While e-commerce has been steadily on the rise for years, the COVID-19 pandemic accelerated its popularity — and in turn the rise of counterfeit products. The staggering retail-industry problem continues to grow as the total global impact of counterfeiting and piracy are expected to reach $4.2 trillion this year. The Organization for Economic Cooperation and Development (OECD) estimates that pirated and counterfeit products make up 2.5% of world trade or $464 billion a year.
As fraudulent and counterfeit products continue to grow in popularity, businesses, consumers and lawmakers alike are calling for more regulation and intervention. One such example of this is eBay’s announcement in April 2022 that it has joined the Coalition for 1099-K Fairness, along with online marketplaces Etsy, Mercari, OfferUp, Poshmark, Reverb and Tradesy. Amazon, however, was noticeably absent from the list.
The Coalition for 1099-K Fairness
The coalition of online marketplaces has banded together to protect casual online sellers, entrepreneurs and micro-businesses from unfair tax and privacy burdens. The group was formed in response to major changes in online tax reporting thresholds, such as the American Rescue Plan Act of 2021, which sets the new reporting threshold at $600 with no minimum transactions, from a previous threshold of $20,000 and 200 or fewer transactions.
Prioritizing occasional, non-professional sellers, the group is committed to maintaining an accessible, fair and safe resale market for used and pre-owned goods via online platforms, while empowering entrepreneurs and micro-businesses trying to get their business off the ground by selling online.
So what’s the problem?
The recent change in the tax code could cause a lot of confusion for American sellers who just sell used goods and owe no taxes, but will now get complicated IRS forms and potentially require experts to file taxes. Additionally, online marketplaces will now be required to collect full social security numbers for sellers, even when they only have a few hundred dollars in online sales.
In February 2022, eBay surveyed the small seller community targeting U.S. adults who have sold goods online in 2021 and made less than $20,000 in online sales in 2021 and are aware of eBay or similar companies. The challenges and pain points resulting from this new reporting requirement and found:
An emerging deterrent
- 69% said they are likely to stop selling online or sell less online based on the new requirements.
- 54% said the new requirements would make it more likely that they dispose of used/pre-owned goods instead of selling online.
- Of the nearly 40% that said the new mandate poses an economic hardship, 74% said they sell online to help pay for necessary personal expenses.
- 85% do not think the IRS should be targeting individuals who only occasionally sell online.
- 60+% of African Americans and Hispanics sell online to help pay for necessary personal expenses compared to the representative sample (47%).
- 86% of women with children said they sell used or pre-owned goods online.
How can we protect consumers and support sellers?
Recent mandates like the American Rescue Plan of 2021 could make it more difficult for sellers to place products online and decrease the overall volume of products sold. They could also lead to other potential rules that could impact sellers and shoppers. While the retail industry certainly needs a safer shopping experience, especially online, it also needs to be accessible for everyone. The Coalition for 1099-K Fairness certainly demonstrates that these marketplaces do have concern for their consumers, but there are undoubtedly more ways they can ensure that potentially dangerous or fraudulent items are removed from their platforms.
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