How Will The New Tax Bill Affect eBay & Amazon Sellers?
The eBay & Amazon Seller's News ~ January 2018 ~ Volume 19, Issue No. 1
Tips, Tools, News and Resources for eBay and Amazon Sellers
This year my wife, Karen, and I got the best Christmas present anyone could ask for -a lovey, healthy and super-cute new granddaughter. Cora McGrath was born to my youngest son, Travis, and his wife Christine, just a few days before Christmas on December 21, 2017.
It's another new year. I remember when my boys were kids and we enrolled them in Karate classes. It wasn't so much about teaching them to fight, as it was a way to build their self-confidence and self-discipline while getting some exercise at the same time.
It took a few years, but they both earned black belts. One of the things I remember about each time they were promoted was, every time they moved to another belt level, they didn't forget everything they learned, but built on their prior experience and knowledge.
Success in our business works the same way: We don't forget what we learned, but keep building on it. There are no colored belts awarded to mark our progress in online sales, we do that by setting our own goals. And, the start of a New Year is an excellent time to do that.
I suggest any of you who are Amazon sellers take a look at AMZFinder. AMZFinder is Amazon seller software that matches product reviews with orders to reduce negative reviews. They offer two major features: Feedback Request System and Review Management. It works on both Mac and PC.
The Feedback Request System will send review request emails and invoices automatically, helping the seller to gain more positive feedback reviews. It features multi-language email templates and automatic email sending rules. AMZFinder can fulfill the email sending task more efficiently and intelligently. Every seller has access to this feature from their free plan, which enables them to send 500 emails every month.
The AMZFinder Review Management feature monitors reviews and matches reviews with order IDs. This is a great way to help sellers contact negative customers and improve product reviews. It is now available for all amazon marketplaces for only $1, and there is no limit for ASINs and time of usage.
I have long performed new product research manually on my own, but I have recently become a fan of Jungle Scout. Their web app gives you the power to scan Amazon's product catalog instantly - so you can spend more time on your business and less time doing research. Their Chrome extension allows you to zero in on the data that matters to help you find new product ideas. And, they offer a 15% discount to veterans. Their service is used by thousands of Amazon sellers to help find new products to source and sell.
Karen and I are selling our Bahamas Time Share at Atlantis. Time shares used to ride high, but became dogs after the 2008 recession, resulting in prices falling all over the world. However, in our case we have owned it for 12 years and used it, so we got our money's worth.
The unit we are selling is (week 5 - first week of Feb), a Deluxe, 2-BR Lock off. What that means is you actually get two separate units with a connecting door. The larger, Master unit has a living room, dining room, full size kitchen, outdoor patio deck, large Master BR (King-size bed) and an on-suite bathroom with Jacuzzi-style tub. It also has in room wi-fi, DVD player and a washer-dryer. The view is of the Atlantis Marina (filled with mega-yachts in the 100 foot + range).
The second unit is smaller, yet still complete and comfortable, has a smaller bedroom (Queen-size bed), full bathroom (no Jacuzzi), combined living/dining area, smaller kitchen and a smaller, yet usable deck (The one BR units with deck are not always available - our experience has been we get a deck unit on the smaller side about 50% of the time).
Both units also include a comfortable sofa-bed and 2 flat screens each (BR and LR). Sleeping accommodation is Sleeps 8 total in both units. Photos (view the slide show) and more information here.
We originally paid $30,000, and similar new units are now selling for over $60,000. Because the secondhand time share market has never fully recovered, we are selling both units for $9,900 total. We are selling for Cash, but mortgages are available. We just lowered that price by $1000.
Ownership options are varied and generous:
The annual maintenance fee for both units averages in the $2900 range ($1450 per unit), but can vary. If you stay in the large unit, and rent the smaller unit out for about $3000 (very easy to get this rate), you can cover your annual maintenance fee for both units. Or, some years when we couldn't go, we rented the whole unit out for $7,000.
I am happy to answer any questions about the units, but please contact the sales agency first, and work with them. More information and sales info here.
Be cautious of free seminars.
I just spoke with one of my readers who was invited to a free seminar to learn about selling on Amazon (there are companies doing this for eBay too). If you get an invitation to a so-called free seminar, you can run the other way (which I suggest), or be prepared to sit through a day-long sales pitch to upgrade to their paid seminar. That cost can vary from $999 to $4,999. And, if you go to that seminar, you get a high-pressure sales pitch for their $10,000 coaching program.
I used to put on one-day, paid eBay and Amazon seminars several years ago (where I actually taught material all day), but stopped because the so-called FREE seminars killed my business.
If you really need coaching, take a look at our personal coaching program. We don't have a canned program, or a fixed price. We tailor our program to your needs, experience and budget. Unless you are someone with zero experience, that doesn't know how to turn on a computer, by far, most of our programs come in under $5000, and many end up costing way less than that.
If you are interested in learning more about our program, you can read more about it here. And, if you do decide to take the next step -I promise you will not get a high-pressure sales pitch.
For some reason Amazon is very lax this time of year when it comes to gated-category approval. A few sellers have told me they were instantly approved upon application. So give it a shot -you might just be surprised.
A few categories getting easy approval have been Luggage, Baby, Automotive and Fashion (not fine jewelry) and a few of the toy sub-categories.
I have no idea when this program ends - Amazon doesn't really talk about, so sorry, but I can't help if this isn't working when you apply.
Amazon Flex is a new Uber-like Amazon service where Amazon hires independent drivers (similar to Uber and Lyft) to deliver packages to customers. Here is an example of a want-ad that Amazon is running:
No one knows how well this will work -will it lead to unhappy buyers? I wonder how tracking will be done.
I learned about this from one of my readers who has a small Amazon business said she is thinking about going to work for them to supplement her income.
Don't forget, Amazon has extended its holiday return policy until January 31st. The Amazon extended holiday return policy allows buyers to return items from orders shipped between November 1 and December 31, right through to January 31st, 2018. This includes both merchant fulfilled and FBA orders.
I recently added and updated some items on my website. Be sure to check out:
eBay claims they have done away with Product Listing ads that connected from your listings to off eBay stores. However, as I showed you in the last issue, I am still seeing the ads in some of my listings. Now, eBay, in a bid to become more Amazon-like, looks like they plan to offer ads that sellers can create that will lead to other eBay sellers of the same, or similar products.
An eBay insider told me these will be display ads similar to Amazon's sponsored products that appear in search results except these ads will appear right in the listings. It seems that ebay cannot find any sales growth through their regular service, so will rely on Ad revenue for that growth.
I am not so much against such a plan, but since the ad appears in a listing we pay for, shouldn't eBay share some of the ad revenue with us?
On to our articles:
Before we get started, whenever the subject of taxes comes up –I always remind people that I am not a tax professional, and when it comes to tax matters you should always seek professional advice.
Just before Christmas, Congress passed, and President Trump signed, a new tax bill into law that will reduce income taxes for many online sellers. Before I get too deep in the weeds about the bill, let's review how income taxes affect online sellers overall.
As most of you know, in late January of each year, Amazon and PayPal issue a 10999(K) Form that shows you (and the government) how much they paid you in the previous year. Although you must take these earnings into account, you are not required to pay taxes on the full amount of the 1099 form.
In both cases (PayPal and eBay) show the amount of your total income -not your profit. And, you only owe income taxes on your profits -not your sales.
But, you do need to file a copy of those 1099s with your business taxes. Here is how you get them:
Log into your PayPal account and click on the Reports Tab. A list of your available reports will come up. Look near the bottom and you will see a link that says Tax Documents and click on that.
When you click on Tax Documents you will get a page that looks like this:
As you can see, the drop down only shows 2016. That is because it is only early January, and the 2017 report is not available until the end of the month.
Log into your Seller Central page and Click on Reports. A list of reports will come up. The last on on the list says Tax Document Library.
When you click on that, you will see a page that looks like this:
Once again this image only shows up to 2016, because the 2017 report is not available yet.
Just wait until February 1st. When you follow these steps you will be able to download the 2017
1099 Documents in PDF format.
OK - so how do we calculate profits?
First, determine how much your eBay and Amazon (and website, or other) sales were. Subtract the amount you paid for merchandise including any inbound shipping (Cost of Goods Sold -COGS). When you subtract your COGS from your total sales, you are left with your Gross Margin.
Now write down your Gross Margin and then subtract all of your business expenses. Here is a list of the most common expenses, but you may have others:
Once you subtract these expenses, you are left with your Net Profit (or loss). The profit is the amount you will pay taxes on. If you have a profit and have other income such as W2 income from work, you add the profit to your other income and that is what you pay tax on (before deductions). If you have a loss, you can deduct that amount from other income (such as W2 income from a job, dividends, retirement and so on).
Now onto the new Tax Bill. There are three major parts to the bill:
I am not addressing that last bullet because this article is about business taxes, but these may affect some of us as well.
The new bill lowers taxes on Corporations from 35% to 21%. There are also larger deductions allowed for Sole Proprietors and sellers who are incorporated (including LLC) who file a Sub-Chapter-S election (These corporations are often referred to as an S-Corp, also known as Pass-through businesses).
The lower taxes on corporations mostly affects very large corporations.
This sounds a bit complicated, but it's not. Basically an S-Corp is a corporation that does not pay taxes as a corporation, but passes the money through to the shareholders (You), so it is only taxed once. This is why it is referred to as a pass-through business.
Sole proprietorships, S corporations, partnerships and LLCs are all pass-through businesses. In the new tax bill (beginning in tax-year 2018), Sole-proprietorships and S-Corps are considered pass-through business that pays taxes through the individual income tax code, rather than through the corporate tax code and gets a sizeable downwards adjustment in the amount passed through. This can effectively lower your taxes up to 20%.
Under the new tax bill, pass-through business owners can deduct 20% of their business income, which will lower their tax liability. So, for example, if your online business made a profit of $50,000, you would only pay taxes on $40,000, and your personal tax rate would apply to that -not the corporate rate.
However, professional-services business owners such as lawyers, doctors and CPA's filing as single, and earning more than $157,500, or filing jointly earning more than $315,000 will see a phase-out and a cap on their deduction.
Independent contractors and small business owners (like you and me) will benefit from the pass-through deduction. The amount you benefit will depend on your income, but unless you are very wealthy, or your pass-through income exceeds $2 Million, you will see some significant savings.
I am not a fan of Pay-Per-Click (PPC) advertising (Amazon, eBay, Google, etc.), and only use it occasionally, but I do use Keywords in my eBay and Amazon listings. Either way, you are paying for keywords.
With PPC you pay for each click, whether someone buys or not. When using keywords in your listings, the costs are more-subtle, such as inventory cost, interest cost and opportunity cost. I cover both costing and keywords in much more detail in The Complete Amazon Marketing System and The Complete eBay Marketing System. Use the wrong keywords, and all three of these costs will come back and bite you.
There are two main types of keywords: Broad and Specific Keyword Phrases (also called long-tail Keywords).
An example of a broad keyword would be Holster or Firepit. If you use these you will get some visibility, and a lot of worthless clicks if you are doing PPC advertising, but if you use more specific terms that match what you are selling, you will see more -and better, traffic to your listings whether from PPC or organic search.
Looking at those two terms Holster and Firepit, here are some more specific keywords that may relate closer to what you are selling:
Those are just a few examples of more specific products within the broad category. Here is an example. Let's assume you are selling a wood burning firepit Here is an example of one I sell, and here are a few of the keywords I use for that:
Sometimes the obvious is not correct and it pays to dig further. Here is an example: One of the products I sell on both eBay and Amazon is an Espresso Tool Kit:
When I researched the keyword Espresso tool kit on Merchantwords it showed:
There were no other suggestions and the monthly search volume was only 2200. So I tried searching the term Espresso Tools and got a lot more suggestions with higher search volumes:
If you use all of these, and add them all up, it comes to 23,600 searches per month.
There are lots of Keyword tools on the market, but most of them are optimized for PPC, whereas I am interested in getting my listings found.
I use Merchantwords. Merchantwords is optimized for Amazon, but my testing shows that the same keywords work on eBay listings as well.
I have set up a special deal for my readers to get a sizeable lifetime discount to Merchantwords. Use this link and you will save $21 per month ($9 month, instead of $30 month).
Lastly - Most people only research keywords when they create a listing or a PPC ad, but remember: Keywords evolve and change. If your listings are more than a year old, or sales of an item slows down, then go back and research current keywords to make sure you are still using the best ones.
It's a new year and I have always found the month of January to be the best time to review and update your goals and your business and selling strategies. Here are some of the actions I take every January:
1. I set new goals, and I look at my entire business with a hard eye, to decide if I am working smart and if I need to change anything I am doing.
Once I set my new goals, I post them near my desk where I can see them every day.
NOTE: When it comes to setting goals, remember these three things:
2. I review my inventory and product offerings looking for slow sellers I may want to drop.
3. I open and read every single one of my listings:
4. For Amazon FBA sellers, February 15th is the date Amazon imposes long-term storage penalties. I find items that will be affected, and put them on sale to hopefully reduce those quantities. Then I put a reminder in my calendar to remove any excess inventory just before the 15th deadline.
5. I find time to sit down with my tax guy (CPA) to see what changes I can make to my operations that will reduce my tax bill (This is very important this year because of the new Tax Bill that takes effect January 1st.).
7. I check my credit cards and PayPal subscriptions for services I am still paying for and may no longer need or have just forgotten about.
8. I check my telephone, cellphone, ISP bills and other business expenses to see if I can find a way to reduce my costs going forward.
9. I clean out my old files to make space for new ones. The limit on IRS audits is seven years, so any income statements, receipts, purchase orders, business bills or sales records more than 7-tears old are tossed.
You may think of other things to review and update. If your spouse or partner works with you, be sure and involve them in the process. However, although your business goals should be on the same page, your personal goals may be different. For example, one of my wife's goals has to do with spending more time quilting. Since I don't quilt, that is not a goal we share, but we have to adjust our business goals so she has time to do that.
As in previous years, Amazon will adjust FBA fees in the U.S. The new FBA fees take effect on February 22, 2018.
Here is what Amazon says about the fee changes:
We all hate fee increases but, the one piece of good news is that Amazon will no longer have a separate storage and handling rate for October through December.
Here is the new schedule showing new versus old fees:
If you look at the chart you can see that Small size items are the way to go. It's not just because of these changes, but I have felt that all sellers (FBA and MF) can benefit from selling items that are small, lightweight and higher in price as a way to reduce shipping costs and FBA storage and fulfillment fees.
If you would like to see some real examples of how this fee change affects FBA sellers, log into your Seller Central page and click on this link.
Tipsy Coasters sells several lines of humorous drink coasters. They are Made in America with imported Botticino marble.
Americo Manufacturing Co. manufactured mats for commercial & promotional use. Decor for your floor.
Tees by Classy sells state "Home" t-shirts. in a nice selection of designs and colors. A portion of their proceeds are donated to The Wounded Warrior Project.
Always Azul is a Colorado pottery company that sells pottery and ceramic planters of all shapes and sizes ranging from $30 to $500. All are made in the USA.
Thread Champs Inc. sells wrinkle free dress shirts, Tee Shirts and trousers for men.
Special T is a wholesale importer of home and garden accessories in seasonal, holiday and garden as well as floral accents.
Cohasset Gifts & Garden designs and manufactures garden and home decor gift items, including bamboo wind chimes and wooden bells.
Jewelry Shoes Pasha makes jewelry for your feet; a collection of bejeweled sandals in an Italian Capri look and style.
Bloomingville makes and sells Danish designed small furniture items and home accessories
Seriously FAB is a manufacturer of cruelty-free, Vegan and anti-aging sun protection products.
The Wuu Jau Sales Company of Edmond OK is a large wholesale distributor of fidget spinners and all types of knives, swords, airsoft guns and other products related to that genre.
Roketa is an importer and wholesale distributor for ATVs, Dirt Bikes, and other off-road sports vehicles.
Hicks Incorporated is one of the largest wholesale distributors of outdoor sporting equipment for hunting, archery, fishing and other outdoor products.
Liberty Mountain a wholesale distributor of all types of camping and outdoor equipment and a nice line of hand warmers that sell well this time of year.
Sarinas Fashion is a wholesale distributor of famous name handbags and other items - However, some of these brands need permission to sell on eBay or Amazon, so check that first before buying.
Once again, my best wishes for the new year.
P.S. If you missed the last issue, click here to read it.
© 1999- Harry McGrath, Inc., DBA Skip McGrath, Auction Seller's Resource and Vision-One Marketing. All Rights Reserved.
Please Note: Some of the products and services mentioned in this website, in articles, banner ads and newsletters and blog posts are for products and services for which I earn a referral fee or commission. We always evaluate anything we recommend very carefully and each year we turn down literally dozens of opportunities to recommend products or services where we can earn a commission. Even though we earn a fee on some of our recommendations, we only recommend products and services that we feel will deliver good value and with rare exceptions, they all come with a money back guarantee.