FreedomWorks
June 19, 2008

Senate Housing Bill Requires eBay, Amazon, Google, and All Credit Card Companies to Report Transactions to the Government
Broad, invasive provision touches nearly every aspect of American commerce.

Contact: Adam Brandon
Phone: 202-942-7612
Email: abrandon@freedomworks.org

Washington, DC - Hidden deep in Senator Christopher Dodd's 630-page Senate housing legislation is a sweeping provision that affects the privacy and operation of nearly all of America’s small businesses. The provision, which was added by the bill's managers without debate this week, would require the nation's payment systems to track, aggregate, and report information on nearly every electronic transaction to the federal government.

FreedomWorks Chairman Dick Armey commented: "This is a provision with astonishing reach, and it was slipped into the bill just this week. Not only does it affect nearly every credit card transaction in America, such as Visa, MasterCard, Discover, and American Express, but the bill specifically targets payment systems like eBay's PayPal, Amazon, and Google Checkout that are used by many small online businesses. The privacy implications for America's small businesses are breathtaking."

"Privacy groups like the Center for Democracy and Technology and small business organizations like the NFIB sharply criticized this idea when it first appeared earlier this year. What is the federal government's purpose with this kind of detailed data? How will this database be secured, and who will have access? Many small proprietors use their Social Security number as their tax ID. How will their privacy be protected? What compliance costs will this impose on businesses? Why is Sen. Chris Dodd putting this provision in a housing bailout bill? The bill also includes the creation of a new national fingerprint registry for mortgage brokers.

"At a time when concerns about both identity theft and government spying are paramount, Congress wants to create a new honey pot of private data that includes Social Security numbers. This bill reduces privacy across America's payment processing systems and treats every American small business or eBay power seller like a criminal on parole by requiring an unprecedented level of reporting to the federal government. This outrageous idea is another reason to delay the housing bailout legislation so that Senators and the public at large have time to examine its full implications."

From the Senate Bill Summary:

Payment Card and Third Party Network Information Reporting. The proposal requires information reporting on payment card and third party network transactions. Payment settlement entities, including merchant acquiring banks and third party settlement organizations, or third party payment facilitators acting on their behalf, will be required to report the annual gross amount of reportable transactions to the IRS and to the participating payee. Reportable transactions include any payment card transaction and any third party network transaction. Participating payees include persons who accept a payment card as payment and third party networks who accept payment from a third party settlement organization in settlement of transactions. A payment card means any card issued pursuant to an agreement or arrangement which provides for standards and mechanisms for settling the transactions. Use of an account number or other indicia associated with a payment card will be treated in the same manner as a payment card. A de minimis exception for transactions of $10,000 or less and 200 transactions or less applies to payments by third party settlement organizations. The proposal applies to returns for calendar years beginning after December 31, 2010. Back-up withholding provisions apply to amounts paid after December 31, 2011. This proposal is estimated to raise $9.802 billion over ten years.


reference: FreedomWorks.org

This is mind boggling -

It was just a matter of time. Politicians are running out of sources of money to spend in securing votes and fulfilling pork barrel entitlement commitments made in getting elected.

Indeed it is, but somehow, not surprising. WOW

We all new this would eventualy happen...

Please don't just resign yourselves to defeat. Send snail mail e-mails,faxes or whatever means of communication you have at your disposal. Tell your representatives that you will vote them out if they don't kill this bill. Don't give up.

Very interesting, especially since Christopher Dodd is in the back pocket of the financial services industry.

See this here for more.
They didn't give him all this money and don't expect anything in return you know.

Something is rotten in the state of Connecticut indeed...

I heard this bill passed recently. Is that true? Means the IRS will be coming after all ebay sellers (or other online sellers) soon.

"Means the IRS will be coming after all ebay sellers (or other online sellers) soon."

You should be keeping accurate business records as any B&M store anyway. The only taxable amount is NET profit, not the gross amount of sale/s. If you're not declaring eCommerce profits on your taxes now, you are playing with fire.

You'd be surprised at how many sellers are nailed in random audits for not declaring income or loses. And if you are caught by a random audit after the fact, it's much harder to go back and prove net profit after all expenses. Yeah, it hurts to pay taxes, but the old adage about the first hit not hurting as much as subsequent hits is true -- especially when you can't reduce the income to just net profit and add in late payment penalties and interest.

I'm confused about this.

How does this affect the thousand who sell casually on Ebay? For instance, I belong to many doll lists. Collectors are always selling back and forth to one another -- buyer buys doll, decides they want another doll, so they sell the first doll to raise money. Happens all the time. Will these small hobbyists now be expected to report these things as income tax?

I know you only pay on the profit, but good grief- the amount of extra paperwork and record keeping just by hobbyists to prove they're not really making money is going to be crazy. It's going to really kill off the small Ebay seller who sometimes just wants to turn around, sell part of his collection to fund a new purchase. Egads.

"Will these small hobbyists now be expected to report these things as income tax?"

TECHNICALLY, by law ALL income derived from business, trade, hobbies or investments is taxable and is to be shown on tax returns. There are NO exceptions to the rule. For example, even though not federally taxed, all tax free income derived from municipal bonds MUST be reported, on the appropriate line, on your 1040. All income earned via business orientated hobbies, must be listed (but income can be offset by loses from the hobby, not to exceed the hobby income).

I'm just telling you what the IRS regs are -- it's up to you as to how you deal with them. I do 200+ tax returns a year ranging from client's kids making $5K, to businesses in the millions. I also sit through 6 to 8 full blown audits a year.

Currently, many folks do as you suggest, suburbantreasure, and just ignore the casual trades for collecting or hobby purposes as not being necessary to declare without facing any real consequences. IF this new reporting requirement goes through, the IRS will receive reports similar to 1099 Bs -- investment brokerage reports of sales proceeds -- and will have the ability to cross check those reports with an individual's declaration of income. A casual hobbyist, even for just collecting purposes and not income generation, may generate at least a letter of inquiry, if not a full paper audit, if such reports are not reflected properly on a tax return.

I "casually" sell on ebay, other auctions sites, my web store, local fleamarkets, craft shows etc. We have been filing a schedule C on my tax returns since the first year we started. We also have a local sales tax id # for both businesses & are classified as sole proprietorships on both id's.

I haven't been audited for that but....

About 4 years ago I made the mistake of listening to some jerk on ebay's boards about getting a employer ID number... DON'T do it unless you actually have employees (not yourself if you are a sole proprietorship). I have been fighting with the IRS for years over this. I found out I didn't need one, and I cancelled the number right away but they kept sending me payment coupons. I would call them and they would say oops and tell me to through them away. Last summer an IRS agent knocked on my door and asked my husband where I was how many employees I had why hadn't I paid employment taxes on them in the last 4 years etc.

Those of you who know tessablueskies knows I usually sell crocheted towels and potholders etc. I was about in tears ... help they are after my towels. Boy did that IRS guy feel really stupid when I told him what had happened 4 years ago, and what I sell, AND how if this doesn't get straightened out this time this issue will be in a press release to all the news agencies I can get my hands on. They still sent me payment coupons after that. I called the agent back (he made the mistake of leaving me his cell number) and the 800 # for the IRS back for the 40th time about this they swear they finally got it out of their system. So far this year so good...

Those of you with actual employees I hope you have a really good CPA. I know I will get one if my other ID gets big enough for it and I have to hire someone to help. It's not worth the nightmare the IRS will create for you.

For those of you NOT sure what you should be doing. I urge you to check with your tax preparers, CPA's, lawyers, etc. Laws vary from state to state. It's better to be safe than sorry.

[quote="mongoose";p="181720]
I'm just telling you what the IRS regs are -- it's up to you as to how you deal with them. [/quote]

To this Mr Mongoose, all I have to say is "SHOW ME THE LAW!" Show me the LAW the explicitly states that I must pay INCOME TAXES? Show me the law please.

http://www.youtube.com/watch?v=nX-03Sf1wDo

http://www.youtube.com/watch?v=0CcHgHeraZI&feature=related

http://www.youtube.com/watch?v=pu0iSxAKxT0&feature=related

http://www.youtube.com/watch?v=aroN2uRbIMc

Our elected officials in office have been trying to tax "Garage Sales" "Flee Markets" & "Internet" sites for years. Their push'in hard!

From what I read in the article this law just collects data on the amount of "sales" or "internet" transactions and does "not" collect personal data such as "names" "SSI numbers". Just the amount of internet sales and how much money these internet sales generate.

As I understood the law many, many years ago the government cannot tax the sale of a used item being sold by someone who made the original purchase from a "B&M" store. This is the governments pain in the ass and is considered double taxation. The federal government "cannot" tax something that is being taxed by the state. This is the reason as I understood it years ago as to why the government wasn't able to tax flee market transactions. "The government would be taxing goods purchased by the original owner from a Brick & Morter retail store". That's double taxation and it's getting in the way of them taxing internet businesses such as "drop shippers", "wholesalers", "individuals buying from wholesalers for resale purposes", etc..........

The federal government doesn't collect sales tax. The states collect the sales tax and the federal government doesn't get a "cent" of it. I'm sure the federal government is working on ways to get some money out of it but from what I read they are just collecting data on transactions and transaction sales amounts without collecting personal information and SSI numbers.

I don't know for sure and Mongoose or someone that knows the tax laws will have to pop in with the answer but I think maybe the federal government can tax or put some kind of fee on interstate commerce and international commerce. I'm sure the reason for collecting this internet information is to help the states implement sales taxes and to tax interstate and international transactions.

P.S. The federal government can tax you on your personal income but again, they cannot tax people who are re-selling their items they personally purchased from a Brick & Mortar store as personal income. The states can't put sales taxes on these items. This is the federal and state governments biggest pain in the ass and they haven't sorted it out yet. People that are just cleaning out their garages are saving the online businesses and people that purchase items strictly for resale.

"To this Mr Mongoose, all I have to say is "SHOW ME THE LAW!"

Your rebellion against , or denial of the right of the government to tax wages, earning, etc., is preaching to the choir. I have long been actively involved in showing what a sham the "taxing authority" is in actuality. I've even helped prepare documentation and arguments presented in courts where the defendant prevailed.

With that said, I must also tell you that for every individual who has successfully fought the IRS and won, there are literally thousands who have been convicted for tax evasion.

There are many groups around, that for either legitimate or frivolous reasons, reject the authority of the IRS and Congress, et al, to collect taxes, regardless of the constitutionality of their premise. If you belong to such a group or are following their advice, be prepared to spend a very large amount of money in defending yourself if you are taken to court for tax fraud and or evasion.

I became an Enrolled Agent (tested, vetted and licensed by the IRS to appear before them, including Tax Court, to represent others in tax matters) while learning to fight the system that I believe is basically illegal. And fight the system I do -- but with the knowledge that at any time the IRS can and will prosecute for violating "their laws." You can challenge me all you want about the legality of the tax system; you can challenge the IRS the same way -- but, you have to be able to defend yourself if you are challenged in your beliefs.

Here are a few excerpts of my published works used either in public commentary or actual court cases. As you can see, I'm essentially on your side -- but I continue to file taxes until I know that I can prevail in any action brought against me for not doing so.

"The Constitution prohibits any direct tax, unless in proportion to numbers as ascertained by the census..... [and] ... prohibits Congress from laying a direct tax on the revenue from property of the citizen without regard to state lines...- United States Supreme Court in Pollack v. Farmers' Loan & Trust Company (1895) "... [the 16th Amendment] conferred no new power of taxation... [and]... prohibited the ... power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged...".-United States Supreme Court in Stanton v. Baltic Mining (1916)

If the Sixteenth Amendment conferred no new power of taxation, how then does the IRS get away with using it as the "income tax amendment" to crucify and destroy Americans - especially in light of the incontrovertible fact that it was NEVER legally ratified by the required number of states?

I can even provide you with legal citations of the cases I've been involved with where the plaintiff (non tax paying citizen) has prevailed against the IRS. However, the ratio of plaintiffs unsuccessful to those successful runs in excess of 10,000:1.

While I admire your defiance, the more the better (can you imagine what would happen to the "voluntary" tax system in this country if 10% of the citizens refused to file?), I urge you use caution and common sense in exercising it.