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

AZBrahma

Synchromatic
Dec 18, 2020
557
Arizona
I can't be nice and play by the rules when discussing some of these things on a fundamental level, so I won't. But I do have one ongoing thought about the implementation of all these things I'll share. Why is is that every new requirement, reg, or law that goes on the books increases the complexity and burden and expense, whether they be a private citizen or a business? The US already has a ridiculously complex and burdensome tax code. It is getting so complex that it is untenable for many and discouraging for some who may want to start a small business. Things just keep getting piled on, and it is the individual or business responsibility to account for it.

"One of the great mistakes is to judge policies and programs by their intentions rather than their results." - Milton Friedman
 

pmac11

Country Gent
Mar 4, 2018
3,658
Toronto, Ontario
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.
This is above and beyond the GST. It seems that what the US is doing is recording all your sales in a year as income. In Canadian terms, it would be a separate T4 at year's end, with the income subject to CPP, EI, federal and provincial taxes...
This seems messed up..I spent taxable income when I initially purchase the gear. Applying income tax if I sell the gear years later seems like double dipping.
 
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Back in Black

Country Gent
Jun 22, 2020
1,397
Ontario Canada
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.

EM,

Here in Ontario, it's called HST. It's a blended tax, part Provincial, part Federal, 13% in total. This is sales tax, which as a business man, you can apply to be refunded. What you're referring to above, is income tax.

A seller is a seller, is a seller.

If you're manufacturing anything for sale, you're liable to have to pay ''income tax'' on any ''profit made"

It's not that difficult...especially as a small builder. You're only paying tax on your ''profit''.

And...after you deduct, shipping costs, vehicle costs, shop/tools/equipment/material costs...you're actually paying tax on very little.

One ledger book is all you need, your spouse, who becomes your employee, and a tax deduction, maintains track of costs/profit/receipts/sales slips...etc.

What you're addressing is nothing new. Be careful who you sell to, stay away from Ebay/Reverb etc. They are not your friends, and they have their own tax liabilities as well.

Fair...does not enter into anything...but it's business! And, your profit margin should be high enough to make your efforts worth while...if not, you're wasting time and ''cost capital''. Take your wife on a nice vacation instead.

BIB
 

Back in Black

Country Gent
Jun 22, 2020
1,397
Ontario Canada
This is above and beyond the GST. It seems that what the US is doing is recording all your sales in a year as income. In Canadian terms, it would be a separate T4 at year's end, with the income subject to CPP, EI, federal and provincial taxes...
This seems messed up..I spent taxable income when I initially purchase the gear. Applying income tax if I sell the gear years later seems like double dipping.

Not really, read my response to englishman.

You are a manufacturer of instruments...you have costs...and you have profit.

You are always responsible as a business person, to declare profit.

Hence...income tax.

BIB.
 

pmac11

Country Gent
Mar 4, 2018
3,658
Toronto, Ontario
Not really, read my response to englishman.

You are a manufacturer of instruments...you have costs...and you have profit.

You are always responsible as a business person, to declare profit.

Hence...income tax.

BIB.
Agreed re business sales... but this seems to be ANY sale you make on line, including casual gear sales.
 

GlenP

Country Gent
Jul 23, 2019
2,364
WA
I think folks are getting confused by the thread title, “Big tax changes,” but the tax rule itself has not changed, what is changing is the threshold for reporting proceeds is being lowered, which will require more documentation and substantiation to declare what portion of the reported proceeds are actually taxable. The amount of tax owed is not being changed, rather they are collecting more information from online sales portals to make it more difficult to cheat or avoid paying currently established taxes under the existing and current tax codes for those who may produce smaller amounts of taxable income. While many larger and highly profitable corporations operate with substantial subsidies and pay effectively zero or even a negative tax, and who pay their employees below the threshold income for additional government assistance to be able to eat, so sure, go after the garage sales to boost the tax revenue.
 

Henry

I Bleed Orange
Apr 9, 2014
18,709
Petaluma
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.
That article from cnbc is a mess that I think just confuses people but the law has actually already passed and will come into effect next year.
 

swivel

Country Gent
May 13, 2018
2,214
PNW
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."
Thus the reason accountants say you have to show a profit every 3-4 years to deduct your expenses and call it a business to avoid paying taxes on resale.
The whole thing is insane. They are trying to get money off private sales of used items between individuals that have been previously taxed.
Ebay asked for my SS number so I dont sell there anymore.

What this means is you need to be much more careful about purchasing things now, you can't just resell immediately if it's not a keeper! Think about that... I'd say I turn around and sell probably 90% of larger musical items I buy.... in the past. Not now.
 

wabash slim

I Bleed Orange
Feb 10, 2010
17,612
lafayette in
We have sales tax in most states. It's the same thing as VAT. Except in Europe VAT is around 20% while sakes tax is under 10%.
Indiana is 7% unless you're near Indy. The 9 counties that make up the greater Indy area have another 5% sales tax just to cover Jim Irsay's NFL stadium that I can't afford to go to.
 

Chet Harrison

Gretschie
Apr 27, 2020
232
USA
The only people who will get boned by this new automatic reporting threshold are the people who weren’t paying their taxes to begin with, you know, cheaters. You guys need to relax.
 
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englishman

Gretschified
Apr 5, 2014
13,033
Detroit
The only people who will get boned by this new automatic reporting threshold are the people who weren’t paying their taxes to begin with, you know, cheaters. You guys need to relax.
Maybe so, but this will affect us all because there is a huge market out there taking advantage of the current rules. That market will disappear or go even more underground and we'll have packets of cash in mail. This will make a lot of parts much harder to find at a decent price.
 

juks

Country Gent
Nov 26, 2020
2,528
Fremont, California
BTW, does this mean if I trade in old gear at GC, if value is over the threshold it becomes income?

Or if I buy a new car, my trade in value is taxable income?
 

juks

Country Gent
Nov 26, 2020
2,528
Fremont, California
Copied from Henry's post above:

"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."

That's confusing. Expenses to me would be things like Reverb fees, packing materials, shipping costs if you offer free shipping. But if you sell an item at lesser value than what you paid for it, is there income? That's a loss, not income. I think I need to see what is a definition of income and expense.
 

Henry

I Bleed Orange
Apr 9, 2014
18,709
Petaluma
Copied from Henry's post above:

"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."

That's confusing. Expenses to me would be things like Reverb fees, packing materials, shipping costs if you offer free shipping. But if you sell an item at lesser value than what you paid for it, is there income? That's a loss, not income. I think I need to see what is a definition of income and expense.
I think you are talking about net income (net loss) which is generally income minus expense. You can have income and still have a net loss, just as you can have an expense and still have net income.
 

speedicut

Friend of Fred
Jun 5, 2012
6,117
Alabama
I think, if passed, it will start Dec 31 2022.

Expect much higher bank fees and higher instances of audit if it passes... the customer will have to pay for the cost of the extra reporting ( from the current amount of $10,000 to $600 is going to be pricey!) and the IRS will increase the rate of audits when they get this info because this is an effort to increase tax revenues.
And, as always, when you get audited, the burden of proof that the aggregate is not income will be on you.
 

speedicut

Friend of Fred
Jun 5, 2012
6,117
Alabama
Copied from Henry's post above:

"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."

That's confusing. Expenses to me would be things like Reverb fees, packing materials, shipping costs if you offer free shipping. But if you sell an item at lesser value than what you paid for it, is there income? That's a loss, not income. I think I need to see what is a definition of income and expense.
I think the only solution would be to treat all buying and selling as a business.
Get quikbooks and start a new company. You can use your SSN if you don't have anorher tax ID number.
Buy something, get a receipt and it's Cost Of Goods Sold. When it sells, it's Income. All fees whether PayPal, reverb, ect are Dues And Subscriptions. Shipping and bank fees are other expenses. I did this with my internet marketing business and it was simple... BUT... I have an expensive accou tant for my brick and mortar business (bottled water distributorship) and he did my online business too.

I bet this new law makes doing your own taxes much more difficult!
 


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