Michael Wilson: Online sales tax change hurts small sellers unnecessarily | Columnists

For many North Carolina residents, online marketplaces have become an important part of our livelihoods, whether you’re a casual seller or running a business. In 2008, I started selling fraternity and sorority pins on eBay from my parents’ spare room when I was in high school. Years later, this occasional online sale has turned into a business with a thriving brick-and-mortar store in Greensboro. I have seen firsthand the economic opportunity that platforms can provide if they are accessible to everyone. Unfortunately, a recent change to the Internal Revenue Service (IRS) reporting requirements for online sales is alarming news for millions of small sellers who don’t run businesses.

Starting this year, the annual sales threshold that triggers additional IRS review has been lowered to $600 from $20,000 (and 200 transactions). This is a radical change that will force millions of people to declare a few hundred dollars in sales, even if this income is not taxable. Instead of lowering the threshold by a reasonable amount, Congress decided to almost completely remove the limit. This change confuses many people who only use these platforms for low-cost transactions.

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Much of the confusion stems from the fact that selling used and used goods for less than the original purchase price is non-taxable income. This means that if someone sells a necklace for $600 and initially paid $1,000, they will owe no tax on that sale. That’s the good news. The bad news is that the IRS will now require the seller to prove that there was no profit from the sale. If the seller cannot prove the original purchase price, they may be liable for income tax on those sales (keep those receipts!). So whether or not the sellers are liable for taxes, they will be subject to additional scrutiny from the IRS and much more complicated tax filings.

Besides the confusion, there are other unintended consequences of this change. Many small sellers, once they learn about the new requirements, will need a tax expert to help them complete their return. This added expense, coupled with the likelihood of many sellers overstating their income, threatens to deter the sale of second-hand goods online. As inflation and economic uncertainty persist, now is not the time to limit the resources of thousands of people in our state who use online marketplaces to help fund their family’s necessities.

If I had to navigate these strict requirements when I first started selling, I might have decided it was too much of a hassle. This worries me because we should encourage entrepreneurship and remove barriers to entry. We owe it to the next generation to keep our markets open and increase competition.

Casual sellers shouldn’t face the added expense and stress of selling small quantities of used items online, and the IRS shouldn’t be spending its limited resources investigating those sales. I urge Congress to fix the reporting threshold for used goods sales to save people the time, expense, and frustration associated with this misguided requirement.

Michael Wilson is the owner of State St. Jewelers in Greensboro and has been a longtime member of the online retail community.

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David A. Albanese