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what's up guys welcome to daily refinement  today's video i'm going to go over every single   ebay or reseller tax related question that  i can think of um i'm not a professional   when it comes to taxes and i have lots of  resources for that but i've actually made   a blog post at dailyrefinement.com blog slash  restart taxes that hosts all this information   also this video will be time stamped so you can  skip ahead to the question that you're looking for   and i also have a playlist with all these tax  questions in it to help you guys along your   way and this should be more than enough to get  you started with reselling and all the numbers   it may seem super overwhelming at first but  honestly it's not that complicated and i'm   going to go over step by step how you can  accomplish all your tax and bookkeeping   in this video so please smash the like button  consider subscribing we'll see you guys inside so guys first question is going to be what  do i need to actually keep track do i need   a spreadsheet do i need a ledger do i need  a journal what do i actually need so let's   keep it really really simple what you need is  to open a separate bank account this is free   so i recommend you open a bank account put as much  money as you feel comfortable putting in there   for your resale business and then also you need a  receipt book so i have one in my list of resource   supplies at bitly slash resource supplies that'll  go to my amazon store inside their search for a   receipt book and this is a simple transaction  receipt that keeps track of something that you   buy in cash so in the beginning maybe fill out  one of these even if you buy something with a   credit card just so that you're aware of all the  different expenses associated with reselling so   first thing that you need separate bank account  use the debit card that comes with that to make   purchases in the beginning and a simple receipt  book to keep track of things that you pay for   in cash now when the irs asks you to verify  what those cash purchases are for essentially   what they're going to do is look at the atm  cash withdrawal so let's say you withdrew   a hundred dollars and then you went out to a  garage sale flea market thrift store whatever   paid for something in cash that receipt that you  have is what they're going to use to validate   that transaction and that withdrawal to see if  that matches up it's as simple as it gets so you   don't need anything fancy you actually don't need  any spreadsheets if you only make purchases with   that debit card and when you use cash you use this  receipt book and you give this to a professional   a cpa or an accountant they will be able to do  your taxes for you it's pretty straightforward   the bank account will show how much money came in  from ebay or amazon or mercari poshmark it'll show   the receipts how much money went in that's what  they're going to report to the irs is how much   income that you made and it's your job to subtract  all of the different expenses out of that and the   amount left in your bank account is essentially  what you pay taxes on that's sort of how reseller   bookkeeping and taxes work now this video is  sponsored by mark's tax course so as you guys   know um my friend mark not your dad's cpa he has  a course on bookkeeping and accounting so those   two courses are on my write up at reseller my  reseller blog that we'll put again here or in the   description below so you can check out that blog  post check out mark's two courses and he goes over   all these different topics that we cover today  in more in greater length and explains all of it   you can ask him he's a tax pro and the reseller  and this is something i found pretty astonishing   he's done over 1 000 reseller tax returns in the  last couple years that's a lot it's more than   one a day so not only is he a reseller files his  own taxes as a reseller he also does tax returns   for literally thousands of resellers so that's one  resource also as you guys know i run a reseller   partnership with my colleague tech and sports  where we show people how to run an online store   inside our group cheryl miller is our accountant  so inside our group we have an accountant that   helps people with any questions so if you guys  have more questions beyond what's in this video   which i'm sure you will tag her and she also has a  spreadsheet that you can buy it's very inexpensive   where you enter in everything and it will keep  track for you and again this is just extra you   don't actually need that spreadsheet but in the  beginning i recommend you do line by line and   try to figure out exactly how much money are  you making as a reseller because eventually   you're going to want to pour on the gas and grow  your business and if you don't know your numbers   then i don't recommend doing that so if you  understand how much money you're making on one   item then you can do the same thing 100 000 or a  million times just have to understand it one time   so the first thing you need to do is have the  bank account receive book and understand how   it works on a single transaction number two is  should i hire a professional or do taxes myself   now you can definitely sign up for a service like  turbo tax and it will sort of guestimate what kind   of deductions you have for your home business but  i'm not a professional so i recommend getting a   tax professional at least for the first year get a  cpa or a tax accountant and reach out to them and   see if they have resources to help you set up your  your bookkeeping your accounting right the first   time so i recommend hiring a professional just  like hiring a plumber at your house you could do   it yourself watch a couple youtube videos and  then start taking stuff apart but you can end   up with a giant mess if you don't properly do  it so i think it's exactly the same as hiring   a plumber or an electrician if you don't want to  set your house on fire or flood your entire house   you can just pay someone a few hundred dollars for  a couple of hours of time and solve the problem   you can watch them after you're really curious  how it works or you can watch the youtube videos   and hire a plumber or electrician but i recommend  hiring a professional in the beginning but you can   totally do it yourself i personally do do my own  tax return but not at first in the beginning i did   hire a pro and at this point i actually still hire  someone to look over it i do it myself but i still   hire someone to double check what's the difference  between bookkeeper accountant tax preparer or cpa   or enrolled agent these are different types of  terms that tax professionals use depending on what   kind of education and credentials they have so  make sure that when you're picking an accountant   maybe ask them what their credentials are how  long they've been doing it make sure they have   experience with online sales since we're in the  online sale industry more and more accountants   have experience with what i call a quilted  income where you put together a little bit   of door dash a little bit of uber eats a little  bit of uber a little bit of real estate property   income and maybe you have a part-time job at  starbucks more and more that's becoming a normal   thing so make sure that you have an accountant  that has the proper experience to do the best   job with you and find the most deductions why do  we have to pay taxes when we resell now this is   a pretty common question because people think  i've already purchased this item when i resell   it why do i owe tax on something i already paid  tax for in the first place now there's a couple   of differentiators here one is the difference  between income tax and sales tax when you buy an   item depending on what state you live in the state  assesses the tax that they collect on that sale   income tax is what you pay on the income you earn  so technically if you sell something even for one   dollar you actually owe taxes on that that's just  the system that we live in but luckily the system   that we live in also has ways to deduct expenses  out so typically when you sell something that you   already own you don't owe tax on it because  the cost that you paid for it is above the   the cost that you paid for plus the expenses to  fulfill that sale are typically more than what   you paid for it so you didn't earn a profit if you  took the proper deductions now again that's really   important and again this is not a tax channel  so don't sue me but when you are selling your   own personal items that's a little bit different  than selling items as a business for profit so you   guys know on my channel i talk a lot about the  difference between being a hobby and just doing   things for fun and being a professional where you  actually sell things for a profit and i also want   to point out in the in mark's course he actually  goes over how some hobby income is taxable   and you can't take the deductions so think about  how crazy that is you earn income from let's say   you bake a pie with your friends for your  friend you charge your friend 30 for the   cake and because you're not set up properly you  can't take all the deductions like home office   deduction all that stuff so you actually may not  be able to deduct all the expenses incurred minus   like i think um i'm not again not tax professional  but i believe that the cost of making the cake   is probably always deductible but again ask a  tax professional but most of us listening to   this channel are doing this as a business and  not for fun not for a hobby you want to earn a   profit that's the main differentiator so somebody  brought up what if i'm at a garage sale do i need   to charge sales tax and again that's typically  for something done for a business purpose not   just a personal flip so a little bit different  if you have the garage sale running 365 days a   year and that's the way that you earn money you  probably should collect and remit sales tax now   sales tax remember most of the platforms that we  sell on collect and remit the sales tax for you   but i still recommend that you file a zero percent  sales tax on your um tax certificate because a lot   of resellers have tax certificates where you can  end up buying items without tax so if you buy   something without tax you're exempt that's tax  exemption but the state's going to want to know   you bought 500 with the stuff tax free when you  sold it how much sales tax did you collect and   remit that's going to be what the state expects  so a normal business that buys something for 500   will sell for one thousand dollars if you have a  ten percent tax return or tax rate in your state   you owe your state one hundred dollars now if  you sell on ebay poshmark mercari amazon they'll   probably collect that 100 for you and send it to  the company or send it to the government but again   you're responsible for sales tax and  i do recommend that you file a zero   tax owed because the companies that you sell  on typically remit for you now i'll give you   another example for me on my own website i have  to do it on my own if i collect it not using one   of the payment processors that does it for me so  it's interesting depending on how you sell things   either you do it or somebody somebody else does  it or another platform does it but somebody's   got to do it if i don't make much money do i  still owe taxes and the answer is yes if you   make one dollar profit you make one penny profit  you actually still owe tax on that because it's   it's a profit so you owe tax on all of it i know  it might seem unfair but it's also unfair that you   can deduct all your business expenses and a lot of  small businesses actually are pretty close to just   breaking even so it's a tax haven for a lot of  people owning a small business because they get a   percentage write-off and a lot of different things  that they do so it's important to understand yes   you owe taxes but then you also have abilities to  reduce your tax burden and you don't have that at   a regular job you don't get to deduct your commute  you don't get the deduct home office usually not   because those are built differently if you go  to somebody else's workplace and do work it's   not the same as you doing work at home at your  own desk that you paid for in your living room   do i have a hobby or business now the main is are  you doing it for fun or you're doing it to earn   a profit it's pretty straightforward most people  listening right now are doing this as a business   so congratulations you own your own business  as soon as you sell one item and this is going   to bring us into the next question which is how  should i set up my business should i be a sole   proprietorship should i be a partnership should  i be a corporation how should i organize my my   company um so by default guys everyone is a sole  proprietor so you do not need to set up a separate   corporation or partnership or any type of business  structure you can just file under your normal   social security number so whatever your number  is one two three four five six seven eight nine   you file under that as your income there's  a separate form and again this is why you   want to talk to a professional in the beginning  to make sure that you're filing this properly   so you're going to essentially file as a sole  proprietorship as a default and if you decide   to go through a corporation i don't know the  exact number where it starts to make sense but   essentially you're paying self-employment tax  when you are a sole proprietor and that's around   18 depend i mean don't quote me i'm not  a cpa but there's a self-employment tax   and part of that is the you're paying for the full  amount of social security so again i'm not going   to go over exactly what self-employment  taxes because i'm not an accountant but   you're responsible for self-employment  tax but when you work for somebody else   they are responsible for at least half i think  that's how it works so the way that i'm set   up because a lot of people are curious how my  company set up is i work for daily refinement   inc it's my own company but i work for it's a  corporation so i pay myself a salary and that   is taxed differently than the amount at the  end of the year that i take as a dividend   so if i earn a profit so whatever my salary is  if there's money left over that money left over   is taxed differently so my salary is based on a  reasonable amount per listing and i count that   as two dollars i think two dollars is very  reasonable for the to execute a living and i   think if the irs came here and looked at how  much i'm doing i can do at least 10 an hour   so that's a minimum of 20 an hour that's how i  came up with that number of at least two dollars   so personally i'm trying to sell 50 000 items  per year so i put my income salary for my company   around 100 000. that's how that is organized  that's how it's set up if you're a corporation   it might make sense if you're earning enough  that you want to reduce that self-employment   tax so you're kind of working for your company  and you're an owner of the company if that makes   sense it's a little bit more complicated  and again not necessary for 99 of resellers   does my business location matter i personally  think that your business location does matter   because wherever you are conducting business is  probably where you should remit and and send sales   tax so i don't think it's reasonable for me to set  up my company in montana because i don't i don't   live in montana i don't have stuff in montana i  don't do anything in montana so i recommend that   you do your business location where you live next  is how does selling on multiple platforms affect   me so as you guys know some people throw some hate  on me because i don't want to sell on multiple   platforms anymore i just want to pick one and the  reason is because it kind of complicates the tax   recording because when i was on poshmark mercari  ebay amazon essentially i get four different tax   forms that i need to fill out and i need to report  all four different incomes it's already difficult   and complicated enough to just list one platform  and i'm not in the business of collecting as many   1099s as possible that sounds like a recipe for  disaster in fact i was talking to my videographer   about how i could make my life as complicated as  possible and it would be me having nine different   stores on nine different platforms and only  earning a small amount of money per platform   that would be infuriating going over all those  tax returns at the beginning of the year so again   i don't recommend you list on more than one  platform but if you do it just makes for a   little bit more bookkeeping and accounting and  a little bit more on the reporting side you've   got to report all the different kinds of income  so again you kind of want to make as much money   and as few different opportunities as possible  i understand they say don't put all your eggs   in one basket but maybe don't put 20 eggs in  20 different baskets that's kind of difficult   we have 24 hours in the day i think it's it would  be foolish to put it in 24 different buckets   so just pick a few what is bookkeeping and how do  i do it essentially bookkeeping is record keeping   so each time a transaction happens where you  buy something or sell something bookkeeping is   just keeping track that's how i look at it and  again i'm not a professional there's people who   literally have the job of just bookkeeper they're  just keeping track and then there's the role of   accountant who's essentially in my opinion looking  for the way to maximize your your tax deductions   so you owe the least amount of tax one person  keeps track one person maximizes your deduction   that's how i look at it what is inventory and how  do i keep track of it so this is a pretty common   question and i would have you guys google search  the difference between cash accounting and accrual   accounting so most resellers i recommend cash  accounting where you assess the cost of goods sold   right when you buy the item the other way would  be the accrual accounting where you count the   cost of goods sold when the item actually sells  so that's a bit more complicated you have to pick   one or the other and i think i'm not again i'm not  an accountant but i think you can only switch one   time so i recommend you pick cash accounting but  talk to your tax professional first and the way   the inventory is deducted is that it's an expense  so if you buy something for 20 and sell it for   10 you're gonna end up taking a loss but if you  buy something for 10 and sell for 100 you end up   making a profit but the the inventory cost is just  that 10 it's always the same what are some common   deductions that i should look for so again this is  going to depend on your business but i recommend   home office deduction i recommend a percentage  of your internet element electricity phone bill   maybe the part that you use for your business i  recommend maybe some supply shipping supplies i   recommend all shipping that you pay to usps post  office or fedex all the marketing fees you pay to   ebay poshmark mercari all those platform fees  all those different things are tax deductible   and again this is why you want to talk to a tax  professional because they can give you every   single deduction that they can think of and that's  literally their job to reduce your tax burden   my taxes are a mess how do i deal with it so i  recommend you just start over and i think that   one main theme on my channel is that the  fastest way to learn something is to start   all the way back at the bottom of the mountain  most people don't want to do that they feel like   they have enough experience that they'll  have life experience and i was saying that   the older you are typically the less likely you  want to be to start over like if you tell somebody   who's 64 years old you have to go all the way back  to the beginning and learn this it's not going to   be something they want to hear necessarily unless  you are a lifetime learner and you're okay going   back to the beginning and starting over but even  me personally i consider going back and starting   over not beneath me anymore i think it's it's  how you do it um when i was installing the dimmer   switch at my house i was telling people that if i  installed the wires incorrectly i could actually   start a fire so i think it's important to manually  take your time and learn all the different steps   even though it feels like starting over because  it is so definitely take your time as you're doing   this if your taxes are a mess just start  over and keep good records moving forward   with a little extra time each day you can go back  and adjust your previous issues and the only thing   you can do is be more organized in the future  and work on your mess one transaction at a time   is the irs out to get me and how likely am i to  be audited so again i'm not a cpa and i've never   seen anybody get audited from reselling but it  can happen and what they're looking for and i'll   tell you this is because with some experience in  being suspended on ebay i think what happened is   that i was audited right so essentially somebody  went through my sales and said wow this person   is doing a lot of sales we need to do more  investigation and there were periods where i had   more sales than less so i went from selling  two thousand dollars a day to like six thousand   dollars a day that's a pretty dramatic change  so that is what causes people to get audited so   when you are doing your accounting and your  bookkeeping you want to be as consistent as   possible if you're trying to avoid being audited  then you wouldn't all of a sudden make a million   dollars in one day and then go back to making 200  a day so being out of that is extremely unlikely   the irs is not out to get you and in the case that  you do get audited it hasn't happened to me but   it's not actually that difficult because all the  money is traceable right you have a bank account   you can see what's coming out of the bank account  you can see what's going into the bank account   so from my experience i'm looking at all  these different ways people are trying to   get out of paying taxes it's actually pretty  straightforward and it's part of just living   in the united states so i recommend that you  just work with the irs i don't feel like the   irs is out to get me and i live in california  where i have the highest tax rate i think okay   what if i don't have any receipts or records  that's okay but moving forward you need to have   receipts and records otherwise you won't be able  to verify the purchase so what the irs is trying   to do is prove that you spent this much money  on this thing so you just need those records   and receipts to help you build your case so i  recommend you keep your tax records forever but   some people say seven to ten years it's up to you  to determine how much it is you could also email   every single record to yourself or use an online  receipt holder that holds all the information   how do i separate business from personal so for  me personally i separate business and personal   personal by just using two different credit cards  my apple pay is only set up for personal and i   use a credit card each time on my business  purchases so i can keep track and i'm also   aware of what i'm swiping on i actually  probably don't recommend using apple pay or   pay because it's so easy to spend money without  knowing what it actually is if you can get into   the habit of paying cash writing a check using a  debit card you can see the balances go down go up   go down go up versus a credit card you don't  really get to feel that until the end of the   month and most people don't have a grasp of is  their monthly net worth going up so i definitely   recommend doing things as manual or analog  as possible start with cash then a check on   a credit card keeping it business and personal is  pretty straightforward i have two business cards   i'm sorry two credit cards on my wallet one's  personal ones business pretty straightforward   what is an easy way to keep track of my  business number should i use a spreadsheet   i think so in the beginning you should track  all the different expenses there's about nine   different fees associated with selling on ebay  so it's important to understand what all nine   of those are so i would recommend google docs or  excel google docs is free so i recommend opening   up a sheet and just breaking it down one item by  one i'm also kind of digging the common core way   they teach math in elementary schools now where  they try to show people three carrots um times   four carrots is 12 carrots so it's three sets of  four carrots they're trying to like visually show   kids how math works versus when i grew up it was  memorization three times four twelve four times   nine thirty six i know all my math tables from  memorization but i was never explained to me   that three carrots times four carrots is twelve  carrots and you literally look at three groups   or four groups of three carats that's a good  way to visualize that's why i recommend using   a spreadsheet because you can adjust one number up  or down and see how it affects the final number so   really really important keep track have a basic  understanding of algebra and how math works   how do i not get overwhelmed this is a big  one it can seem overwhelming and that's why   i recommend you just start small start with one  item five items 10 items understand and then grow   most people are just growing non-stop and they  don't really stop to figure out what's going   on and that's how you get overwhelmed imagine  like you are married right now and every single   week you take on a new spouse two spouses three  sauces four spouses it would get it would stack up   you would start forgetting things you would start  following through on your commitments and promises   it'd be very expensive to figure out what  happened to a previous relationship so if you   think of every single transaction as a  relationship you would definitely take   your time and complete them have closure on  all of them before moving on to the next one   what if i have employees or contractors this  is important so if you are an employer so   you actually hire your employees then you are  responsible for collecting some tax from them   right so they fill out their form a w-2 employee  is a little bit different the employer has a   lot more responsibility on a 1099 route you're  sending somebody the full amount that you pay them   and they are handling taxes on their own so  from my experience i've had much better luck   working with w-2 employees it's more stable it's  there's more protection for the employer more   protection for the employee it's better people  are more reliable because they have more security   1099 is challenging because it's sort of work  when you can when you want how you want to do it   that's how ebay pays us right ebay pays us however  much we want to work they don't say you have to   work 9 am to 5 pm and load items in and ship  they don't tell you any of that you just do   whatever you can they pay you whatever whatever it  amounts to so it's really important to understand   working as a contractor is what we do also but  we're also employing ourselves trying to make   an income so that's why like i don't really care  about whether or not it's fun because i'm doing   this to make a living i want to know what my hours  are how much reason how many resources i need to   accomplish it i want to make it consistent so the  fun part comes from after the paycheck is in my   bank account then i can go have fun the sexual  part may sound a bit boring but it's honestly   if you can look at it like a relationship and  you're nurturing and understanding what it needs   and it doesn't have to be boring some people and  we're never taught this stuff um how important it   is to balance a checkbook have a budget understand  how your your finances work in your business i was   never taught that i had to learn it on my own so  take the time to really understand how this is   gonna work i highly recommend you take both mark's  bookkeeping course and his accounting course if   you want to get like a crash course on how this  works if you're looking for the long term route   then you can definitely join our patreon group  patreon.com resource podcast in there you can tag   sharon miller who's our accountant or you can ask  me or anybody else in the group how to approach   some specific tax question and we'll do the best  we can or point you to a professional resource   to somebody that can actually answer legally what  you're listening right now is just my own personal   experience and the questions that i pulled  today were the most commonly asked questions   so if you guys have any more questions that  weren't covered please email me at chris   dailyrefinement.com or comment below i read  every single comment um if you want a more   detailed response i would email me but you can  throw it in the in the comment section below and   i'll do my best to answer those so i appreciate  you guys until next time make progress daily you