Taxes for selling your gear

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dtk

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according to the CPA I use, if I claim that these were tools I used, reselling them somehow is not taxable. I do get some contract income for my marching band playing so its possible that is having an effect...talk to a tax professional.
 

Squirrel Man

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I wonder if you can offset costs. Like I purchase a kit for $500 and two years later after investing $250 into it I sell it for $1,000 - I should only have to pay tax on the total sale less my costs ($1,000 - $500 - $250 = $250).

That sounded like a high school math problem.

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Fat Drummer

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It's not sales tax, it's income tax.
Yes, but the sales tax was indeed collected on the secondary sale as well... so now the used item will have been taxed a minimum of 3 times (two sales and one income ) if bought new and sold once.

Didn't we have a get together and throw little tea party over these very issues awhile back?
 

dcrigger

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I wonder if you can offset costs. Like I purchase a kit for $500 and two years later after investing $250 into it I sell it for $1,000 - I should only have to pay tax on the total sale less my costs ($1,000 - $500 - $250 = $250).

That sounded like a high school math problem.

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That's exactly what it is - if I'm not mistaken. Nothing's really changed - if you sell something for a profit - the profit is taxable. It has always been taxable.

It's just that now with us doing transaction more publicly - ie: not just selling things in a parking lot for cash - it is easier to track that flow of money.

But nothing has changed as far as what is owed and for what - all profits have always been taxable - from the first dollar.

It's kinda of business 101. But what I always find so confusing is how many don't see selling things like we do with drums as being no different than any other business.
 

Squirrel Man

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That's exactly what it is - if I'm not mistaken. Nothing's really changed - if you sell something for a profit - the profit is taxable. It has always been taxable.

It's just that now with us doing transaction more publicly - ie: not just selling things in a parking lot for cash - it is easier to track that flow of money.

But nothing has changed as far as what is owed and for what - all profits have always been taxable - from the first dollar.

It's kinda of business 101. But what I always find so confusing is how many don't see selling things like we do with drums as being no different than any other business.
Exactly - and, you have to document, keep receipts and logs otherwise you're peeing in the wind. If you can't prove it you're going to pay taxes on the whole thing.

For the record, I'm actually a CPA so I know a little about this but I suck at taxes. I'm an industry/operating guy, I paid someone this year to do mine but I'll probably do mine next year, they really didn't do anything better than I would have done.
 

dcrigger

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Yes, but the sales tax was indeed collected on the secondary sale as well... so now the used item will have been taxed a minimum of 3 times (two sales and one income ) if bought new and sold once.

Didn't we have a get together and throw little tea party over these very issues awhile back?
Nope nope nope - this IRS thing has nothing to do with sales tax (that's a state thing).... it is not the item that is being taxed. It is the seller's profit.

But let's look at your tax scenario and I'll think you'll see how nothing is being taxed more than once - though there may be multiple tax payments along the way.
Example - I recently sold an old comic book I bought for a dollar and sold for $100. If I paid sales tax on the original purchase of a dollar.

So the original dealer paid say, 50¢ for the book. As a reseller, he wouldn't have paid sales tax on that purchase - though he was responsible for collecting 8¢ from me at the time of sale... Assuming his store had zero other expenses, he would've paid income tax on his profit from that sale - so say 28% of 50¢... basically 14¢ (though again this would be a lot less - as his rent, labor, etc. costs would lower his profit and his tax owed.

Now 40 years later, I sell the book for $100...

My profit will be $99 - which I would be taxable - but this is NEW money - money that has never been taxed before - so there is no double taxation involved at all.

As for the sales tax owed on my sales transaction - why should I get to buy something for a dollar and resell it for $100 and not owe the state it's share of that transaction - when the auto repair shop down the street buys things from wholesalers, then sells them for a profit and those transactions require sales tax be collected. How am I and he any different? With my $100 sale, I'm doing profitably doing business in my state - why shouldn't my sale put a little bit in the state kitty - so the traffic lights and the road between my house and the mail center are kept functioning. Because those things don't pay for themselves... and I'm using them in my successful pursuit of making money.

In a nutshell - when looking at these things - I think it makes more sense to not focus so much on the item and instead focus on the money. And by doing so - and looking at it all with a business point of view - it makes all the sense in the world. At least it does to me.
 

felis

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Nope nope nope - this IRS thing has nothing to do with sales tax (that's a state thing).... it is not the item that is being taxed. It is the seller's profit.....
If you sell something for less than what you paid for it, wouldn't it be considered a loss?
 

bpaluzzi

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If you sell something for less than what you paid for it, shouldn't it be considered a loss?
It is, and you don't owe any taxes on it. If you're selling gear as a business, you can count it as a business loss (but that also means your profits would be income, not capital gains). If it's just occasional selling, you can't deduct the loss, but you also don't owe any taxes.
 

sixplymaple

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It's not sales tax, it's income tax.
Yeah, you’re right. I’m still being taxed twice though. First on the income to pay for the new gear and then the income of the resale of the same gear. That’s absurd.
 

bpaluzzi

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Yeah, you’re right. I’m still being taxed twice though. First on the income to pay for the new gear and then the income of the resale of the same gear. That’s absurd.
It's not being taxed twice -- you're only taxed if you made a profit, which is entirely new money being injected into the equation. If you sell it for what you paid (or take a loss), you don't owe any tax.
 

sixplymaple

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It's not being taxed twice -- you're only taxed if you made a profit, which is entirely new money being injected into the equation. If you sell it for what you paid (or take a loss), you don't owe any tax.
How do they have any idea what I paid for it though?
 

bpaluzzi

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How do they have any idea what I paid for it though?
It's up to you to keep a record of it. You can offset the line items from the 1099 by adding a "Cost of Goods Sold" line on your taxes (up to the amount of the 1099) -- in other words, if you have a drum that you originally paid $100 for, and sold it for $30 on eBay, you could add a negative $30 to offset the 1099. If you get audited, you'll just need to be able to prove what you paid for it.
 

Johnny K

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Wait? The govt wants me to report proceeds from sales of things I bought with income that was taxed? I don't think so. I lose money on this stuff, so no capital gains to report.
 
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