Does anyone understand the new PayPal tax rules? I know it only applies to "Goods & Services" payments. I know it generates a "1099-K" which gets sent to the IRS. But beyond that I don't understand much. Do you pay same tax rate as regular income tax? Is it reported on both federal and state returns? Are we required to collect state and county sales tax on private sales now?
It's not just PayPal it's every peer to peer payment system and online selling site (so ebay, mercari, venmo, etc.)
1099K is generated if you get income over $600 (from goods and services on PayPal, on your total including tax and shipping on eBay from what I read). That is income so it goes on fed and state returns.
If you can provide proof of what you paid for the items you sold, you only need to pay income tax on the profit you made. Otherwise you gotta best guess it and hope to not be audited.
Talk to a tax pro in your state about sales tax, but for the amount most people sell it probably doesn't matter much. If you are selling on eBay it's already been charged to the buyer. If you are selling out of state directly, it's generally the buyers responsibility to report it on their tax return and pay taxes.
Rule was in place last year but at the eleventh hour the IRS decided they would not enforce it for 2022. They may decide that again, or congress can pass legislation raising the minimum $600 threshold to a more reasonable amount (I believe it used to be $30K before the rule change last year).
