I have been selling second hand items on facebook marketplace this past year, for under the value I purchased them for. I live in New York. I file the short ez form every year since I was 16. my question is: after $600 in sales during one fiscal year, I will receive a 1099K from facebook for they report that to the IRS; for each sale, Facebook collects x amount for taxes, as viewed in my order history [receipts]. That money Facebook keeps, I do not get that when I get paid for the sale of the item. So how is it that I have to pay tax on the sales at the end of the year as well? is this not 'double dipping'? Facebook keeps that money for what purpose? that money is not a seller's fee or any other fee they place, it is listed as SALES TAX.
2 Answers from Attorneys
2 separate taxes. Sales tax on the sale of the products and income tax on any profit from sales. Sales taxes are a deductible item as is the cost of the product. You need to file a standard form 1040 and schedule C for the business income. If the business shows a loss it will reduce other income on your return.
The tax which Facebook collects is sales tax; Facebook sends that money to New York. They don't keep it.
The 1099 reports gross receipts from your total sales, and you use that when you complete your income tax return. Just like a W-2. So that's income tax, whereas the tax Facebook collects and sends to New York is sales tax.