SmallBizResource Blog -- Internet

eBay Sellers Getting Socked Again?

Posted by Gayle Kesten Monday, Aug 4, 2008, 01:48 PM ET

Question: What does the housing market have in common with online auction sites?

Answer: They're both part of a new law, the Housing and Economic Recovery Act of 2008, signed by President Bush last week. Tucked into the law, "aimed at resurrecting the housing market from its worst slump since the Great Depression and stabilizing the two largest mortgage finance companies," is a provision that requires credit-card processors to disclose the dollar amount of payments their merchants received from them.

The law also extends to online-payment processors, like PayPal and Google Checkout, and will impact merchants who make more than 200 sales per year totaling more than $10,000.

"The law is designed to crack down on merchants who are under-reporting their revenues," according to an article in the San Francisco Chronicle. "It is expected to raise about $10 billion over 10 years."

It goes on to say: "Some merchants say the rule will overstate their card revenues because the gross amount reported to the IRS won't reflect refunds they pay out. Carol Guthrie, a spokeswoman for the Senate Finance Committee, says merchants can still deduct those amounts when they file their tax returns."

That's what she says. The Chamber of Commerce, on the other hand, is quoted on the Internet Business Law Services Web site saying: "Many participating merchants will bear additional expenses related to the burdens of converting a payment distribution system that was previously not taxpayer-specific into one that would be."

Merchants like eBay sellers, many of whom, you'll recall, were irate about the auction site's changes in fees and policies back in May.

And, according to The Wall Street Journal: "Confusion about taxes may be more prevalent among eBay sellers than brick-and-mortar firms because it is comparatively easy and cheap to set up an eBay business. The transition from casual seller to profit-seeking business can seem almost spontaneous."

The article offers these four tips to help eBay entrepreneurs protect themselves while complying with Big Brother:

• Report all income from online sales, even from casual or hobby selling.
• If you mean to deduct expenses, act like a business.
• Keep your personal and business accounts separate.
• Claim the home office deduction.

Of note, the law doesn't go into effect until 2011.

Whaddya think?

Internet