Should More Dealers be on Ebay and participate in third party discount programs

[mwhafner]

Toolfest ,

When making online purchases, you may want to make sure that they are not still subject to state taxes.  The tax (or at least the state portion) is generally still owed.  The difference is that you are responsible for filing, not the seller. 

 

[mastercabman]

This reminds me of some real estate transactions.  A buyer and a seller are arguing over some minor issue, let's say the amount to fix the issue is $1000.  They can't reach an agreement.  The Realtor stands to earn $5k on the transaction.  Does the Realtor say "I guess we can't come to a deal.  The deal is off" and lose the sale?  I guess if the Realtor is Kevin, then yes.  The smart Realtor says "let's quit arguing about this.  I'll pay the $1000 and let's close the deal!"  The smart Realtor pays $1000, but walks away with $4000.  Had they not done that, they would walk away with $0.  I don't know about you Kevin, but I'd much rather walk away from a transaction with some money instead of no money.

So the Realtor makes $4000.00 but gets taxed for $5000.00 ?    Can he/she write that off?
Doesn't make a whole lot of sense!

 

[JohnDistai]

At first I didn't understand your response, and I thought it was ridiculous.  But now I think I do.  Clever.  The IRS has its hands in everything.  There is no free anything without the IRS trying to take a piece of it.

The Realtor would probably write the $1000 off as an expense, or only claim $4000 as income.  Had they not invested the $1000 they would have not earned the $4000 in income.  They would probably request the closing agent provide them with $4000 and adjust the commission out of the closing documents.  I don't know, I'm neither a Realtor, Closing Agent, or an Accountant.  Either way, it was an example to show how ridiculous it is to avoid business because you don't want to pay an eBay fee.

 

[mastercabman]

I understand,not a good example but i understand!!!!

 

[JohnDistai]

Imagine being able to take a piece of $12k a month in sales just by showing up.  It boggles my mind how people would avoid this or pass this up.  It especially boggles my mind when many Internet dealers already have the mechanisms in place for participating on eBay.  You already have all the credit card systems set up, delivery systems, warehousing, websites, etc.  You would only add a new sales channel to your store.  A channel where already informed buyers could have a choice of where they purchased from.  These are buyers that did their own research, and that you wouldn't have to interact with as intensely.  You could still focus your time to servicing customers who needed more help who haven't made a purchasing decision yet, or helping customers fix problems.

If you don't like eBay, fine.  Those of us that know what we want and can not pass up the third party incentive will hold our noses and buy from the Jester, or we'll try one of the other up and comers who don't have much feedback.  These up and comers may provide service that the Jester can't touch.  Perhaps we should give them a try and help them build up.

Anyhow, I think it is foolish to pass up this opportunity while the third party incentive is in place.  Once the Bing cashback goes away, fold up the eBay store and go back to your Internet presence.  If you can provide better service than the Jester then there is a high likelihood that your eBay customers will follow you.  When the Bing Cashback program expires, there would be no other incentive to use eBay.

I wish I had an opportunity to mint money just by showing up.

 

[Wood_Junkie]

This reminds me of some real estate transactions.  A buyer and a seller are arguing over some minor issue, let's say the amount to fix the issue is $1000.  They can't reach an agreement.  The Realtor stands to earn $5k on the transaction.  Does the Realtor say "I guess we can't come to a deal.  The deal is off" and lose the sale?  I guess if the Realtor is Kevin, then yes.  The smart Realtor says "let's quit arguing about this.  I'll pay the $1000 and let's close the deal!"  The smart Realtor pays $1000, but walks away with $4000.  Had they not done that, they would walk away with $0.  I don't know about you Kevin, but I'd much rather walk away from a transaction with some money instead of no money.

So the Realtor makes $4000.00 but gets taxed for $5000.00 ?     Can he/she write that off?
Doesn't make a whole lot of sense!

Yes, it would be true.  Let's say they're in the 30% tax bracket (easier math).

30% of $5000 is $1500.
They paid the $1000 difference.
So they NET out making $2500 profit.  $2500 is still a lot better than zero.

Complete and total sidebar, but there is an extremely insightful chapter about realtors and realtor monetary motivations in the book Freakonomics.  It's a quick read and written in a really friend manner (despite being written by an utter super-geek theoretical economist).
Here's the punchline:  There is no reward for a non-sale.  Therefore, ALL incentive is to make the sale.

 

[JohnDistai]

Freakanomics is a great book!  I almost named my child Sh!thead, pronounced (sha-teed).  The wife wasn't too happy with that, so I call him Lemonjello (le-mon jello) instead.

You may also enjoy "Supercrunchers" by Ian Ayers.  Its about data collection and how companies are using it run our lives.  Sounds boring, but it is quite interesting.

 

[Toolfest]

mwhafner.

Have you or anyone you know paid this tax, how does it work?

Amazon.com's sales were $24.51 billion last year, has anyone heard of a non-Washington state citizen paying sales tax on an item purchased from Amazon?

A law is only as effective as its enforcement. Jaywalking is technically illegal in New York but you can do it in front of the NYPD and you won't get a ticket. If you jaywalk in Los Angeles on the other hand, then instead of buying  the Centrotec Imperial Wood Drill Set Bob has on special, you will be making a mandatory contribution to Mayor Villaraigosa.

 

[JohnDistai]

Many states call it a "use tax" and you are supposed to pay it.  There is a spot for it on your state tax form.  They even have handy calculators to help you figure an amount to pay based on your income.  Real handy.

 

[peter halle]

To answer a question posted here:

Have you or anyone you know paid this tax, how does it work?

In the Commonwealth of Virginia, there is a a place on your tax return to record these types of purchases.  It is up to the individual to fill in the amount.  Don't, and you get audited, then it becomes tax fraud.

Yes or no is up to the individual.  A prediction - as the states get less funding from the federal government and have to find new income streams, this untapped market will be tapped.

Peter

 

[JohnDistai]

And Virginia looks for every opportunity to collect and rechecks the math on your return.  It may take them 2 years to get around to mentioning something about it, but that's okay.  They charge interest for that time.  If you pay, re-file your Federal with your mistakes corrected and re-file in VA to ask for your money back that you paid them on a mistaken penalty, you never hear from them.  I'm not bitter, those rotten cs'ers.

(A reminder - I should follow up and pursue the refund they owe me.  I can buy another Festool if a reputable dealer goes onto eBay and I can get third party cash back.  The only problem is that their customer service is about as good as the Jester's...)

 

[harry_]

I could be mistaken (and would apply only to the U.S.),......

But I thought that there was a federal law prohibiting taxing internet sales by the individual states unless the seller has a 'brick & mortar' within that state. Has this law expired?

 

[Tom Ryan]

I think the law means that the dealers don't have to collect the sales tax.  The "Use" part of the sales and use tax says that the purchaser
is supposed to pay the tax -- although most don't.

Tom in Central PA