Big tax changes will affect guitar sellers and parts resellers..

Discussion in 'Fred's Barcalounge' started by englishman, Sep 24, 2021.

  1. englishman

    englishman Gretschified

    Age:
    64
    Apr 5, 2014
    Detroit
    Basically, using a service such as paypal, anything brought in over $600 IN A YEAR will generate a 1099K.

    I'm not condoning the mass avoidance of people paying their fair share of taxes on places like Reverb or eBay but I can foresee everything going underground in a cash-based system. Regardless, your favorite pickup reseller may suddenly disappear from the face of the Earth next year.

    https://www.cnbc.com/2021/03/26/its...g-the-irs-about-income-from-online-sales.html
     
    mrfixitmi, Groutsch and Back in Black like this.
  2. Randy99CL

    Randy99CL Country Gent

    Feb 17, 2020
    Albuquerque
    I am considering selling a few guitars and this could be a real PITA.
    Edit: like anything dealing with the IRS, this is complicated. There must be some way to deduct the cost of goods sold, just as with any business. We'll have to see how this shakes out.
     
    Last edited: Sep 24, 2021
    mrfixitmi and pmac11 like this.
  3. Jerzey Bob

    Jerzey Bob Synchromatic

    652
    Apr 3, 2021
    North Jersey
    Just read something where that number also applies to any bank deposits as well. Haven't verified as to whether it's a spam campaign or fear mongoring. I trust MSM like I trust a Central Park night lurker. Until I see a law has passed, it's all hot air to me.
     
    mrfixitmi and pmac11 like this.
  4. swivel

    swivel Country Gent

    May 13, 2018
    PNW
    Yeah, it's the greedy states driving it.
    Realistically, if all us tinkerers kept invoices and payment data, we'd lose a ton every year. If they are going to request we claim, then let's claim it! Probably $5-10K a year for buying music stuff and selling maybe $2k on a good year...

    What I'm not getting is: In the past, my accountant says I need to make a little bit on music every 3-4 years to be legit.... otherwise it's a "hobby".
    So turn that around... If it's a hobby, then how can they tax that which is on a 1099?
    hard to figure.
    How many of you MAKE MONEY on selling a guitar you bought? Maybe 10% of the time at best?
     
    mrfixitmi, pmac11 and Archtops like this.
  5. Sid Nitzerglobin

    Sid Nitzerglobin Country Gent

    Jun 8, 2015
    fROMOHIO
    Already been reporting my sales for the last 6 years as an LLC. My yearly loss from rent & other operating expenses at the shop were a net gain for me until they went & made the standard deduction so high that now I get the worst of both worlds: no effect from the expenses of running the business that barely has any sales w/ customers that want to be a pain in the ass haggling on stuff that's already priced really well by their own admission &/or complaining about charging sales tax but still have to itemize & pay sales tax.... Yay!:confused:

    Sounds whiney I'm sure but I honestly don't care any more ;)

    My honest opinion not meaning to offend, but I support (almost) anything that makes it an even deal for those who are actually doing it by the book.
     
    Last edited: Sep 24, 2021
    mrfixitmi and Groutsch like this.
  6. englishman

    englishman Gretschified

    Age:
    64
    Apr 5, 2014
    Detroit
    That is still just a proposal. The thing I posted is law, starting in 2022
     
  7. englishman

    englishman Gretschified

    Age:
    64
    Apr 5, 2014
    Detroit
    And let’s keep politics out of it.
     
    pmac11 and wabash slim like this.
  8. Jerzey Bob

    Jerzey Bob Synchromatic

    652
    Apr 3, 2021
    North Jersey
    Show me a source that isn't MSM.
     
  9. Henry

    Henry I Bleed Orange

    Apr 9, 2014
    Petaluma
    The rules for income and deductions are not the same.

    E.g. if you sell illegal drugs or weapons, you must report that income. That's how they nailed Capone.

    But you don't get to deduct the costs and expenses for your criminal enterprise.

    Not that what sellers are doing is a criminal enterprise, but to emphasize that income and deductions are not treated the same.

    Talk to your accountant to see what expenses may be deducted.
     
    mrfixitmi, swivel and pmac11 like this.
  10. Henry

    Henry I Bleed Orange

    Apr 9, 2014
    Petaluma
    Just posting an IRS site not offering legal or tax advice.

    https://www.irs.gov/newsroom/tips-for-taxpayers-who-make-money-from-a-hobby

    "If a taxpayer receives income for an activity that they don’t carry out to make a profit, the expenses they pay for the activity are miscellaneous itemized deductions and can no longer be deducted. The taxpayer must still report the income they receive on Schedule 1, Form 1040, line 21."
     
    mrfixitmi likes this.
  11. Back in Black

    Back in Black Country Gent

    Age:
    72
    Jun 22, 2020
    Ontario Canada
    EM,

    Nothing new for us in Canada,

    Purchase price, based primarily on US Dollars, plus 13% Federal/Provincial tax.

    For the most part...I can still save money buying on-line State-side, even when shipping/exchange/brokerage/tax is included.

    You only have to take a quick trip around the grocery store to realize, guitars are not the only thing costing more, and the pandemic hasn't helped.

    And...We're all dreaming in Technicolor, if we think prices are going to go down after the pandemic finally passes.

    I have a simple philosophy, avoid impulse buying and shop fair market...shun the rest. Some should have been shunned and vanished a long time ago.

    Finally, always ask for a discount, groceries/liquor excluded ...all the retailer can say is no...10%/15% is usually easy to get, and a no charge guitar case, if we're talking guitars...if you ask!

    As far as purchasing cars, buy base models, as options have little to no residual value at trade in time. I average 12 years on a new vehicle. All the money you save by staying away from the expensive, mostly useless options, will help keep your vehicle serviced/maintained for a long time.

    BIB.
     
    mrfixitmi and pmac11 like this.
  12. GlenP

    GlenP Country Gent

    Jul 23, 2019
    WA
    Not sure that I want to be required to provide my SSN to eBay, etc, to satisfy the new reporting requirements. If they are going to report proceeds to the IRS, won't they need an SSN?
     
  13. Henry

    Henry I Bleed Orange

    Apr 9, 2014
    Petaluma
    Good question. I am not certain but those that won't provide an SSN/EIN/TIN may be subject to backup withholding.
     
  14. wabash slim

    wabash slim Gretschified

    Age:
    71
    Feb 10, 2010
    lafayette in
    Cash transactions in person only.
    Hard to talk about taxes without involving government.
    Thankfully, we don't have VAT here in the US----yet.
     
  15. Chet Harrison

    Chet Harrison Gretschie

    134
    Apr 27, 2020
    USA
    A chilling effect on people who casually flip gear for profit is all well and good in my book.
     
  16. pmac11

    pmac11 Country Gent

    Mar 4, 2018
    Toronto, Ontario
    Is it taxed as income,or is it a federal sales tax?
     
  17. knavel

    knavel Country Gent

    Dec 26, 2009
    London, England
    There are many many sources other than mainstream media that confirm the nature of this provision of the law. I'll give you a link below from a large DC law firm, but the article originally posted gets the basics right.

    Bills these days written by the lobbying firms, Congress probably hasn't generated a bill itself since the 1990s. Multiple interests are catered to in these bills so very often things like this 1099 threshold are buried. You will see in the law firm's post that the section number in the law about this change is 9674. That means there are 9673 sections that precede it and who knows how many after it. So the law is hundreds if not thousands of pages.

    The other thing one will always observe is that laws are given names that come from PR departments. In this case the 1099 provision is part of the "American Rescue Plan Act". My favourite of these this year is the "For The People Act". The reality always seems to be the opposite to the title and you ebay and reverb sellers won't be rescuing anyone or anything.

    New 1099: At the end of the day it will largely be more paperwork and a set up to fail if someone gets it wrong and is audited. If questioned you will have to be able to prove that e.g, the Stratocaster you sold for $1000 was sold at a loss since you paid $1200 for it. Elections have consequences, and in the words of Mencken, "Democracy is the theory that the common people know what they want, and deserve to get it good and hard." So glad I got out of America 20 years ago when I saw the writing on the wall. Only wish I had such vision when it comes to picking stocks.

    https://www.lexology.com/library/detail.aspx?g=1299ed16-4881-4e56-8845-bacd97572158
     
    speedicut likes this.
  18. Jerzey Bob

    Jerzey Bob Synchromatic

    652
    Apr 3, 2021
    North Jersey





    Thanks for the link. Yeah, I'm familiar w/ how that stuff's written, & how they present it.
     
    Last edited: Sep 26, 2021
  19. englishman

    englishman Gretschified

    Age:
    64
    Apr 5, 2014
    Detroit
    This will be income.
     
  20. englishman

    englishman Gretschified

    Age:
    64
    Apr 5, 2014
    Detroit
    Are you referring to VAT here? The difference here is that when you sell anything through paypal of something similar, it reports you to the IRS and that becomes part of your taxable income. Reverb and other places already deduct the sales tax before they pay out.

    I'm looking at the chilling effect it will have on small time guitar builders such as myself. I really can't afford an accountant to go through everything and sift out the actual labour cost so I can add that to how much I owe.

    Aslo, many high volume resellers on eBay (and similar) will disappear overnight, prices will go up.
     
    pmac11, Shadowy_Man and Back in Black like this.
IMPORTANT: Treat everyone here with respect, no matter how difficult!
No sex, drug, political, religion or hate discussion permitted here.