Do I need to claim income for cash sales on Facebook Marketplace (local pickup only)?
I’ve been buying and reselling the past few months and have made over 6k doing so. All sales have been local pickups and paid with cash, so I wouldn’t be receiving any tax documents from Facebook.
Also, should I have a business license or resellers permit for doing these sales? I’m buying my products directly from auctions, where I’m already paying 25% in sales tax and premium fees. Having a resellers permit would help with not paying tax upfront when I buy the products, but since I’m buying from auctions, I don’t think that would apply in this case.
Would this be considered as self employed income and should I get a permit for this?
- Nuff SedLv 72 months ago
Yes, profit is generally income and must legally be declared for tax purposes, even if you don't end up owing tax on it. Also, selling your own stuff (e.g., garage sale) is not a taxable event in most places, since you're just profiting from the equivalent value in money, to a certain limit, perhaps offset by the depreciated value of what you're selling. It's different if you're buying things for the purpose of selling them at a profit, since the profit is automatically "income" and subject to the tax regulations (e.g., income tax, sales tax, if any).
- Christin KLv 72 months ago
You don't need "permission." What you should get is a tax-reporting ID number through your state. What is known as an EIN--Employment ID Number--or vendor's license (usually getting the vendor's license gives you the EIN.) You'll have to go to your state's business gateway or taxing website to get that. You'll have to register your business. And yes, you should report the income as income. You will have an opportunity on your tax return to claim this un-official income--you don't need a tax document to do so. And you will owe not merely the Federal income tax on that income, you will also owe the state tax AND the state sales taxes--failure to report may also cause you to owe penalties and interest on that income. Best keep any receipts and proof of expenses such as shipping costs that you incur. What you're doing is operating a small business--and there are also charges on your federal tax return you'll pay for that small business. So be prepared.
- StephenWeinsteinLv 72 months ago
This would be self-employment income and you must claim it.
- Ron AkiaLv 72 months ago
To be perfectly legal, you are running a business and you are required to pay both a federal income tax and social security tax on that income. In addition, if you live in a state with a state income tax, you'll be required to pay that also. On the good side, from the $6,000 you've sold thus far, you deduct the cost of the merchandise, the 25% in fees and taxes, and any other expenses you've incurred from that $6K. That will give you very little if any, income. By the time you deduct what's deductible you'll have little or no income to pay tax on.
You also mentioned that you're paying sales tax on the items you buy from the auction. What you should do is register with the state tax department as once you do this, you won't pay sales tax on the merchandise you buy at the auction for resale although you'll have to file state sales tax returns on the sales tax you're supposed to collect when you sell the item.
I've known many people who have just skipped the entire process as they've always used cash for everything and they've gotten away with it. However, for the record, this is illegal.
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- Anonymous2 months ago
Well the way I look at it, who would find out about it?? There are no receipts, they were cash sales (similar to a garage sale), and you'll never see the customers again. It doesn't matter where or how you purchased the items, and even if you posted the items on FB, the transaction didn't go through FB. You could have posted an item, for example priced at $500, but ended up selling it to someone for $300. So how would anyone else find out? Cash sales are impossible to track, and unless a customer wants a receipt, I wouldn't worry about claiming that income.
- STEVEN FLv 72 months ago
If you sell ANYTHING for more than you paid for it, the difference is legally taxable income. HOW you sold is legally irrelevant for tax purposes.
Receiving 3rd party documents is legally irrelevant.
- Elaine MLv 72 months ago
It's over $5,000 so yes, you have to declare it as income.
- Anonymous2 months ago
Yes that's self-employment income and yes it's taxable. You owe federal self-employment tax on all profit over $400 in a calendar year.
If you live in a state with sales tax, you owe that too (although you were allowed to collect it from your customers).
We don't know if you would owe any federal income tax because you didn't say anything about your whole tax picture.
- SuccessLv 62 months ago
Depending on what state you are in, it may be considered 'Hobby Income'...meaning you do not need a permit.
But the tax laws have changed a lot in the past 2 years, so, if I were you , I would spend money on paying a tax accountant to prepare your taxes.
I THINK that you can write off a big chunk of expenses and probably even qualify for some extra government funding if you go ahead and get the permit and call yourself 'self-employed'.