|Thu Aug 7 2008 13:10:00|
PayPal to Report eBay and Merchant Payments to IRS
By: Ina Steiner
eBay sellers and online merchants are facing increasing regulation as ecommerce moves out of the infancy and adolescence stages and into adulthood. The latest legislation to impact merchants is the Housing and Economic Recovery Act of 2008 recently passed by Congress and signed into law on July 30. PayPal told merchants it would begin reporting payment activity to the IRS.
PayPal said early versions of the legislation would have required it (and all payment providers) to report total payment volume of customers who received as little as $600 per year. PayPal said the new law requires it to report to the IRS the total payment volume received by PayPal customers in the U.S. who receive more than $20,000 in payment volume in a single year and receive more than 200 payments in a single year. The new reporting requirement takes effect in 2011.
According to Kathleen Pender of the San Francisco Chronicle, banks and payment processors must also disclose the dollar amount of payments merchants receive on debit- and credit-card cards. The reporting forms would be similar to the 1099 forms companies use to report other payments to the IRS.
It's interesting to note that more legislation affecting online sellers is under consideration. The National Retail Federation reported two bills recently introduced into the House of Representatives that would place more liability on eBay in cases of suspected "e-fencing." One bill would make e-fencing a federal crime, calling it "organized retail crime."
While legislation seems to target larger sellers, small and casual sellers may become casualties as eBay and other ecommerce-related companies impose policies to help meet such requirements.
Also on the agenda of state legislators, of course, is sales tax collection, which Amazon and Overstock.com are already battling in New York state with regard to their affiliate programs. Expect things to get more complicated for ecommerce providers and online merchants in the coming years.
Update: Someone had asked whether PayPal would be required to report sellers who receive more than $20,000 in payment volume in a single year AND receive more than 200 payments in a single year, or whether it was "OR." PayPal got back to me to say it is 200 transactions AND more than 20k per year.