TurboTax action over the cool gadgets online shopping-

What happents to the hundreds of millions of virtual-yet-very-real dollars generated by the cool gadgets on the World Wide Web?

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During the last ten years, buying cool stuff online has become the norm. People don't just shop online because it's convenient. People shop for cool gadgets online because it's fun. Overstock, Amazon and eBay have vast inventories. Look for something and it's a safe bet you'll find ten sellers offering the same item. 

Then comes the day when buying online shifts to selling online. All that cool stuff you bought? Turn around and sell it to make some money. Many people apply their business know-how and make thousands of dollars monthly. Some business owners even take their existing brick and mortar storefronts to cyberspace. 

Who Said Sales Tax?!

Then the inevitable happens: what was extremely fun becomes less fun because you have to pay sales tax. This has happened in some states. Foreign buyers that buy cool gizmos and other items on eBay and Amazon found themselves paying sales taxes to the state because of the location where they bought their cool stuff from. 

A bill was introduced in Congress that looks to make this official in all fifty states. The Internal Revenue Service already requires Amazon and eBay to generate 1099-MISC statements for sellers that exceed an annual gross sales threshold of $20,000. Sellers that reach $20,000 will have to shell out 15% of their income from profit because they no longer qualify as hobbyists and are considered businesses.

This kind of vigilance isn't going to go away.

Many online sellers are branded as noncompliant when it comes to collecting sales tax on the cool devices they sell.

Much of the merchandise is used or second-hand. A large quantity of rare collectibles — comic books, baseball cards, rare toys, vintage musical instruments — take up virtual space on cybershelves.

Sellers argue that their cool stuff shouldn't be taxed because it isn't new. Lobbyists for the Internet Sales Tax counter by calling it a resale tax. 

From Cha-ching! to Make it Payable to the US Treasury

When you consider all the cool stuff that trade hands at garage sales for cash, it doesn't seem fair. But nonetheless, the best thing to do is just be prepared.

If you sell cool gifts on your website and you get a 1099-MISC form from eBay or Amazon, a phone call to your tax preparer should be your next move. If you get the form, you may or may not have to also pony up the sales tax you should have collected. This isn't the law in every state just yet.

And keep in mind, the miscellaneous income tax is based on profit, not gross. If you grossed $20,000 selling cool stuff on your site but your profit is $10,000, the latter would be used to compute taxable income. 

A tax professional also knows to play several cards from his or her proverbial deck.

Exemptions may be applied to some merchandise and low income status. If you sell cool presents on the ‘net and declare your office to be a dedicated workspace, a home office deduction may also be applicable.

But don't make assumptions just yet. Leave this stuff to a tax pro. TurboTax covers this ground, too, but TurboTax is a piece of licensed software that is designed as a tool.

Bills, Bills, Bills

Again, the best thing is to be aware of what's taxable. Nothing should come as a surprise. EBay owns the most-used online payment transaction site, PayPal. PayPal is what most eBay sellers and buyers use to transmit and receive funds.

EBay has to report the annual gross income of any individual who generates more than 200 transactions and at least $20,000 in sales. Yes, both must apply. Exceeding 200 sales is easy. If you grossed $16,000 or you completed fewer than 200 transactions, then you're off the hook — for the moment. The water line sits at $20K. The conditions apply to Amazon, too. 

So why has all this come to pass? It's probably because hundreds of millions of virtual-yet-very-real dollars generated by sales of cool stuff on the World Wide Web. Where there's pie, the Taxman wants a slice or four.

A simple Excel spreadsheet folder and erasable marker board can help you keep track of the sales and taxes you’ll need to pay. A CPA's number or business card should also take up a couple square inches of desk space. He or she could be a good friend just in case you start selling enough cool stuff to quality for a visit from the Taxman.

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