Taxes ? on Auction House Consignments

[Eric72]

So, here's a situation most of us (presumably) will find ourselves in.

I bought a card at a show...paid cash, no receipt. For the sake of argument, let's say I paid $200. I keep a record of the sale; however, have nothing other than my spreadsheet (and maybe an ATM receipt) to show what and when I paid for it.

Fast forward a year or more. I now sell the card on eBay or some similar online site. Let's say I net $250 after fees and shipping.

Do I pay taxes on the entire $250 - or - does my record-keeping, along with self-reporting correctly, allow me to only pay taxes on the $50 gain?

[Bicem]

What Ryan said.

[Rhotchkiss]

Originally Posted by Eric72

So, here's a situation most of us (presumably) will find ourselves in.

I bought a card at a show...paid cash, no receipt. For the sake of argument, let's say I paid $200. I keep a record of the sale; however, have nothing other than my spreadsheet (and maybe an ATM receipt) to show what and when I paid for it.

Fast forward a year or more. I now sell the card on eBay or some similar online site. Let's say I net $250 after fees and shipping.

Do I pay taxes on the entire $250 - or - does my record-keeping, along with self-reporting correctly, allow me to only pay taxes on the $50 gain?

You pay taxes on $50. That’s what your net gain is, or gain recognized. If you are audited, your spreadsheet plus the eBay receipt is fine proof of basis and net sale proceeds; in fact, the spreadsheet can be great proof if it is meticulously -and contemporaneously maintained.

[Eric72]

Originally Posted by Rhotchkiss

You pay taxes on $50. That’s what your net gain is, or gain recognized. If you are audited, your spreadsheet plus the eBay receipt is fine proof of basis and net sale proceeds; in fact, the spreadsheet can be great proof if it is meticulously -and contemporaneously maintained.

Thanks, Ryan. I appreciate you weighing in on this.

[insidethewrapper]

John above stated the tax law changed in 2018 and you have to pay taxes on the entire $ 250 ( not the Net) if you are not a business in the example stated above. Net is for businesses only. So I'm reading 2 different things on here. Guess I need a tax expert about the current laws to determine who is right.
Business : Sale - cost of goods, etc = Net Profit ( Use Schedule C )
Collector(Non business): Tax on Gross or Net Sale of item ???

[steve B]

If you are a business, there may be other taxes to consider. My city has a tax on a business inventory as long as it's held in the city. Sort of panicked me when I found out, since I'd briefly had a resale certificate, and lots of "stuff" which a taxman might consider to be inventory since I'd sold stuff in most categories of collectibles. T say nothing of the random assortment of rusty metal rods, wood pieces, other random metal pieces etc that I sometimes make things out of.

[Casey2296]

Originally Posted by steve B

If you are a business, there may be other taxes to consider. My city has a tax on a business inventory as long as it's held in the city. Sort of panicked me when I found out, since I'd briefly had a resale certificate, and lots of "stuff" which a taxman might consider to be inventory since I'd sold stuff in most categories of collectibles. T say nothing of the random assortment of rusty metal rods, wood pieces, other random metal pieces etc that I sometimes make things out of.

Nothing worse than paying annual possessory tax to the local gendarme on that Oak table from the 1980's cuz it's too heavy to take to the dump.

[Rhotchkiss]

Originally Posted by insidethewrapper

John above stated the tax law changed in 2018 and you have to pay taxes on the entire $ 250 ( not the Net) if you are not a business in the example stated above. Net is for businesses only. So I'm reading 2 different things on here. Guess I need a tax expert about the current laws to determine who is right.
Business : Sale - cost of goods, etc = Net Profit ( Use Schedule C )
Collector(Non business): Tax on Gross or Net Sale of item ???

You are big boy, capable of deciding whether or not to report taxable gain, capable of deciding whose tax advice on a baseball card message board to follow, and capable of googling your query and finding the answer out for yourself. But just bc I am capable of using a search engine myself, here is one (of a zillion) articles I found (much cheaper than a “tax expert”, which btw, I am (or was)):

https://1040return.com/collectibles-tax-collector/

[swarmee]

Originally Posted by insidethewrapper

John above stated the tax law changed in 2018 and you have to pay taxes on the entire $ 250 ( not the Net) if you are not a business in the example stated above. Net is for businesses only. So I'm reading 2 different things on here. Guess I need a tax expert about the current laws to determine who is right.
Business : Sale - cost of goods, etc = Net Profit ( Use Schedule C )
Collector(Non business): Tax on Gross or Net Sale of item ???

If you record it as an investment, there may be additional ways of categorizing it on your taxes, as Ryan laid out. That's one reason I also recommended talking to an accountant.

[insidethewrapper]

https://www.nolo.com/legal-encyclope...rom-hobby.html

According to this article, since 2018 tax law ,if you are a collector ( hobby vs business) , you must report the total sale as income.

[puckpaul]

Originally Posted by insidethewrapper

https://www.nolo.com/legal-encyclope...rom-hobby.html

According to this article, since 2018 tax law ,if you are a collector ( hobby vs business) , you must report the total sale as income.

No.. you are misreading it. You have to report the total income and cannot deduct ordinary expenses and costs... but you most certainly can deduct the cost of the items you sold. It’s income that is taxed, not sales prices.

[Casey2296]

Ryan has some good points to consider. I'm no CPA so please consult one before you do anything, I do however qualify people based on their tax returns everyday. If you form an LLC you are telling the government I am in the business of buying and selling cards, it could be anything but lets stick to cards. As a business you are allowed to write off expenses against profits. Basic schedule C stuff on your 1040's. To be clear you are buying and selling cards as an investment in that scenario. Also be aware as a business the IRS requires you make a profit at some point, usually 2 of the first 5 years.

In the collectibles as an asset category you should consult an estate planning attorney. Think of a painting that you bought and hung on the wall for 30 years, that would not be an investment. Its value may go up, it may go down. As an asset of your estate the cost basis on things like real estate and other assets increase to current market value at time of death when your heirs inherit the assets.

Again, this stuff is complicated and can vary from state to state. Consult a professional before you do anything.