Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Sat May 7 2016 14:39:23

Sellers Should Think Twice Before Cheating the Feds

By: Ina Steiner

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In March, we wrote about a couple from North Carolina accused of shoplifting from Christian hobby stores and selling the stolen goods online. Their cardinal sin, however, was failing to report the income to the IRS, according to authorities - over $1 million in sales on eBay and Amazon between 2005 through 2011.

This week, we wrote about an eBay seller who was charged with defrauding the USPSfor allegedly counterfeiting postage labels totaling over $400,000 since 2008.

The lesson: just because you don't get caught right away doesn't mean authorities won't catch up with you - and what may seem like smallish sums can add up over the years to make it worth a criminal charge.

Selling online can feel the equivalent of holding a garage sale, the income from which people generally don't report on their income taxes - and we've received questions from readers about their obligations.

Kenneth Corbin revisited the issue of taxes in Sunday's EcommerceBytes Update newsletter. The IRS wouldn't go on the record for his story, but pointed him to online resources that should answer some of your questions. You can find Kenneth's article on EcommerceBytes now.

Let us know if you have questions - and whether you think the government should do more to go after online selling cheaters.




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Readers Comments

Perminate Link for Sellers Should Think Twice Before Cheating the Feds   Sellers Should Think Twice Before Cheating the Feds

by: FeelingFroggy This user has validated their user name.

Sat May 7 17:24:31 2016

To bad the postal inspectors don't go after the chinese sellers listing fake priority mail stamps.

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by: FeelingFroggy This user has validated their user name.

Sat May 7 17:26:21 2016

We have reported these sellers to the postal inspectors more than once. Ah yes how do we know they are fakes. Well we bought some and took them to the post office where we were informed that if we tries to use them we could go to jail.

Then we filed a claim with paypal telling them what we were told by the post office. These sellers can't refund the money fast enough.

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by: gizmo This user has validated their user name.

Sun May 8 00:32:01 2016

Can you imagine the ones who do get away with it? Ones who fly by fake names , addresses , & have several accounts. Oh yah , you might be buying good deals , until a # turns up stolen. But hey , keep looking for the great deals.

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This user has validated their user name. by: toolguy

Sun May 8 10:55:57 2016

From day one back in June of 2000, we have reported all eBay income over the years.

Anyone doing different will be in for a big surprise someday.

Be honest and you never have to look over your shoulder. . .

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This user has validated their user name. by: BuildingMyOwnSite

Sun May 8 21:28:39 2016

Since 1998, reported it all.

Why NOT?

My problem isn't with a measly 15% income tax.  It's with what Ebay has done to me, along with NOT paying their share.

Somebody HAS to pay for all these Freeways, that people use for 10 Mph streets, to get to work, from the 3rd Ring Suburbs.

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This user has validated their user name. by: Rexford

Mon May 9 08:13:44 2016

We pay our taxes and we always have.  

The question is, does Amazon, Google, Apple and other very larger corporations pay their are share? I think we all know the answer to this question.

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This user has validated their user name. by: MainelyVintage

Mon May 9 10:26:26 2016

We were definitely hobbyists early on. However, we started paying once we started to buy for resale.

At first, we were just reporting our income, without expenses. Duh. Now I use a bookkeeping program and do the math.

If the government wanted to see the information about our online sales, it is permanently available to them, right? May as well just pay up : )

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by: Moonwishes This user has validated their user name.
Web Site

Tue May 10 01:46:46 2016

We too from day one have reported our earnings and expenses. The last thing I want in my life is trouble with the tax guys. Although the state sales tax folks from all states but PA can jump off the dock as far as I'm concerned. I sell a product that for the most part in my home state doesn't accrue sales tax, but even cashiers at stores in PA have trouble keeping track of which are taxable and which aren't. So how in the world will I be able to know FOR SURE what would need state sales tax collected in other states? I can't even conceive of a tax collection software that can figure out all those 400+ local taxing bodies!

Anyhow as I have been dutifully paying my taxes over the last 14 years that I have been selling, I've always been surprised at the folks that since the IRS can't 'see' them they think they don't owe income taxes on the money they earn. And these are/were people long past the 'yard sale' aspect of their business. Once you start buying stuff to resale, that is usually a good clue that you are running a business. I personally love the fact that we can deduct so many household expenses because of running not one but two businesses here at our home.

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This user has validated their user name. by: Marie

Tue May 10 02:24:19 2016

I agree with Rexford.  

Instead of worrying about the small fish, they should be going after some of those big fish that are getting away with paying millions if not billions of dollars in taxes.  

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This user has validated their user name. by: VV

Tue May 10 08:00:22 2016

Feds yes.  States I ship to that I don't live in? Hell no.

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by: toyman This user has validated their user name.

Tue May 10 10:43:45 2016

We've been doing it honestly for 18 years. No need to anger the powers that be.

If you get a 1099 from PayPal, make sure you or your accountant lists it on your income. The IRS Definitely knows about them. If your income comes up short of that figure, you will hear about it.

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This user has validated their user name. by: BuildingMyOwnSite

Tue May 10 22:50:05 2016

I have personally been through 2 sales tax audits.  BOTH TIMES, they gave ME money back.

Both times, spent a COUPLE DAYS in my house.

I asked the last guy why they bothered with a small fish like me.  He said they had to do it, just to keep everyone honest.

Then he told me they made more money auditing WalMart, & how they were ripping off the state on stuff like chewing gum...........

He said, that's where the real money is, with corporations that know better, but do it anyway.

After leaving my home, he was on his way to the local Wal Mart, where I am proud to say, I have never set foot in.

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This user has validated their user name. by: Rural artist

Wed May 11 08:44:28 2016

I thought this was a great article and the additional article between yard sale and resale. The article made it crystal clear. I bought a product from a small seller and it did not go well. When I got the item in a very large box the label was very tiny. After reading it she printed a Flat Rate Medium label.  It also never was scanned in leaving a host of bad practices by the PO. It meant they never asked about contents.  Darn thing was broke and there was deceptive non advertising. I told the woman I wanted the product I would have paid real shipping cost--no need to cheat!  I left PO feedback online, and yes, it may not be today but you as a Postal worker and Seller are easy to track-down.  

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This user has validated their user name. by: Shop and Ship

Thu May 12 00:10:32 2016

Obsessive-compulsive behavior disorder? Yet I am impressed that the perp was persistent enough - and the store clerks blind enough - to allow $400,000 worth of merchandise to go out the door unaccounted for. Sounds like it's time to get those security cameras upgraded!  



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