And no, selling keyboards and keycaps between hobbyists doesn't count. But because this is a forum full of smart people, we added the IRS test to Rule 1 to push people off of the fence one way or the other. If the IRS *would* rule your activities a business on Schedule C, then it is a business. If the IRS would rule it a hobby, then it is not a business according to that test.
...
Does that answer your questions?
no.
The VTOS clearly state.
1. Who qualifies as a Vendor?
a. Any individual, entity, or representative of an entity that according to IRS regulations would be classified as a business.
b. Any individual, entity, or representative of an entity that profits from sales, services, or group buying activities.
c. Any individual, entity, or representative of an entity whose intent is either (a) or (b) above.
d. Any individual, entity, or representative of an entity who, in the assessment of the Administrators of this forum, should be so classified.
The way I interpret that, if I take this HO CC I paid $30 for, and I list it in the classifieds for $70 and sell it. I have qualified for 1.b and am now a vendor, because I have made a profit from sales, and I don't plan on donating a cent to geekhack.
Also with you saying "selling between hobbyists," what qualifies as hobbyists? Someone who makes more than 5 posts a day? Someone who has more than 3 keyboards? What's the difference between a vendor making a sale, and a hobbyist making a sale?
I feel if you are going to have an exception to the rule, it should be more clearly defined.
Also the way Rule 1 is worded, it seems like if you meet any of the four criteria, you are a vendor, however that would make 1.c pretty much redundant in that case?
Excellent. Thank you for answering MY question, even if I did not answer yours.
I've expanded the quote of Rule 1 to show it in its entirety. Let's look at each line...
1.a. Any individual, entity, or representative of an entity that according to IRS regulations would be classified as a business.
This is first because it is the most important. And the IRS isn't associated with anyone here. (Non-US folks, the IRS is the tax man, and even if you don't owe our tax man money, the rules in this case can be applied anywhere.)
Basically, if you do something that can't and doesn't make a NET profit, then it isn't a business. If you drive a race car on the weekends, but spend $50 for every $1 you win, you are not a business, according to the IRS. Also, if you invest $1,000 in equipment and then make stuff that earns you $800 in GROSS margin, you have NOT made a NET profit, and are not a business according to IRS rules. Also, if you sell so little you are not even required (in the US) to file a Schedule C, you aren't a business -- you are, in their words, a "hobbyist."
So, if you "take this HO CC I paid $30 for, and I list it in the classifieds for $70 and sell it", the IRS isn't going to classify you as a business, and neither does Rule 1.a.
But what about Rule 1.b.? To start, you aren't an "entity" like CM, you're not a representative of an entity like CM-Rajiv, so those don't apply at all. The the question becomes "are you an individual who profits from sales, services, or group buying activities?" Are you? In any given year, do you make more money than you spend on sales, service or group buying activities? I suppose if
all you do is that ONE transaction, then you might say you made a profit. But (a) you did way more than that, (b) the money and the number of transactions is trivial even if you change that out to a single $200 keyboard you sold for $400, and (c) you had no other costs WHATSOEVER involved in making the sale?
Rule 1.b. is to prevent people and entities who are actually making money from pretending they are not vendors. It is almost true that you could reduce it to absurdity and make a literal case, but really, why bother?
On the other hand, if someone is actually making a living buying and selling, and then posts what appears to be an innocuous Great Find that points to their eBay site, that person is a vendor, and other people on this forum deserve to know so they can make informed choices. Or if some PR person from NewEgg starts posting about how excellent their new keyboard is, that person is a representative of an entity, and should be classified as such.
Then there is Rule 1.c. What if you are starting up a keycap site, or even are running a long-standing keyboard site, but due to the biggest economic downturn in decades you are not actually turning a profit, but you are TRYING to do so? Well, dang, you are a vendor, even if you haven't made money yet.
So, if the government thinks you aren't a vendor, you aren't trying to pretend you are a regular guy instead of a vendor, and you aren't just an unsuccessful vendor, then who cares if you sell a CC for a profit on that single transaction? (By the way, I'd be happy to buy a CC off of you for $70. Call me!)
And Rule 1.d. is there because there are now TWENTY THOUSAND PEOPLE on geekhack.org, and somebody is going to figure out a loophole and we need some sort of safety net.
Anyhow, the short version of the VTOS is still just "Do you make money doing this? Then don't be sneaky and do be polite." So if we accidentally make one too many people be polite, the world won't end. On the other hand, one person could sneak in and make a bunch of money while everyone thought he was being a good guy. That is the guy we want to be sure we shine some sunlight on.
So NOW have I answered your question?
Seriously. I am trying to do just that.
- Ron | samwisekoi
