Paying tax on Amazon sales

[TheAngryCAG]

Hey, I know there are very few people on here who would have experience with this, but maybe someone could help me out.

I've been considering trying to start selling more stuff on Amazon, basically a big chunk of my collection of games/toys and stuff. I know that if you have over 200 transactions or $20,000 in sales, you have to pay taxes on it, but how does that work? Do you pay tax just on the profit? On the gross? Can you deduct what you originally paid for the item?

Thanks in advance for any help

 

[sassylaurie]

Actually, legally, you have to report any net sales over $400 combined across all mediums (ebay, rummage sales, craigslist, amazon, ect...). The $20000/200 transaction relates to a new tax document that is required to be submitted by companies where you have met both conditions to help keep the thousands of people who don't claim these earnings. The form is called the 1099-k and is based off of GROSS moneys paid to you.

So, the law hasn't changed with this document, but now the IRS has evidence if you have sold over $20000 worth of stuff over 200 transactions, strongly encouraging you to actually report it.

Think of it like a W2 from your employer where both you and the IRS receives a copy of the document, but it's submitted by PayPal, Amazon, or any other business where you have received over 200 direct payments totaling over $20000 from. The only difference is that this is based off of gross sales and does not take into account your expenses. Those, you must deduct yourself on your tax form where both the gross numbers from money you received and your deductions are reported.

Bottom line is, you need to have your ass covered with receipts. If you don't have proof of what you paid for the items you sold, you will need to claim the total gross amount at tax time.

There are other deductions such as mileage for your vehicle and other stuff that you can write off as well to deduct from the gross sales amount shown on the 1099-k form, but I am not really sure what they all are. So, if you want to sell over $20000 worth of stuff, you should see if you can deduct enough to show you have made less than $400 by the end of the year.

 

[TheAngryCAG]

Well, when I buy something from a thrift store for $10 and sell it for $20, I get a generic receipt that'll just have the price. If I purchase something from a garage sale and don't get a receipt, what do I do?

As for the net sales over $400, I'm sure no one actually does that. I would love to turn selling into a full time thing, or even just a moderate income equivalent to a part time job, but if I end up paying an addition 20% tax on everything I sell, I feel like there'd be very little actual profit

 

[nddave]

Sassy is just telling you the law and everything in there is true.
If you dont have intital proof/valid reciept SHOWING THE ITEM OF ? then the IRS assumes/claims you got it for free which is 100% profit.

On the other side you can deduct if you have proof of purchase and sold for less this is ONLY to be deducted from your profits of the year.