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Internet IRS Wants to Tax Online Sales
Tuan Nguyen (Blog) - May 8, 2007 9:30 AM
Print E-mail del.icio.us 138 comment(s) - last by Skullaria.. on May 23 at 1:49 AM
Millions of users from eBay and other sale sites could soon be required to file reports with the IRS for personal sales

A quick search for the latest gadgets on eBay can quickly reveal that there are literally millions of users selling and buying stuff on a daily basis. May of eBay's users are simply people at home who sell their belongings or other things for cash. A camera, a CD, clothes -- just about anything. For the most part, many people can make a moderate and even lucrative side income from selling products on eBay.

All this is about to change for millions of eBay users according to a report on a proposal being drafted by the U.S. Treasury Department. The IRS now wants a cut out of sales that occur on eBay and other popular user-to-user sale sites such as Craigslist. A proposal is being drafted that will require all major market sites to store, track and send user information to the IRS. This information includes transaction details and other personal information.

The Center for Democracy and Technology (CDT) reports that the new IRS proposal is all part of President Bush's 2008 budget proposal. The intention is for the IRS to track down small business income that is generated from the sale of personal property. If you make more than $5000 USD per year on 100 or more sales online, you may soon be forced to file income statements with the IRS. This means that users of sites such as eBay, Craigstlist and Amazon.com will be required to fill in more personal information as well as social security numbers.

Demanding that sites such as eBay request more personal information from users is already looked upon as a bad thing according to the CDT. Many Internet users are already up in arms over privacy concerns. Identity theft and other unfortunate situations can occur from storing user information online. Since the beginning, eBay users have experienced account hijacking and other malicious attacks, so storing information such as a social security number will become a big concern for many.

According to the Treasury Department, Americans owe it billions of dollars and this would be a legitimate move into getting some of that lost revenue. But the CDT indicates that the Treasury Department has not yet convinced Congress that this proposal is necessary.

CDT deputy director Ari Schwartz indicated that collecting personal information such as social security numbers is a big no-no for end-user security. "Such data retention proposals would force the creation of massive, privately maintained databases of personally identifiable data that government investigators could tap at their leisure," said Schwartz. "Sites that currently ask consumers for their [social security numbers} are very likely to be related to illegal 'phishing scams," added Schwartz.

The IRS claims that such a move is a necessity due to the "explosive" growth of the Internet. "One of the more popular business opportunities is the selling of new and used items through online auction sites such as eBay, Ubid, etc.," noted the IRS report.

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By Eurasianman on 5/8/2007 9:41:21 AM , Rating: 2
This is stupid. As if we don't file enough taxes as it is. Also, the fact that this might require us store personal data (specifically our S.S.N.) is the dumbest thing I ever heard of... especially on a site that's already been hacked a few times here and there. IRS should just lay off!!!

Next thing you'll know, we'll start having to pay taxes for our items on sites such as Newegg, ZipZoomFly, mwave, etc.!

This is so ridiculous! If this goes all the way through, I think many will see internet sales and purchases go down in no time!!!




By akugami on 5/8/2007 9:47:44 AM , Rating: 2
You can move to Delaware. No taxes, or at least no sales tax. I'm in the process of looking for houses there.


By jskirwin on 5/8/2007 10:15:18 AM , Rating: 2
Delaware makes up for the no sales tax by hitting you with a higher state income tax - at least for those in the middle - upper tax brackets.


By encryptkeeper on 5/8/2007 10:46:31 AM , Rating: 3
Oregon does the same thing. Don't EVER fool yourself into thinking you won't be taxed. You want a government? You're going to be taxed, deal with it.

People are always going to die, and they'll always be taxed. I admit, it already sounds like a lot more paperwork than is necessary for selling a George Jones CD for 7 bucks. But almost every other sale is taxed. About the only thing that isn't is a garage sale. MILLIONS are floating around Ebay, and they want their cut but if the tax reporting procedure is too difficult it will wind up killing EBay, and creating a whole new site. I used the garage sale analogy because if they want to kill this, they'd better use that as precedent. Sales Tax is traditionally levied on RETAIL goods, not items sold by a second or third party.


By nayy on 5/8/2007 11:22:26 AM , Rating: 3
And where do I move to if I don't want a government?
jk

I agree that makes no sense to tax small personal sales that occur online, but there are some people doing some serious profits selling new items online, and they should be taxed.


By Justin Case on 5/8/2007 12:08:17 PM , Rating: 5
>And where do I move to if I don't want a government?

Iraq?


By jskirwin on 5/8/2007 12:55:11 PM , Rating: 4
quote:
Iraq?


If you are looking for anarchy, I might suggest Somalia, parts of Congo and of course, the Northwest territories of Pakistan. In anarchic situations you become the government as long as you have the biggest/most powerful force.

Otherwise you end up dead/enslaved.

Life in Delaware would seem idyllic by comparison - even with the high cancer rates.


By Some1ne on 5/8/2007 6:09:17 PM , Rating: 3
Your post is self-contradictory. If there is an individual/entity with a "biggest/most powerful force" (or multiple ones trying to fight it out for control), then there is no longer anarchy. Anarchy refers specifically to the lack of such concetrated/centralized sources of control.

Don't confuse "anarchy" with "chaos". That's just what those fat-cats in Washington want you to do.


By awer26 on 5/8/2007 7:41:12 PM , Rating: 3
Sealand?


By CollegeTechGuy on 5/8/2007 6:41:25 PM , Rating: 2
Go get an island, get some people to move there with you. Get some small country to sponser you as a country. Declare War on the U.S.A. then after they start to attack surrender and you'll be rich. Look at how much money we have dumped into other countries we have attack.
:D


By crleap on 5/10/2007 5:55:11 AM , Rating: 2
We can all learn a bit about this strategy made famous by the Duchy of Grand Fenwick.


By qdemn7 on 5/9/2007 5:59:10 AM , Rating: 2
quote:
And where do I move to if I don't want a government?
Luna sounds good! Brass Cannon!


By decapitator666 on 5/10/2007 1:04:20 PM , Rating: 2
The montana mountains.. be sure to wear camouflage to fit in with the gun toting locals


By iFX on 5/8/2007 12:18:10 PM , Rating: 2
Use your brain. This proposed tax had ZERO to do with funding government. The goverment has operated just fine for hundreds of years before people starting selling things on the Internet.


By Rockjock51 on 5/8/2007 1:22:49 PM , Rating: 2
What's the national debt these days?


By BladeVenom on 5/8/2007 6:18:44 PM , Rating: 2
Taxing ebay items sure isn't going to fix the debt.


By ZmaxDP on 5/8/2007 2:04:28 PM , Rating: 5
Use your brain. Before the internet existed, people didn't sell things online, and instead had untaxed garage sales (comparable to selling a few items a year < 100 or <5000$) or took them to legitimate businesses like Pawn Shops which are taxed, or to illegitimate businesses that didn't report taxes but should have legally speaking.

Along comes the internet and you have what amounts to Internet Pawn Shops where you or I can take our old digital camera, have some guy sell it for us on E-bay, we get most of the cash and he gets a fee. His income should be taxed, though my part of the income shouldn't be as it was a personal item. You also have some sleaze balls buying items from Goodwill and other donation based charity stores and then selling them online for their real value. That should flat out be illegal, though there's no real way to regulate it currently. Get something like a tax in place for people who break a certain item or monetary limit and you're discouraging that directly and creating a paper trail as the people who continue would need to have documents on the items in case they get audited.

Or, just use common sense. If it is a tax, it has everything to do with funding the government, as that is all it goes to. The government. What else is this tax about pray tell? Getting back at the little guy? Doing evil upon the masses? There are very few people in the world who operate on vindictive reasoning or spite just for the fun of it. Most of those who do don't go into government. It is too much of a pain with too little reward.

This tax is completely justified and long overdue in its intent. The question is are they writing the law properly so that it targets the people it is meant to, so that it corrects bad behavior and doesn't prohibit good behavior, and so that the market isn't badly disrupted as a result.

I think 100 items and 5000 bucks is too low. I know that I've got several digital cameras and a few other items I might sell this year that will surpass that amount of money, though not that amount of items. I'm not who this is supposed to target, but it looks like I might fit the profile anyway.

I think they should up the item level to 200, and the monetary level to $10,000 with qualification occurring at either benchmark (don't have to hit both, just one).

Then, I think e-bay should create a tiered account structure where typical users who don't think they'll hit that amount can sign up as they currently do.

Any users operating in a commercial fashion on e-bay need to be required to open a storefront (or similar) account where they have to enter a tax ID number or a SSN.

If you are treating e-bay as a commercial marketplace to make profit, then you take on the additional risk of identity theft. If not, then you don't take on that risk.

Sure, crafty people could try and open multiple accounts to stay under the umbrella restrictions, but I'm sure some equally clever people at e-bay could find some way of tracking that down using some less sensitive information.

Point being, the government survives based on taxes, and in this case I think that certain people have found a loophole in tax laws that comes as a result of new ways of doing business (online). It is perfectly rational and justified for the government to change the law to close the loophole. The sooner they do it, the better considering how we're building up debt at the moment. Given, this is only a small drop in the bucket, but every little drip helps. Now if we could only get our representatives to stop bleeding the money out of the treasury like it was a hemophiliac...


By herrdoktor330 on 5/10/2007 11:59:47 PM , Rating: 2
Here's an Idea:

What if someone opened up an off-shore auction site in a place that didn't have to comply to US regulations? Say... I dunno... Vietnam? New Guinea? New Zealand? Uzbekestan? Anywhere.

Couldn't you in theory get away with keeping "business as usual" and collect your income that way? Then all the profits from the sales online go to one of those countries who won't turn over that information.

<rant>
Look... it's bad enough there's a silent war against the middle class of this country, with the elimination of blue collar jobs and lack of equitable employment for the masses. Do they have to stick it to those trying to eek out a living even more?
</rant>