, as well as the 1099-K reporting. If memory serves, I thought Ebay was also supposed to be dropping Paypal as one of their primary/main payment service processors at some point a while ago. Seem to remember talk that Ebay was going to be partnering up with a European based payment processing service that would supposedly give them, Ebay, more control and say over the payment processing, along with probably a bigger piece of that processing fee pie as well. Yet when I purchase anything on Ebay, it still looks like Paypal is their major, primary player for providing payment processing services after all. At least it seems to be for me. And as for taking on the things like sales taxes and 1099 reporting, I think Ebay may have been agreeing to do that so those responsibilities wouldn't fall to or on their users/sellers. Not doing so could have potentially turned even more sellers away from using Ebay going forward, by saddling them more things they didn't understand or want responsibility for. And if Ebay didn't go along with 1099-K reporting, could see the governments/tax authorities threatening to come in and start reviewing their records and data to begin going after their sellers as well. Don't think Ebay made a mistake as much as they possibly weren't given a choice in the 1099 reporting issue.