Taxes and The eBay Seller

The Online Seller's News, June 6, 2011, Volume 11, No. 11

Tips, Tools, News and Resources for eBay, Amazon and independent Online Sellers ~ Published Twice Monthly since 1999
by: Skip McGrath

In This Issue:

Musings from eBay and beyond

1. Taxes and The eBay Seller
2. Niche of The Month – Selling Old Postcards on eBay
3. New Way To Sell on Facebook
4. Is Management Trying To Kill The “eBay Community?”
5. Building Your Feedback on Amazon
6. New Wholesale Sources for eBay & Amazon Sellers

"A politician thinks about the next election. A leader thinks about the next generation." ~ Seen on a bumper sticker

Musings from eBay and beyond

The first thing I need to address this month is an apology. In the last issue, my article about the PayPal 1099 misstated the threshold that PayPal uses to send out a 1099. The correct amount is $20,000 per year in payments received and 200 transactions. You must have both the amount ($20,000) and 200 transactions to qualify to receive a 1099. I am sorry for any confusion I caused. The error was completely mine. I was writing from memory instead of checking my facts.

I introduced my Gold Book last month and gave my readers a $10 off special for the month of May. I have extended this a few days as a lot of people take off the whole Memorial Day week. This will now end on June 8^th –just 2 more days and then the price goes up. Here is the link to read about: How To Make Money Buying and Selling Gold. (By the way my system really works. I bought gold from two people last week and yesterday I received a check from my refiner for over $2300. That is an $1100 profit for about one-hour total work).

I am often asked what I am Selling on eBay and Amazon – You can see my eBay items in the scrolling gallery at the bottom of this page. (The gallery is one of the services provided by Vendio.)

If you want to see what I am selling on Amazon, here is a link to My Amazon Storefront.

I am often asked: “What is the best digital camera for eBay sellers?” My absolute favorite for the price versus the features is the Panasonic Lumix DMC-FZ40 14.1 MP camera. This is the 14.1 MP Model, but you can also get the 12 MP Model for about $100 less.

I have a page on my website at EZ Auction Tools that reviews other digital cameras that are good for eBay in both budget models and higher priced models. I also have a page that lists my top ten digital photography books.

Amazon raised some fees for FBA Sellers. The pick and pack media fee for standard sized books and media items under $25 was raised from $0.50 to $0.60. That is not huge, but if you are a high volume seller it can really add up. Amazon raised a few other fees as well but most of them applied to oversized items such as plasma TVs. They also announced an increase in storage fees for items left in the warehouse for over 1 year.

I was interviewed by Mark Pearlman for his Nationwide Radio Show - Your Money Matters. Mark interviewed my about how we got our start on eBay and tips for today'seBay sellers.

Here is a link to the interview.

Lets get started with this month’s articles:

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1. Taxes and The eBay Seller

Last month’s article about PayPal sending 1099s to sellers caused a lot of questions. One of the most asked was, “If I don’t get a 1099 does that mean I don’t have to pay taxes.” To answer that here is a guest article by: Kristine A. McKinley, CPA, Certified Financial Planner®, and founder of Beacon Financial Advisors.

Are You Required to Report your eBay Earnings?

Many people ask me if they are required to report the profits they earn on items they sell on eBay. The answer is "yes".

If you sell items on eBay for a profit, then you should report your eBay sales, and you may owe income taxes on any profits. It doesn't matter if it's just a hobby or if you are trying to build a business.

Generally, any income you receive from all sources is subject to income tax unless it is specifically exempt by law (hint: eBay profits are not exempt by law). That means that a lot of activities that you might not think of as taxable, such as garage sale income, gambling winnings, and yes – eBay profits – are taxable.

You must file a tax return if your net earnings from self-employment are $600 or more. You are self-employed if you carry on a trade or business for profit. If you are selling on eBay with the intent of making a profit, then you are self-employed.

To report your earnings, you should file Form 1040, and attach Schedule C or C-EZ. Schedule C is used to calculate your net profit or loss from your business, which is then reported on your Form 1040.

At this point, you may be thinking "I don't run a business; I just sell on eBay as a hobby". Unfortunately, income from hobbies is taxable as well. Even worse, you can only deduct expenses up to your hobby income, which means losses are not deductible.

There are several tax advantages to selling on eBay. Personal expenses, such as the use of your car, home or computer may become partially deductible, retirement savings plans can shelter part of your eBay income from taxes, and you may be able to hire your family to help shift income to members in a lower tax bracket. So even if you only sell a few items on eBay, not only are you required to report your eBay earnings, it may even help you reduce your income taxes by taking advantage of tax opportunities available only to small business owners.

Finally, there is a common misconception that if you did not receive a 1099 or W-2, you are not required to report your income. This is not true. All income is reportable, regardless of whether you receive a form or not. EBay is only a facilitator of the auction; therefore you will not receive a 1099 from eBay reporting your sales (Unless you exceed the PayPal/IRS threshold. See the first item in Musings)

Kristine A. McKinley, CPA, Certified Financial Planner®, and founder of Beacon Financial Advisors, teaches individuals and families how to invest and plan for retirement, college, and other financial goals. Kristine offers financial and tax planning on an hourly, fee-only basis.

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2. Niche of The Month – Selling Old Postcards on eBay

Old or vintage postcards are one of the best-selling and potentially most profitable collectibles to sell on eBay. But not just any old postcard --there is just ONE postcard type that virtually anyone can sell, without experience, without prior knowledge and without risk. This one postcard type regularly breaks auction prices; rarely goes unsold, can be picked up for pennies and uploaded to eBay in three minutes flat.

They call this type of postcard 'topographical' and they depict known geographical locations, such as towns and cities, small villages and hamlets, in the US, UK and many other countries. Topographical postcards are hugely popular and highly collectible, and they can be bought for under a dollar at auctions, flea markets, garage sales, estate sales, thrift shops and even on eBay itself.

They can be resold for ten, twenty, sometimes hundreds of times the price you paid. And they are collected all over the world. You can sell cards to buyers in almost any country including the US, UK, Canada, Germany, India, Australia, Ireland, and Japan.

Topographical postcards can be relied on for markups of 100% to 1000%, and sometimes more. If you are interested in exploring this easy-to-enter and very profitable niche, my friend Avril Harriman has written a quick-start guide to selling old postcards on eBay. It is called Bank Big Profits Selling Vintage Topographical View Postcards on eBay. I followed Avril’s advice when her book first came out a couple of years ago. I bought a box of about 200 postcards at a local country auction for $135. I ended up throwing about 30 of them away, but sold all the rest over an 8-week period for a total of $700 (This worked out to a cost of $0.79 each). Just one of the postcards in the box sold for $55 and over a dozen or so sold for prices between $10 and 25. Most of the others went for between $2 and $5. Once I was down to the last ones that didn’t sell, I put them in a lot and sold the lot for $70. All in all it was a very profitable exercise.

Here is a screenshot of some recent postcard sales on eBay:

One word of caution: If you do a completed items search on eBay it looks like the sell through rate is very poor –and it is because there are thousands of postcards listed, and the market has corrected somewhat with the poor economy. But when you look closer, one reason so many cards are not selling is that a lot of them are new –or just junk. If you are going to do this it is important to know what sells and what doesn’t.

Here is some of what you will learn in Avril's book:

• Where to find secret vintage postcard treasures - forgotten about and neglected for DECADES - that will fetch you fantastic prices on eBay. Avril has been hunting down these postcards from the same secret sources for nearly 40 years. These places are rarely divulged by most people selling postcards.

• How to buy postcards so inexpensively you're guaranteed to profit massively on every sale. These are the basics you need to know immediately so you can hit the ground running. Within days you'll know what are the best postcards to obtain - which postcards are worthless - where to find the most valuable ones - how much they're likely to fetch you on eBay - and what you should be paying for them. This info alone could make you thousands of dollars and put you well ahead of even the most experienced postcard seller and collector.
  
  

• The one type of postcard that's despised by dealers - but which YOU can regularly find for 10-cents and sell on eBay for$25 or more! Most dealers won't touch this specific type of postcard. They believe it has no resale value. But Avril shows you how to turn these ignored postcards into a fantastic source of profits! You can buy many of these for a quarter and sell them for prices as high as $40.

Get your copy of Bank Big Profits Selling Vintage Topographical View Postcards on eBay

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3. New Way To Sell on Facebook

As you all know, Facebook has forever changed the way people communicate and share. And now, this 700 million-person juggernaut is beginning to change the way people discover, buy and sell products.

If you think about it, Facebook should be a great selling tool because it's easy to spread listings to friends of friends and because people are their "real selves" - not fake or anonymous profiles. And as a seller, that should mean "better" buyers and more sales.  But sellers still struggle with the interface.

Last week I spoke with Jonathan Ehrlich one of the founders of a new, still-in-development marketplace, called Copious. Copious is being designed to help sellers sell using tools like Facebook.  

The company is still in development but they are looking for early adopters and trying to build their list to get future customers once all of the features are up and running. It's free to list products on Copious. I worked out a special deal for my readers who add their email address (link to http://copious.com/seller). Here is what you get:

• $50 in Free Facebook ads to support your listings

• 75% off the Copious commission (only 3.5% instead of normally 10%)

The Copious marketplace is scheduled to launch in mid-June and at this stage, they are primarily looking for sellers of handbags. But regardless of what you sell, I strongly suggest you add your email address here (http://copious.com/seller) to learn more.  Signing up takes about 20 seconds. Just put SkipM in the space where it says "code" to ensure you get the deal. And don’t worry, they promise not to rent or sell your name –this is just so they can send you information as the site expans and their services become available to sell all products.

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4. Is Management Trying To Kill The “eBay Community?”

Whenever I write an article like this I always worry that new and small eBay sellers will read it and become discouraged –and that is certainly not my intent. It is still quite possible to start and run a profitable eBay business. What I am pointing out in this article is that it’s more of just a business now and not as much fun as it used to be. I don’t think that will change until eBay investors get fed up with the current management and boot them out. We can never go back to the “old eBay,” but a new broom is needed to sweep the eBay offices clean of the people who screwed up this once-great company.

When eBay first started skeptics said it wouldn’t work. A popular quote was: “There is no way someone will buy something from an auction and then send money to a complete stranger.” Boy, were the skeptics wrong. Overnight eBay became the fastest growing company in America. And when they went public eBay held the Wall Street record for the fastest growing public company in history. So what happened?

There were three secrets to the early success of eBay and current management has abandoned them all.

1. Community - eBay fostered a sense of “community.” Whether you bought or sold on eBay you felt like you were a part of something. You were not buying goods from an impersonal company; you were buying from another person just like you. Over the years we have made hundreds of email friends on eBay.

2. Feedback – The mutual feedback system was a stroke of genius. Buyers and sellers could leave feedback for each other. Imagine how good customer service would be if when you went to the shopping mall, every store had a whiteboard outside where customers could leave comments about the product and service. And, the store was not allowed to erase the comments unless they found an unhappy customer and fixed whatever their problem was? That was how it worked on eBay before seller feedback restrictions and DSRs.

3. Entrepreneurship – eBay created literally hundreds of thousands of individual entrepreneurs by providing an easy platform to sell. The advent of PayPal (which eBay resisted early on) was the “killer app” that made it explode. Anyone who wanted to make money could clean out their garage and start selling. When that stuff was gone you went to garage sales. Or you went to liquidators and bought surplus merchandise at pennies on the dollar and sold it for a nice markup. The fees were reasonable and regulations and policies were designed to encourage sellers and prevent fraud.

The first to go was feedback. When sellers could no longer leave negative feedback for deadbeat bidders or completely unreasonable buyers it put sellers at a disadvantage. Next to go were the policies that favored commerce and made it easy for sellers to manage their business on the platform. Then the fee increases just kept coming. The price of Gasoline is the only thing that is going up faster than eBay fees.

And now eBay wants to put the final nail in the coffin by killing any remaining vestige of community. Soon buyers and sellers will not be able to communicate in any way that reveals their contact information or identity. All communications between bidders, buyers and sellers will be through an anonymous emailer within eBay.

Does that mean I am leaving eBay, or can new or small sellers no longer make money on eBay? NO. It just means that the current management at eBay has finally succeeded in sucking all the fun out of selling. Since CEO John Donohoe took over it’s been plain that his goal was the Amazonification (I think that’s a real word) of eBay –he wants buyers to think they are buying from eBay –not a real person who has a stake in the buyer’s satisfaction.

But it hasn’t worked out well for Donohoe –or eBay stockholders. When he took over in June of 2008 eBay’s stock was in the vicinity of $26 share. It got as low as $12 in early 2009 and today it has struggled back to the $31 range; A whopping gain of 19% over three years or a little over 6% a year. And almost all of that gain is due to the success of PayPal –not so much eBay itself.

During that same period, Amazon, the company Donohoe was trying to emulate, was roaring. In mid June 2008 when Donohoe took over eBay, Amazon stock was in the $75 range. Today it’s trading around $192 – an increase of 250%. Way to go Mr. Donohoe!

So yes, I will keep selling on eBay (and Amazon and from my web sites), but now eBay is just a daily chore and that’s a shame because it used to be so much fun.

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5. Building Your Feedback on Amazon

If you sell on Amazon, and are like me, you are probably wondering why your feedback seems to grow so slowly. I have been selling on Amazon for 4 years and my feedback score was 100% --but the total number of feedbacks left was only 9. But when I looked at other Amazon sellers, I saw many with feedback scores in the hundreds.

When I looked into this, I found that these sellers are soliciting feedback by emailing their customers. So I tried that a few times and it seemed to work. After sending out about 20 emails, my feedback climbed to 12. The problem was I just don’t have time to send an email to every Amazon buyer. Then a reader of mine turned me on to a service called Feedback Five. Within just a few weeks, my feedback climbed to 20.

Feedback Five is a service that tracks your sales and sends a customer service email to your buyers that includes a link where they can leave you feedback. Best of all you get to customize the message. Here is the message I am currently using.

Dear _________,

We are contacting you to ensure that your expectations were met for your order with Summerdale_House on Amazon.

Here are the details for your order:

Bodum Chambord 8-Cup French Press 1.0-Litre Coffee Maker, 34-Ounce, Gold Chrome

Our goal is for you to be completely satisfied with this transaction. If this is not the case, we would appreciate it if you would give us a chance to address your concerns before leaving feedback. If you've had a pleasant buying experience, we would be grateful if you would leave us positive feedback by clicking on the following link:

http://www.amazon.com/gp/feedback/leave-customer-feedback.html/?pageSize=1&order=103-7430688-987880

Thank You,

Summerdale_House Customer Service Team

Every one of my buyers gets this email a few days after they receive their product. From what I can see about 13% of them actually click on the link and leave feedback. That doesn’t sound like a lot, but it’s about ten times better than just waiting for folks to leave feedback.

It’s easy to get started and they offer a free trial. And Feedback Five works with Amazon Canada, UK, France and Germany. Click here for a special free trial offer for my readers.

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6. New Wholesale Sources for eBay & Amazon Sellers

DPJ Wholesale carries a large line of general wholesale products and has a low $50 minimum order.

Atlantic Crossing sells a huge variety of beads and beading supplies.

Barry Country Crafts wholesales Hand Painted country home décor, Country Wood signs, personalized Christmas ornaments and seasonal pins; Custom signs available.

Hollon Safe is a manufacture of safes. They have a Dropship program for all models of safes including depository safes, gun safes, home safes, and commercial safes.

Cousin Corporation of America is a wholesale provider to the creative industry. Their products include glass beads, semi-precious beads, Swarovski crystals, plastic beads, and a complete selection of bead kits and beading supplies.

Genco Marketplace sells remanufactured laptops and computers that have been tested and returned to factory specs. The prices are great but you do have to purchase in bulk –ten or more at a time. You have to register to see the product lots.

KLENZ LLC manufacturers a 2'x4' pre-moistened towel. The large size covers a myriad of uses, including camping, outdoor sports, military, emergency construction or any time a person would like to clean up or freshen up without the use of fresh-water facilities. They come 12 to a box.

Motorvicity Distribution is an Import Tuning Wholesaler Located in Madison Heights Michigan. They Stock parts from Sparco, AEM, ACT, Eibach, Tokico Apexi and many more.

Koby International Inc. is a leading car audio wholesaler. They sell to shops and online stores and carry most of the large name brand car audio equipment and systems.

Bedtime Linens is a Manufacturer and Wholesaler of bed linens. They offer a wide variety of quality pillowcases, linens, comforters and more.

Africa Imports claims to be the largest site on the Internet for African and Afro-Centric goods. African clothing, jewelry, fabric, art, black skin care, and more ...

Scales Galore is a wholesale supplier of scales of all kinds, including baby scales, bathroom scales, scales for food service, education, industrial uses, and more.

That’s all for now. See you in two weeks.

Skip McGrath
The Online Seller's News

P.S. If you missed the last issue, click here to read it.

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