Now, when you sell a used guitar...

JLD4133

Country Gent
May 10, 2011
1,516
Mequon, WI
I sense something of a "sky is falling" reaction to the >$600 rule. The only real change here is that Reverb and Ebay and similar clearinghouses are now going to issue 1099's. If you are only an occasional seller, ie, a small number of transaction like one or two a year, the odds of an audit are extremely low. You simply have to report what you paid and what you received (netted of costs of sale) to figure if you made a gain on the sale(s). If you made $200 as in the example discussed in previous posts, an income tax would be negligible. And the reporting form is not that formidable at all. If you are buying and selling routinely, however, you would be seen as engaging in a business. In this case, the reporting form may be more detailed, such as a Schedule C, and the net income would be considered "ordinary income" rather than capital gain. It all seems a bit complicated, but it really is not such a huge deal as it might seem.
 

MadKaw

Gretschie
Apr 17, 2020
272
Michigan, USA
One nice thing about buying online is the readily accessible order history. Once a year I print out my orders for the year and put it in the file for my taxes. If nothing else it helps me track the sales tax paid.

BTW: There's a $250K exemption on capital gains from sale of property.
 

speedicut

Friend of Fred
Gold Supporting Member
Jun 5, 2012
6,381
Alabama
While I certainly understand the concerns this raises, I will echo Thunder 58‘s comments that we want to be careful not to allow this discussion to become political. Political concerns are real, but we can’t solve them here. More to the point, the members here represent a number of viewpoints, and political disagreements can bleed over into other areas, disrupting the harmony of the forum, overall.
I thought carefully before posting... It wasn't political, it was more bureaucratic.. Like complaining about the DMV.
I hope it wasn't mistaken as political.. If so, please delete.
 

Synchro

The artist formerly known as: Synchro
Staff member
Jun 2, 2008
26,707
Tucson
I thought carefully before posting... It wasn't political, it was more bureaucratic.. Like complaining about the DMV.
I hope it wasn't mistaken as political.. If so, please delete.
I was not singling out any specific comment. I want this discussion to continue, but just reminding everyone that we need to keep politics out of it. Sadly, as soon as politics enter into a thread, things tend to go off the rails. I wish it weren’t that way, but unfortunately, they are.
 

wabash slim

I Bleed Orange
Feb 10, 2010
18,836
lafayette in
There's the idea of "$1 and other considerations" that's used in real estate. Use the Dark Web?
Go back to the barter system? Tax was paid when the instrument was bought initially. Uncle Sam wants tax paid on every subsequent transaction. Mo money, mo money. Tax on top of tax---it's a never-ending circle. I wouldn't mind paying taxes if they didn't waste it.
 

juks

Country Gent
Gold Supporting Member
Nov 26, 2020
3,267
Fremont, California
They are ... 88,000+ new agents "to audit the rich, bwahahaha".... and something something in the news about new hires being willing to carry and use something something for enforcement.

The big problem for guitar hobbyists is all those guitars in the collection they bought years ago and have no receipts or the blue ink on the receipts faded away. Most citizens get rid of old financial documents and receipts after the IRS's published seven year retention limit. So used guitar sales are going to be a landmine of financial risk. Soon there will be digital currency (CBDC) and the challenge of accounting for original value will be even more difficult for tax payers.

No one will be able to get value out of their old guitar equipment to fund purchasing that brand new GAS-inducing factory guitar they have been lusting after. Old guitar gear will end up in landfills because it's easier to just dispose of it than try to sell it or even pawn it for groceries. And no new guitars will be bought.

Players will be back to owning just a single guitar, not a fleet.

Guitar factory and retail sales will plummet and Guitar Brands will vanish.

.

The $600 limit and 80K new agents are thanks to two different administrations. Hence not linked.

Selling through Craigslist gets you around it. Also it appears that Guitar Center does not record what you sell to them in the store. And of course pawn shops not either.
 

Back in Black

Country Gent
Double Platinum Member
Jun 22, 2020
1,738
Ontario Canada
There's the idea of "$1 and other considerations" that's used in real estate. Use the Dark Web?
Go back to the barter system? Tax was paid when the instrument was bought initially. Uncle Sam wants tax paid on every subsequent transaction. Mo money, mo money. Tax on top of tax---it's a never-ending circle. I wouldn't mind paying taxes if they didn't waste it.

Slim,

Being north of the north border my comments may to some seem irrelevant, but, buying is buying, selling is selling, and tax is tax.

This is not the first time our group has tackled this issue.

If I buy a guitar from a ''seller'' in Texas, retail or otherwise, before the guitar crosses the border into Canada, I'm advised by the shipping carrier (FEDEX) that funds are owing, which will include 13% Ontario Sales Tax.

I conduct an on-line payment transaction with the shipping carrier (FEDEX), my package is released from customs (on the Canadian side of the border) and within a couple days, my package is at the door with no further funds owing.

What a lot of you from south of the border may not stop to consider, It is very expensive for me, to bring a $3500. USD guitar across the border, and into my music room.

With Exchange/Brokerage/packing and shipping/13% Provincial Sales Tax, that $3500. guitar has cost me more than $5000.

As well as the above, PAYPAL may also charge me a transaction fee.

eBay has what they call ''The Global Shipping Plan'' , which routes, just about every package through their Kentucky Facility. I pay all the same ''up front'' fees as I do with FEDEX/UPS, and when my package arrives, no other fees are owing.

When I tell my wife, and believe me, I have the most supportive wife in the world, that I'm buying a new $3500. guitar, which is coming up from Texas, what I am really telling her, is that I'm buying a $5000. guitar, which is coming up from Texas!

Ya wanna play, ya gotta pay!!

As far as selling possessions, I don't, and the very odd time that I have, it's been to someone I know, my item for your cash. Selling on sites like Reverb, you are telling the whole world that you are a ''seller''.

Incoming money, is incoming money...that's why it's called ''income'' and you have to be very careful, because the more money that's incoming, the more you appear to be running a business, and that's when the red flags start popping up.

And as Forrest Gump would say...''That's all I have to say about that!!

Best,

BIB.

Mrs Gump.jpg
 
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Henry

I Bleed Orange
Apr 9, 2014
19,224
Petaluma
I don't think this applies to a trade when no $'s are involved.
Are there market places that facilitate trade? Most of those will be on person or at a store.

Arguably a trade means the 2 items are of equal value so there would not be any net income.

This post is not tax or legal advice. Consult your tax professional.
 

Synchro

The artist formerly known as: Synchro
Staff member
Jun 2, 2008
26,707
Tucson
Slim,

Being north of the north border my comments may to some seem irrelevant, but, buying is buying, selling is selling, and tax is tax.

This is not the first time our group has tackled this issue.

If I buy a guitar from a ''seller'' in Texas, retail or otherwise, before the guitar crosses the border into Canada, I'm advised by the shipping carrier (FEDEX) that funds are owing, which will include 13% Ontario Sales Tax.

I conduct an on-line payment transaction with the shipping carrier (FEDEX), my package is released from customs (on the Canadian side of the border) and within a couple days, my package is at the door with no further funds owing.

What a lot of you from south of the border may not stop to consider, It is very expensive for me, to bring a $3500. USD guitar across the border, and into my music room.

With Exchange/Brokerage/packing and shipping/13% Provincial Sales Tax, that $3500. guitar has cost me more than $5000.

As well as the above, PAYPAL may also charge me a transaction fee.

eBay has what they call ''The Global Shipping Plan'' , which routes, just about every package through their Kentucky Facility. I pay all the same ''up front'' fees as I do with FEDEX/UPS, and when my package arrives, no other fees are owing.

When I tell my wife, and believe me, I have the most supportive wife in the world, that I'm buying a new $3500. guitar, which is coming up from Texas, what I am really telling her, is that I'm buying a $5000. guitar, which is coming up from Texas!

Ya wanna play, ya gotta pay!!

As far as selling possessions, I don't, and the very odd time that I have, it's been to someone I know, my item for your cash. Selling on sites like Reverb, you are telling the whole world that you are a ''seller''.

Incoming money, is incoming money...that's why it's called ''income'' and you have to be very careful, because the more money that's incoming, the more you appear to be running a business, and that's when the red flags start popping up.

And as Forrest Gump would say...''That's all I have to say about that!!

Best,

BIB.

View attachment 191100
But it’s not income, if I sell something for what I paid for it. It’s not income in any sense of the word. If I buy a guitar for $2,000, just my income tax alone means that I would have to gross around $3,000.

My single greatest expense is federal income tax. I don’t object to paying federal income tax, and I’m glad to pay my fair share. However, if I convert post tax income into goods, and then sell those goods, that is not income. If I sell for a profit, that could be considered a capital gain, and I would be taxed on that profit, but that income was already taxed, and those taxes were willingly paid.

Import duty is another matter, and has nothing to do with income tax, or capital gains. Likewise for sales tax. These are levied on the receiving end. I recently was involved in shipping some equipment to an overseas branch office and, with regard to these matters, my only role was to provide accurate descriptions and to state the fair market value of the equipment. The question of import duties and taxes are matters the happen on the receiving end of the transaction. I have copies of the declaration form, in case there is a question regarding these items, but I used figures that were accurate, to the best of my knowledge, and I doubt that these will be questioned.

Never have I felt that taxes should be evaded, but neither should they be levied twice.
 

juks

Country Gent
Gold Supporting Member
Nov 26, 2020
3,267
Fremont, California
But it’s not income, if I sell something for what I paid for it. It’s not income in any sense of the word. If I buy a guitar for $2,000, just my income tax alone means that I would have to gross around $3,000.

My single greatest expense is federal income tax. I don’t object to paying federal income tax, and I’m glad to pay my fair share. However, if I convert post tax income into goods, and then sell those goods, that is not income. If I sell for a profit, that could be considered a capital gain, and I would be taxed on that profit, but that income was already taxed, and those taxes were willingly paid.

Import duty is another matter, and has nothing to do with income tax, or capital gains. Likewise for sales tax. These are levied on the receiving end. I recently was involved in shipping some equipment to an overseas branch office and, with regard to these matters, my only role was to provide accurate descriptions and to state the fair market value of the equipment. The question of import duties and taxes are matters the happen on the receiving end of the transaction. I have copies of the declaration form, in case there is a question regarding these items, but I used figures that were accurate, to the best of my knowledge, and I doubt that these will be questioned.

Never have I felt that taxes should be evaded, but neither should they be levied twice.

There are lot of people who have sold goods on various marketplaces for living and never paid any taxes on what is income from a 'professional' business. I.e. do not pay their fair share. Just search 'Amazon mystery pallets' on YouTube for examples. Those are Amazon customer returns you can buy by pallet and sell for profit on Ebay etc.

So I fully understand the intent of getting those people to pay their fair share of income taxes. However, the solution they came up with is ridiculous IMO. There should be a better way the make a distinction between what you describe above and 'professional' selling.

I don't understand what was wrong with the 200 transactions / $20K threshold for IRS reporting? After all $20K revenue probably gave most of them less than $5K profit. Should be plenty restrictive enough.
 

nightbird

Gretschie
May 4, 2013
106
Aurora
So, what's to prevent someone from selling a guitar for $2,000 that they paid $1,000 for and have a friend write up a reciept stating 5 years ago you purchased the guitar for $2,100?
 

Bkat

Electromatic
Dec 8, 2013
70
Illinois
So, what's to prevent someone from selling a guitar for $2,000 that they paid $1,000 for and have a friend write up a reciept stating 5 years ago you purchased the guitar for $2,100?
That's tax fraud and probably not worth the risk for either party. Your scenario would mean presenting the IRS with a forged document simply because you don't want to pay tax on $1,000 income.

They are only taxing profits, not double dipping on sales tax or anything like that.
 

DavyH

Electromatic
Aug 11, 2022
72
Aurora, Colorado
Musicians live rather informal lives and eschew paperwork when possible. As information technology has advanced over the last 40 years, it's become less and less possible to eschew the paperwork, and people do get caught short. Right around the time that bars began to have to 1099 their six-night-a-week-bands, I became aware there was a sixteen-inch shell in the air with my name engraved upon it in the most exquisite filigree. Through the good offices of a wonderful H&R Block woman, I managed to be elsewhere when it impacted. In all of that I learned that (at the time) I could deduct the whole cost of a new-to-me instrument as a one-time expense, along with all the other deductible stuff, and got into the habit of keeping detailed records of everything. Still do.

It does seem fair that IF you deducted that White Falcon all those years ago, you should have to pay the piper when you sell it.

Entirely irrelevant,of course, is the abysmal quality of the piper's playing as well as you NOT getting to call the tune!:rolleyes:
 

Synchro

The artist formerly known as: Synchro
Staff member
Jun 2, 2008
26,707
Tucson
There are lot of people who have sold goods on various marketplaces for living and never paid any taxes on what is income from a 'professional' business. I.e. do not pay their fair share. Just search 'Amazon mystery pallets' on YouTube for examples. Those are Amazon customer returns you can buy by pallet and sell for profit on Ebay etc.

So I fully understand the intent of getting those people to pay their fair share of income taxes. However, the solution they came up with is ridiculous IMO. There should be a better way the make a distinction between what you describe above and 'professional' selling.

I don't understand what was wrong with the 200 transactions / $20K threshold for IRS reporting? After all $20K revenue probably gave most of them less than $5K profit. Should be plenty restrictive enough.
My own feeling is similar. The threshold value is set low enough that personal transactions are likely to be treated as if they were commercial transactions.

Music is not a business to me. I don’t want music to be a business. Music is a serious interest in my life, but I make my living in another field. If you were to chart out my musical purchases, there would be a net loss. I couldn‘t even come close to recovering my investments in guitars, amps etc. That‘s fine, because I do not expect my instruments to perform as an investment. If my transactions are going to come under scrutiny, starting at the $600 per year level, then should I be able to deduct the losses I have taken when I traded guitars in? It spirals, quickly, into something that could be unwieldy.
 

Lou Coppolino

Country Gent
Jul 23, 2022
1,459
Howell, NJ
Are there market places that facilitate trade? Most of those will be on person or at a store.

Arguably a trade means the 2 items are of equal value so there would not be any net income.

This post is not tax or legal advice. Consult your tax professional.

I hope to do a trade at the Fall Philly Guitar Show on Nov. 5, 2022.
 

Lou Coppolino

Country Gent
Jul 23, 2022
1,459
Howell, NJ
They are ... 88,000+ new agents "to audit the rich, bwahahaha".... and something something in the news about new hires being willing to carry and use something something for enforcement.

The big problem for guitar hobbyists is all those guitars in the collection they bought years ago and have no receipts or the blue ink on the receipts faded away. Most citizens get rid of old financial documents

No one will be ut of their old guitar equipment to fund purchasing that brand new GAS-inducing factory guitar they have been lusting after. Old guitar gear will end up in landfills because it's easier to just dispose of it than try to sell it or even pawn it for groceries. And no new guitars will be bought.



.

They are ... 88,000+ new agents "

No one will be able to get value out of their old guitar equipment to fund purchasing that brand new GAS-inducing factory guitar they have been lusting after. Old guitar gear will end up in landfills because it's easier to just dispose of it than try to sell it or even pawn it for groceries. And no new guitars will

.

They are ... 88,000+ new agents "to audit the rich, bwahahaha".... and something something in the news about new hires being willing to carry and use something something for enforcement.

The big problem for guitar hobbyists is all those guitars in the collection they bought years ago and have no receipts or the blue ink on the receipts faded away. Most citizens get rid of old financial documents and receipts after the IRS's published seven year retention limit. So used guitar sales are going to be a landmine of financial risk. Soon there will be digital currency (CBDC) and the challenge of accounting for original value will be even more difficult for tax payers.

No one will be able to get value out of their old guitar equipment to fund purchasing that brand new GAS-inducing factory guitar they have been lusting after. Old guitar gear will end up in landfills because it's easier to just dispose of it than try to sell it or even pawn it for groceries. And no new guitars will be bought.

Players will be back to owning just a single guitar, not a fleet.

Guitar factory and retail sales will plummet and Guitar Brands will vanish.

.


You may get a better trade at a guitar show.

At the last Summer Philly Show, I did an even up trade of my '07 Rickenbacker 370 for a new Gretsch 2 tone limited edition Gretsch Falcon.

No cash involved.

Some deal are out there.
 

juks

Country Gent
Gold Supporting Member
Nov 26, 2020
3,267
Fremont, California
My own feeling is similar. The threshold value is set low enough that personal transactions are likely to be treated as if they were commercial transactions.

Music is not a business to me. I don’t want music to be a business. Music is a serious interest in my life, but I make my living in another field. If you were to chart out my musical purchases, there would be a net loss. I couldn‘t even come close to recovering my investments in guitars, amps etc. That‘s fine, because I do not expect my instruments to perform as an investment. If my transactions are going to come under scrutiny, starting at the $600 per year level, then should I be able to deduct the losses I have taken when I traded guitars in? It spirals, quickly, into something that could be unwieldy.

If you have to pay tax on profit then you should be able to deduct losses.

However, I bought a Ric 4001 in Sweden in 1980s. Guess if I have the receipt? 😄

The other thing that used to happen was that if you made a loss couple years in a row, IRS considered it as a hobby and refused loss deductions. I don't know if the new rules have made a change to that. They should IMO.
 

Back in Black

Country Gent
Double Platinum Member
Jun 22, 2020
1,738
Ontario Canada
But it’s not income, if I sell something for what I paid for it. It’s not income in any sense of the word. If I buy a guitar for $2,000, just my income tax alone means that I would have to gross around $3,000.

My single greatest expense is federal income tax. I don’t object to paying federal income tax, and I’m glad to pay my fair share. However, if I convert post tax income into goods, and then sell those goods, that is not income. If I sell for a profit, that could be considered a capital gain, and I would be taxed on that profit, but that income was already taxed, and those taxes were willingly paid.

Import duty is another matter, and has nothing to do with income tax, or capital gains. Likewise for sales tax. These are levied on the receiving end. I recently was involved in shipping some equipment to an overseas branch office and, with regard to these matters, my only role was to provide accurate descriptions and to state the fair market value of the equipment. The question of import duties and taxes are matters the happen on the receiving end of the transaction. I have copies of the declaration form, in case there is a question regarding these items, but I used figures that were accurate, to the best of my knowledge, and I doubt that these will be questioned.

Never have I felt that taxes should be evaded, but neither should they be levied twice.
Hi Synchro,

Any profit, could be perceived as ''income''.

Anyone who buys and resells at a loss, or for ''cost'', is either temporarily or permanently in an unfortunate set of personal circumstances, or just careless and foolhardy.

As an example, selling on Reverb for a profit is ''income'', selling large quantities on Reverb, lets say a valuable vintage guitar collection for $150,000, which is not unheard of, is capital gain, and taxable.

Here in Canada, selling a second residence is ''capital gains''. Selling expensive collector vehicles is ''capital gains''.

You can be sure the IRS is standing in the wings at Barrett Jackson, when a car rolls across the block for seven figures.

Gambling winnings in Vegas/Atlantic City are taxable. Out of country winners can apply to get the taxes back, but, the the IRS is going to take the taxes first.

I'd have a pretty difficult time, in 2022, convincing Revenue Canada, that the sale of a $500,000. guitar collection, and a million dollar vintage Ferrari, is not taxable income, especially if in 1975 I bought the Ferrari for $35,000., and my ''cost'' for the guitar collection was $75,000.

As opposed to reselling my guitar collection and my vintage Ferrari at cost I'd happily pay the tax. That's still $1,000,000. in the bank, taxes paid, as opposed to $110,000. in the bank, and not having been required to pay any taxes.

As far as sales tax being levied on the receiving end, the receiver is the end, and if this tax is evaded, by whatever means, the receiver (me/you), can be held liable, and made to pay! Which by the way, is the primary reason ''smuggling'' is highly frowned upon. Evasion is evasion.

Just like getting paid under the table sounds like a good idea...GOOD...right up until you get that knock on the door.

Best,

BIB.
 


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