D. Stussy wrote:
- quote -

[To the moderator: This may be getting out of hand. Also, I
can't figure out anywhere to trim which wouldn't significantly
affect context.]

There are no circumstances I can see in which it is more
advantageous to California for a "business" to be treated as
a "business" than as a "hobby" -- so there is no reason for
the FTB or Board of Equalization acting as the income tax
appeals board to consider the issue, if the OP were to
consider it a "hobby". Sales tax reporting is a separate
issue, but obtaining a sales tax ID or resale license (not
PRECISELY the same thing, but close enough) is NOT called
"registering as a 'used goods dealer'". In fact, until 2003,
one had to obtain a sales tax ID to pay the use tax.

Now, for the question of employee vs. independent contractor
issues, California (specifically, the EDD) has far more
interest than the IRS.

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Arthur L. Rubin wrote:
- quote -

Tell that to our CA Board of Equalization, who besides being
the "sales tax police" also have APPEALS authority over
income tax cases after the FTB gets their shot. California
is one of those states where the state income tax system is
based on the IRC. They will hit this person for BOTH types
of taxes in less than a heartbeat.

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D. Stussy wrote:
- quote -

My state has the same SALES TAX requirements as you state
your state does, but I don't recall any "used goods dealer"
registration requirement. But, even so, registration as a
"used goods dealer" does not create a (state legal)
requirement to act in a "business-like manner".

You seem to be staying that your state would require the
original poster to register with the state as a dealer,
rather than merely getting a sales tax ID number or a resale
license. I can see many circumstances (in California) in
which an activity which is clearly a hobby may require
getting a sales tax ID number. A resale license (which
allow you to buy items without paying sales tax) may be a
factor in acting in a "business-like manner", but applying
for a permit doesn't seem to me to be even part of that
factor.

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"Harlan Lunsford" <t> wrote ....
- quote -

NO problem at all.

- quote -

Nahhhhhhhh, but I believe that in a random audit, or
possibly a newly designed compliance program, people like
Steve will be found.

The sooner he and others similarly situated understand their
obligations with the help you EA's & CPA's on this board
giving helpful advise, then people will have fewer
problems.

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Arthur L. Rubin wrote:
- quote -

The original poster never said if he was selling his OWN
stuff or the stuff of others. If he is selling oter
people's stuff (consignment or not), then he is a used goods
dealer (and in my state, state law defines a dealer as a
person with more than three sales/year, "garage sales"
generally excluded). My state is also one of those that
parallels the IRC for state income tax purposes. Simply
put, if the state classifies him as a "dealer," he IS
operating a business regardless of what the other facts and
circumstances imply.

"Operation in a businesslike manner" (required by law or
not) IS one of the 9 factors in the regulations under IRC
183. What I addressed was a condition where he is REQUIRED
to operate in such a manner - and it does not matter that
the requirement is state law based as long as Congress or
Treasury doesn't further expand the federal law to define
the term better.

Is the Internal Revenue Code the only set of laws you recognize?

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TaxmanHog wrote:
- quote -

That's a wonderful explanation. Hope you don't mind if I
print it out to have on hand just in case someone asks the
same question.

Also, you could have asked for Steve's ssn!

Cheer$,
Harlan Lunsford, EA n LA

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D. Stussy wrote:

- quote -

Why does the STATE determination that you (as an individual,
ignoring the question of which activity generated the
required sales) have to collect sales tax affect the FEDERAL
determination of whether you are operating a business? A
business license may be one of the factors, but a sales tax
license is not exactly a resale license, and even THAT isn't
a business license.

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Steve wrote:

- quote -

At most, 28% of the gain, assuming that everything you sell
falls under the "collectible" definition - for your OWN
property.

- quote -

The selling of your OWN used property does not, by itself,
constitute a business. However, check with your state's
department of revenue regarding exceptions to SALES TAX. If
you become subject ot sales tax, then it will be deemed a
business activity.

If you are selling other peoples' trash, then you are in
business. Self employment tax is effectively about 14.1%
(15.3 * 0.9235), plus regular income tax on the net profit,
and don't forget to collect sales tax where appropriate.

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"Steve" <buddabooshiaebay[at]yahoo.com> wrote:

- quote -

1) It ultimately depends on your individual tax rate, could
be as low as 10% to well over 30%.

2) Self employment tax is 15.3% of net income (after
expenses applied)

3) same as 1 & 2

4) report it now as you go. Is being accused of tax fraud
worth it? You are talking 5% per month just in interest
alone, then penalties, audit & collection representation
expenses, and if no reasonable cause then fight tax fraud
charges possibly worst case scenario.

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"Steve" wrote:

- quote -


- quote -

Let us look at # 3 first!
Which yields a effective total tax rate of 22888/75000=> 30.52%

- quote -

typically 15.3 %

- quote -

In 2003, Let's assume your Single, live in a cheap
apartment, have no dependents, no other source of income.
no major deduction (personal)

Net Schedule C profits = $75,000
Adjusted Gross Income = 69,701
Taxable income = 61,901
Income Tax = 12,291
SE TAX = 10,597
Total tax = 22,888

- quote -

At worst Jail time, you are aware of your obligations, and
appear to be neglecting them willfully. read this:
http://www.irs.gov/irs/article/0,,id=106790,00.html

At minimum
If you have not even filed the tax return(s) in question (2002,
2001, 2000....etc),
ADD 22.5% for Failure to file penalty.
ADD .5% for ever month the return is late maximum 25%
Failure to pay penalty.

If ya did already file but for some reasonable or LAME reason
neglected to include the business profits. and ya get caught.
read this about accuracy related penalties 20 , 40 and even 75%!
http://www.irs.gov/irm/part20/ch01s08.html

The final things you need to be concerned with are:

Estimated tax penalty, which accrues at about the rate of
interest for they calendar year in involved, when this kicks
in depends on several complicated factors that only your CPA
(I hope you have one), can figure on form 2210.

To top IT OFF there is Regular OLD Interest on all of this
(compounding on the Late filing penalty if relevant).
5% right now, but that changes every quarter, and the rates
in effect during the period of time of the accrued tax
liability will rule.

Application of penalties in the above tax computation:
After you ponder your prospect for a year and file on
or about 4/15/2005

FTF penalty = $5,150.
FTP Penalty = $1,373 plus more accruing potential max (5722.)
ES Penalty = $1,200
Interest ~= $1,400+

Total BILL =$32,012.
effective rate for neglecting your obligation $32012/$75000=> 43%, or your precious freedom!

GOOOOOOOOOOOOOD luck Steve!

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buddabooshiaebay[at]yahoo.com (Steve) writes:

- quote -

Deduct your expenses from your gross business income.
Pay SE Tax at a rate slightly under 15.3% and whatever
is your tax rate on your taxable income, less certain
credits. Download a copy of Schedule C (Form 1040)
"Profit or Loss from Business" at http://www.irs.gov
to see how you will be reporting income and expense.
There are other forms which you will likely have to use.
For now, let's just stick with that one. Absent any jail
time (that's getting too expensive), depending on your
income, you could be saddled with all kinds of tax and
penalty. These could lead to liens on your property and
a sad state of affairs, indeed!!!=(: I'd suggest you engage
a professional to help you in these matters. Conducting
business is risky enough without having matters complicated
by non-compliance with the rules. Professional help will
likely save you much, MUCH, more than the cost!!=

Good Luck!!!=

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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To whom it may concern,

Ebay's a hobby of mine, I have a full time job. I'm
thinking of selling mainly trash, but the trash from what
people claim as worth $0, can be turned into some BIG cash
ranging from $5-$1500 per item (My secret).

I'm kind of worried about Mr. IRS man a coming. My
questions are 1) If a profit of $30,000 were to be made,
then what percentage of that should be set aside for Federal
taxes? 2)

What
percentage of that should be set aside for
self-employment tax? and 3) If I keep accruing an
average of $5,000-$10,000 per month on Ebay, what
should be the percentages be for each type of tax to
set aside? Finally, what are the % tax penalties if
I never paid the tax and Mr. IRS man comes a knockin'
a few years down the line?

Many thanks!

Steve

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