"I sold an item and had it set for the buyer to pay the shipping. The item sold. It shows the buyer paid for shipping. Why then must I ALSO PAY FOR SHIPPING??????????? Who gets the extra money ? And doesn't this add more to the taxes I have to pay? If I sell the item for $20 and there is $7 shipping doesn't this mean I now have to pay taxes on $27? How is ebays **bleep** system now rigged? I don't believe you both parties paid shipping in the past. **bleep** is going on now? I'm really NOT IMPRESSE WITH THIS NEW SYSTEM OF both parties pay for shipping. If the user paid for it why must I turn around and pay too? **bleep**????? When did this become so **bleep** moronic?" Wow.
I will try to explain and hope you will try to follow this series of steps. I'll use your numbers, $20 plus $7. I'll even leave sales taxes out of the equation, which can happen if your buyer's delivery address is in Oregon, Montana, New Hampshire, Delaware, or a non-sales-taxed area of Alaska. You sell an item for $20.00 and your listing -- which you write, remember -- says the buyer will pay shipping of $7.00. So your buyer will pay $27.00. Still with me? eBay has received $27.00 on your behalf.
Why must you pay for postage? Because you are in possession of the item. The Post Office will not accept letters or packages that do not have stamps or other tapes or labels already on those letters or packages.You can either buy postage through eBay's programming or take the wrapped-up item to your local post office and buy postage at the counter. (There are other computer programs such as PirateShip that you could use to buy postage at a discount, but I'm trying to keep this explanation as simple as possible.)
So, let say you decide to buy US Postal Service postage through eBay's program, which does offer a slight reduction in price compared to if you went in to your local post office and paid the clerk for postage. The postage label you print through eBay might say that you only have to pay $5.50 to send that sold item to your buyer. OK? Your buyer paid $7.00 but you might only pay $5.50 to the USPS through eBay. $7.00 minus $5.50 equals $1.50 of what you have called "extra money."
"Who gets the [$1.50 of] extra money ?" You do. (Isn't that obvious?)
"If I sell the item for $20 and there is $7 shipping doesn't this mean I now have to pay taxes on $27?"
Assuming you are speaking of income taxes, and you are not what the IRS considers a hobbyist-seller, the answer is No, you would possibly not have to pay income taxes on $27.00. You may be entitled to deduct the amount of postage that you paid. (I say possibly because I am not an accountant; everybody's income tax situation is different; and I really don't want to know anything else about your particular financial situation.)
What did you pay for postage, again? In my example above, using your original numbers, remember, you paid $5.50 for postage. That means you could deduct $5.50.
No U.S. taxpayer pays income taxes on amounts that are valid deductions.
That $5.50 would be included in the amount you list as deductible postage or shipping costs for all your eBay sales, on the Schedule C to the IRS Form 1040 that you use for filing your income tax return.
$27.00 minus $5.50 equals $21.50.With only this info, the IRS could hold you responsible for income taxes on $21.50 on this transaction.
However, even that number is most likely not accurate. There are other allowable tax deductions and eBay's fee(s). eBay retains a Final Value Fee (FVF) from the total amount paid by your buyer -- $27.00. The FVF consists of (1) a percentage of the total paid by the buyer, most often 13.25%, plus (2) $0.30 per order. Those $3.88 fees you pay to eBay (which eBay keeps) are deductible on the Schedule C to Form 1040.
On this transaction: $27.00 x .1325 = $3.5775. That is rounded up to the nearest penny: $3.58 + 0.30 = $3.88.
Also the costs of your mailing envelope(s) or new empty box(es) are deductible. The cost for each blank mailing label you buy is deductible. The cost for packaging tape is deductible. Your mileage driving to and from Staples or Walmart to buy envelopes and/or bubble wrap and/or blank mailing labels is deductible, at a certain dollar amount per mile. Your mileage driving to and from the post office to mail the item, if you do that, is deductible. The instructions for Forms 1040 and/or Schedule C will probably tell you what that amount is. There are other regular posters who might chime in with even deeper detail that I have included. Example: if you purchased that item for $18.00 before you sold it for $20.00, your Cost of Goods (COG) on this item, $18.00, could also be a deduction. In theory, on this transaction alone, you could owe income tax, to the IRS, on only maybe $2.00 or $3.00. BTW, none of this is particularly new, nor does it apply only to selling on eBay.
