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In Trouble for Failing to Report eBay and Amazon Income

If you sell online and don’t declare your earnings to government tax agencies, you could find yourself in hot water, as one married couple from North Carolina discovered. A federal grand jury indicted the pair for tax fraud, including conspiracy to defraud the United States and filing false tax returns.

The couple was arrested and charged last week. According to the indictment, the husband owned and operated Southern Sales Online (SSO), an online retail business that sold a variety of merchandise through eBay and Amazon, including scrapbooking and art materials, books, inspirational DVDs, pet supplies and tools.

The government alleges that the couple failed to report gross receipts for SSO on their tax returns filed with the Internal Revenue Service (IRS) – an amount the government estimated totaled over $1 million from the period of 2005 through 2011.

The indictment also alleges that the couple stole merchandise from LifeWay Christian Stores and Hobby Lobby and then knowingly sold the stolen merchandise through SSO at prices less than retail value, and were charged accordingly.

TaxGirl columnist Kelly Phillips Erb covered about the case in Forbes, describing the allegations and writing, “That’s right. The Balsons went to Christian oriented stores, stole Christian oriented merchandise and then sold it online without reporting the sales to the IRS. That would literally be a multitude of sins.”

All but one of the 27,744 eBay feedback received from SSO’s buyers were from more than a year ago, and some of the 4 negs, 36 neutral, and 5 withdrawn feedback comments that were left on the account include mentions of slow shipping or poor communication.

The government outlined the jail time the pair could face for the various charges, including “three years in prison for each false tax return count” – as well as monetary penalties and restitution. It also included a reminder in its announcement that an indictment is not a finding of guilt.

The story may give some people who sell online pause for thought as the April 15th tax filing deadline draws near.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.