Kids goods

Online second-hand sellers balk at new tax filing threshold

Melissa Williams has been buying and reselling her children’s clothes on various online platforms for over a decade.

But a new tax barrier could force her to suspend her accounts and abandon what she calls a sustainable economic solution for her family.

“If I couldn’t do what I do and buy second-hand things from other sellers, then we go to big stores, especially where I live,” said Williams, a stay-at-home mom. of Walla. Walla, Washington.

The hurdle comes from a revised part of the tax code included in President Biden’s 2021 US bailout, which requires sellers to report transactions on third-party networks that exceed $600 – a significant change from the previous threshold of $20,000.

Sellers must file a Form 1099-K for such transactions, and although the IRS says the change only affects tax reporting rules — rather than broader income taxation — for smaller dealers like Williams , that’s a big change.

She said she had already exceeded the $600 threshold on children’s fashion marketplace Kidizen and e-commerce site Mercari, so she is considering suspending both accounts.

“It really helps us financially, to be able to sell my kids’ used clothes and then turn around and buy their next size up,” Williams told The Hill.

Seeking a return to $20,000

Now a coalition of online retailers, including Kidizen, eBay, Etsy and Poshmark, are pushing for a return to the upper threshold.

According to the Coalition for 1099-K Fairness, which also includes Airbnb, Goldin, Mercari, OfferUp, PayPal, Reverb and Commerce.

The survey, which polled 757 people with 2021 sales of less than $20,000, found that 69% of respondents now intend to sell less or stop selling. And 54% said they would likely dispose of used goods instead of selling them, which could be a blow to the online market and reuse-based sustainability efforts.

“If you’re someone like me, you find this stuff in your closet when you’re cleaning for spring, or you have stuff in your garage,” Renée Morin, eBay’s sustainability manager, told The Hill.

“You want to participate online and get these goods into e-commerce and avoid sending them to a landfill,” Morin said.

At Kidizen — which Williams cites as her favorite platform — sellers across the United States ship directly to buyers, said co-founder and CEO Dori Graff. Most dealers, she said, “get their inventory from their own kids.”

“We’re very community-driven,” Graff said. “With parents going through a similar transition at the same time, it connects them in a way that goes way beyond trade.”

Raising a reporting threshold from $20,000 to $600 “affects millions of online sellers,” added Mary Fallon, co-founder and chief creative officer of Kidizen, who said more than 75% of Site sales this year came from sellers whose transactions exceeded the $600 threshold.

Congress takes note

Several bills introduced on both sides of the aisle propose either returning to the $20,000 limit or settling on a compromise figure.

The Cut Red Tape for Online Sales Act, sponsored by Rep. Chris Pappas (DN.H.) as HR.7079 and Sen. Maggie Hassan (DN.H.) as S.3840, calls for increased threshold at $5,000.

Several Republican-sponsored bills, meanwhile, call for a return to the $20,000 threshold: Rep. Carol Miller (W.Va.) Saving Gig Economy Taxpayers Act (HR.3425), Sen. Bill Hagerty (Tenn.) SNOOP Act of 2022 (S.3546) and a third bill (S.948) proposed by Sen. Rick Scott (Fla.)

A spokeswoman for Miller said she intended to push passage of her bill in the post-election season, noting the MP ‘supports restoring the threshold to its original levels. “.

“However, she is certainly open to negotiation if the Democrats have a reasonable proposal to save taxpayers from their own liberal and hefty taxes and bureaucracy included in the US bailout,” the spokeswoman said, describing what plan as an “absurd budget trick”. ”

Pappas, who proposed the $5,000 threshold, described the issue as “absolutely important to settle before the end of the year.”

“Selling online has helped my constituents supplement their incomes and give second-hand goods a second life,” he said in a statement.

The House Ways and Means Committee — the committee with jurisdiction over this section of the US bailout — did not respond to The Hill’s request for comment.

A spokesperson for the Coalition for 1099-K Fairness said the group “supports any legislation to raise the threshold.”

“Even a $5,000 threshold would provide significant relief to families and micro businesses. The hope is that the threshold will be raised as part of a package of tax extensions during the lame duck session,” the spokesperson added.

A “big deterrent”

At Kidizen, if sellers approach the current $600 threshold, the company sends them a warning notification and requests their W-9 information, Graff said.

“For most of our salespeople, it’s their social security number,” she said, noting that that in itself is a “great deterrent.”

“We had a number of stores that actually put their store on hold for the rest of the year,” Graff said.

Williams, who is debating whether to suspend her accounts, described “a scary situation” in which she has no idea how her sales are impacting her tax return.

But moving away from those platforms and back to big-box stores would also mean giving up its ability to buy and resell quality fashion brands, according to Williams.

“Unfortunately a lot of these brands that focus on organics and sustainability and recycling and all that – they are more expensive,” she said.

While the most sustainable fashion practice is buying fewer, higher-quality items, the second most sustainable behavior is engaging in online resale, according to Kidizen’s Fallon.

Emphasizing that Kidizen’s brands retain their value and typically reach “far beyond a child’s reach,” Graff added that “their company’s goal is to keep items in circulation for as long as possible.”

“If we deter consumers from reselling,” Graff continued, “they might go back to fast fashion.”

Williams said she hopes Congress decides to return to the $20,000 threshold.

“I would know that I would never have to worry or question that,” she said. “There’s no way I’m going to achieve that – not even close, doing what I do.”

“We’re not trying to get away from paying taxes,” Williams added. “We try to dress our children.”