Cost basis - Warning tax related topic

[toppcat]

Originally Posted by ALR-bishop

Had never considered the relationship between intelligence and baseball card collecting. Maybe a good separate topic

Turds and punchbowls might be a better topic.

[ALR-bishop]

Had never considered that either Dave.

[SAllen2556]

This thread is the reason I married an accountant instead of becoming one.

I do wonder, though, about card shows. They're largely all cash transactions and no receipts are ever given. In fact, if you want to have fun, ask a stodgy old card dealer for a receipt next time you buy at a card show. Every dealer at every card show is a tax cheat, right? They're not issuing receipts, and most aren't even keeping track of sales.

For the cost of a $40 table you can liquidate your cards with absolutely no paper trail. And in metro Detroit, the number of card shows per month has quadrupled, at least, over the last few years. I know for a fact that more than one dealer at the last show I attended gave up selling on eBay and now just travel from show to show on weekends instead. No records. No paper trail. All cash.

This statement from Bob C. typifies the stupidity and overreach of the tax laws:
"...I've explained to people how when they just trade cards, that is still technically deemed a sales transaction by the IRS, and is supposed to be reported as a taxable sale by both parties to the trade on their tax returns."

No offense to Bob C., he's obviously very good at what he does and quite bright, but if you need a CPA to sell baseball cards, there's something wrong with the system. And people will always find ways around paying higher taxes. It's the American way.

[Stupe the Second Sacker]

Originally Posted by SAllen2556

This thread is the reason I married an accountant instead of becoming one.

I do wonder, though, about card shows. They're largely all cash transactions and no receipts are ever given. In fact, if you want to have fun, ask a stodgy old card dealer for a receipt next time you buy at a card show. Every dealer at every card show is a tax cheat, right? They're not issuing receipts, and most aren't even keeping track of sales.

For the cost of a $40 table you can liquidate your cards with absolutely no paper trail. And in metro Detroit, the number of card shows per month has quadrupled, at least, over the last few years. I know for a fact that more than one dealer at the last show I attended gave up selling on eBay and now just travel from show to show on weekends instead. No records. No paper trail. All cash.

This statement from Bob C. typifies the stupidity and overreach of the tax laws:
"...I've explained to people how when they just trade cards, that is still technically deemed a sales transaction by the IRS, and is supposed to be reported as a taxable sale by both parties to the trade on their tax returns."

No offense to Bob C., he's obviously very good at what he does and quite bright, but if you need a CPA to sell baseball cards, there's something wrong with the system. And people will always find ways around paying higher taxes. It's the American way.

Scotts gets it. Hope others here are paying attention.

[obcbobd]

Originally Posted by SAllen2556

This thread is the reason I married an accountant instead of becoming one.

I do wonder, though, about card shows. They're largely all cash transactions and no receipts are ever given. In fact, if you want to have fun, ask a stodgy old card dealer for a receipt next time you buy at a card show. Every dealer at every card show is a tax cheat, right? They're not issuing receipts, and most aren't even keeping track of sales.

In the early 1990s I worked for the Massachusetts Department of Revenue. I also went to the occasional card show. I noticed that with the exception of Hall's Nostalgia, who had a physical store, no one charged state sales tax. I thought of asking one of my managers why they didn't crack down on this, of course I never did. Thirty years later I still never see anyone charging sales tax at shows.

[raulus]

Originally Posted by obcbobd

In the early 1990s I worked for the Massachusetts Department of Revenue. I also went to the occasional card show. I noticed that with the exception of Hall's Nostalgia, who had a physical store, no one charged state sales tax. I thought of asking one of my managers why they didn't crack down on this, of course I never did. Thirty years later I still never see anyone charging sales tax at shows.

Sounds like a fun job at the DOR.

My experience is that collecting sales tax is only required if the business is registered to collect sales tax in that state. Registration requirements vary from state to state, but often revolve around issues like nexus and sales volume in that state.

Every once in a while, I'll get an email from an auction house announcing that they are now required to collect sales tax in a specific state, which adds to their existing list. I suspect this happens when they cross the sales threshold for that state.

So for a vendor who doesn't do much business in the state, often they won't be required to actually collect sales tax in that state. While there may be some gamesmanship around cash sales going on, I wouldn't be surprised if most of the dealers from out of state fall below the threshold necessary to register to collect sales tax in Mass.

[jethrod3]

Originally Posted by obcbobd

In the early 1990s I worked for the Massachusetts Department of Revenue. I also went to the occasional card show. I noticed that with the exception of Hall's Nostalgia, who had a physical store, no one charged state sales tax. I thought of asking one of my managers why they didn't crack down on this, of course I never did. Thirty years later I still never see anyone charging sales tax at shows.

So several years ago, when I had started doing one or two local small shows, I was under the impression (for whatever reason, right or wrong) that setting up at an occasional card show was pretty much the equivalent of setting up a garage sale: I was selling essentially second-hand stuff, not with the idea of making a huge profit (or often any profit), and I believe I'd read some tax rules about there being some number of times you could set up for a garage sale and NOT have to declare the financials unless you exceeded that number.

Even if I were to do a show again tomorrow, my intention would be to not sell off my few high-dollar collectibles for a profit now; it would be to reduce clutter from my collection and attempt to break even on stuff I either no longer want (much like one does at a garage sale) or that was thrown in with other items in auction lots that I actually wanted.

This of course begs the question: If someone, for the sake of discussion, is not a collector now, but has 5 sets of 1988 Topps baseball that they sell at a garage sale for $15 each because at time of purchase they thought it could be a great investment (but now is hardly worth the paper the cards are printed on), are those sets deemed collectibles and thus subject to reporting to the IRS? From what I've read, if the seller makes any profit, I think the answer unfortunately would be yes! But unless there are stricter rules for garage sales, unless I'm missing something, the tax law would be quite unenforceable.

[raulus]

Originally Posted by jethrod3

So several years ago, when I had started doing one or two local small shows, I was under the impression (for whatever reason, right or wrong) that setting up at an occasional card show was pretty much the equivalent of setting up a garage sale: I was selling essentially second-hand stuff, not with the idea of making a huge profit (or often any profit), and I believe I'd read some tax rules about there being some number of times you could set up for a garage sale and NOT have to declare the financials unless you exceeded that number.

Even if I were to do a show again tomorrow, my intention would be to not sell off my few high-dollar collectibles for a profit now; it would be to reduce clutter from my collection and attempt to break even on stuff I either no longer want (much like one does at a garage sale) or that was thrown in with other items in auction lots that I actually wanted.

This of course begs the question: If someone, for the sake of discussion, is not a collector now, but has 5 sets of 1988 Topps baseball that they sell at a garage sale for $15 each because at time of purchase they thought it could be a great investment (but now is hardly worth the paper the cards are printed on), are those sets deemed collectibles and thus subject to reporting to the IRS? From what I've read, if the seller makes any profit, I think the answer unfortunately would be yes! But unless there are stricter rules for garage sales, unless I'm missing something, the tax law would be quite unenforceable.

I'm not entirely sure why there's such a fascination with small potatoes.

I would suspect that the cost to buy those sets is probably greater than the $75 you sold them for, so no gain.

Even if all $75 was income, you're talking about a tax of at most maybe $30, give or take. If we're fussing over $30, then we're probably doing something wrong. Both because paying $30 shouldn't kill anyone financially, and failing to pay $30 is unlikely to result in a death sentence under federal tax law.

Now, if you were talking about $30,000 or $300,000, then the stakes are a lot higher. But you're probably not ringing up those sorts of sales at a garage sale.

[jethrod3]

Originally Posted by raulus

I'm not entirely sure why there's such a fascination with small potatoes.

I would suspect that the cost to buy those sets is probably greater than the $75 you sold them for, so no gain.

Even if all $75 was income, you're talking about a tax of at most maybe $30, give or take. If we're fussing over $30, then we're probably doing something wrong. Both because paying $30 shouldn't kill anyone financially, and failing to pay $30 is unlikely to result in a death sentence under federal tax law.

Now, if you were talking about $30,000 or $300,000, then the stakes are a lot higher. But you're probably not ringing up those sorts of sales at a garage sale.

I wouldn't call it a fascination. I think it's more about questions regarding interpretation, questions about where the IRS could or really should draw the line, and questions about where some of us might fit in that are not dealers but maybe just most casual of sellers. We are probably talking about a figure somewhere in between the $75 and $30,000 you mentioned for the casual collector (non-dealer) that sets up occasionally at a card show, and probably much more skewed to the $75 side. Probably the guy that makes between a couple hundred dollar to maybe $1K after factoring in table costs.

So no, not likely to result in a death sentence. But officially, even for such events that parallel what you might make at an average garage sale (though admittedly most are not making money on what is sold at garage sales), I think given the current rules, not declaring what you made even as a non-dealer at a mom-and-pop tiny card show (if you made anything above basis at all) is still a violation of the tax law. It's a complicated mess for folks that buy large lots of stuff at auctions, keep 1 or 2 desired items, but try to sell the rest of the stuff so it doesn't accumulate in one's house. At a minimum, some records must be kept now, even for the most casual of sellers in that situation, because more than likely, you'll also want to sell those one or two items you may have purchased in those auctions, and in the end, you'll have to figure out basis and profit, even if those desired items may not get you more than, say, $100 if sold at a show. All of this makes me want to consider becoming a CPA when I retire from my current day job!

[edhans]

Originally Posted by SAllen2556

In fact, if you want to have fun, ask a stodgy old card dealer for a receipt next time you buy at a card show. Every dealer at every card show is a tax cheat, right? They're not issuing receipts, and most aren't even keeping track of sales.
.

Scott,
I am one of those stodgy old dealers and I will happily write you out a receipt when you purchase cards from me. Contrary to your assumption, I track my sales and purchases, report them on schedule C and pay self employment tax on my earnings. Many (probably most dealers) do the same. Your blanket accusation is, quite frankly, offensive.

[Exhibitman]

Originally Posted by edhans

Scott,
I am one of those stodgy old dealers and I will happily write you out a receipt when you purchase cards from me. Contrary to your assumption, I track my sales and purchases, report them on schedule C and pay self employment tax on my earnings. Many (probably most dealers) do the same. Your blanket accusation is, quite frankly, offensive.

Old, definitely.

Be nice to catch up with you in Chicago this summer, Ed.

[edhans]

You too, Adam.