Taxes

[GabeC90]

Hello,

If someone is trying to sell a diamond for $20,000+ In Texas.. do they have to pay state sales tax and taxes to the IRS? The buyer and seller are both confused about the process. It’s a personal sale and they are worried about how to handle the taxes.

The seller wants to know if she has to remit sales tax and report the money received to the IRS?

The buyer wants to know if she needs to report the money used to the IRS?

Hopefully I explained it correctly.

Thank you!

 

[PreRaphaelite]

I can’t speak to the legality or morality of paying tax on the transaction but here’s the official policy:
https://comptroller.texas.gov/taxes/sales/

Good luck to all involved!

 

[Miss Marple]

In general, private sales are not taxed. The information above re taxes in Texas apply to retail sales. A random person selling a pre-owned item as a one off would not be subject to those rules. If I recall correctly, the IRS also does not attempt to collect income taxes on such a sale—assuming no profit by the seller.

 

[new-beginning]

sales tax is paid to the state, not to the IRS. And yes, Texas wants the $$$. The buyer pays the taxes. If the seller is a business they probably will collect the taxes and forward. If this is a transaction between individuals, it probably is the buyer's responsibility to pay the state.

 

[Karl_K]

If selling it for a profit about having to pay the irs:
"Sale of personal items.If you sold an item you owned for personal use, such as a car, re-frigerator, furniture, stereo, jewelry, or silver-ware, your gain is taxable as a capital gain. Re-port it as explained in the Instructions for Schedule D (Form 1040). You can't deduct a loss.However, if you sold an item you held for in-vestment, such as gold or silver bullion, coins, or gems, any gain is taxable as a capital gain and any loss is deductible as a capital loss."

"Example 39.You sold a painting on an on-line auction website for $100. You bought the painting for $20 at a garage sale years ago. Re-port your $80 gain as a capital gain as ex-plained in the Instructions for Schedule D (Form 1040)"

https://www.irs.gov/pub/irs-pdf/p525.pdf

 

[Karl_K]

The buyer pays the use/sales tax.
https://comptroller.texas.gov/taxes/sales/faq/use.php

 

[Venzen007]

It's not on the private seller to ensure the buyer pays sales tax by collecting it for the State. Buyer pays the price he/she and the seller have agreed upon; what the buyer does after is between the State and the buyer. Private seller shouldn't be worrying about collecting sales tax.

 

[MollyMalone]

In general, private sales are not taxed. The information above re taxes in Texas apply to retail sales. A random person selling a pre-owned item as a one off would not be subject to those rules. If I recall correctly, the IRS also does not attempt to collect income taxes on such a sale—assuming no profit by the seller.

FYI: the seller in the OP's question actually should collect, and forward, the sales tax on the sale of the diamond because the selling price is more than more than $3,000 -- the annual limit on the exemption for a private individual making a one-off sale or only occasional sales of items originally purchased for their own use or a family member's personal use. And if the sale is of an item not originally purchased for such personal use, a seller not engaged in retail sales is expected to collect and forward the sales taxes on any one of more than 2 sales in a calendar year regardless of the aggregate sales amount.
https://texreg.sos.state.tx.us/publ...=&p_ploc=1&pg=3&p_tac=&ti=34&pt=1&ch=3&rl=316

It's not on the private seller to ensure the buyer pays sales tax by collecting it for the State. Buyer pays the price he/she and the seller have agreed upon; what the buyer does after is between the State and the buyer. Private seller shouldn't be worrying about collecting sales tax.

psst... that's not true everywhere in the US of A. See my FYI above re Texas; I know Florida and NY have similar provisions & I'd bet these three are not the only states.

 

[Venzen007]

psst... that's not true everywhere in the US of A. See my FYI above re Texas; I know Florida and NY have similar provisions & I'd bet these three are not the only states.

I read it, and yep, that's the way I read it, too. I don't agree with it, the state forcing a private citizen to act as their agent in collecting taxes from another person when they are not in the business of doing so, but who am I?

 

[Miss Marple]

@MollyMalone thanks for jumping in to clarify. That what I get for not reading the whole thing.

@Venzen007 totally agree re tax collection.

OP--looks like you've received someuseful advice here.

 

[Potti]

If selling it for a profit about having to pay the irs:
"Sale of personal items.If you sold an item you owned for personal use, such as a car, re-frigerator, mefurniture, stereo, jewelry, or silver-ware, your gain is taxable as a capital gain. Re-port it as explained in the Instructions for Schedule D (Form 1040). You can't deduct a loss.However, if you sold an item you held for in-vestment, such as gold or silver bullion, coins, or gems, any gain is taxable as a capital gain and any loss is deductible as a capital loss. Best tax consultant near site Your Books On Time."

"Example 39.You sold a painting on an on-line auction website for $100. You bought the painting for $20 at a garage sale years ago. Re-port your $80 gain as a capital gain as ex-plained in the Instructions for Schedule D (Form 1040)"
https://www.irs.gov/pub/irs-pdf/p525.pdf
http://yourbooksontime.com/tax-consultant

thanks for the detailed answer!

 

[LLJsmom]

Three potential levels of taxation in general.
1. Federal payable to IRS. Based on gain. @Karl_K is correct.See his link to Schedule D. Paid by seller.
2. State level income tax based on gain. Paid by seller. Texas does not impose income tax.
3. State level sales and use. Varies by state. Both and seller and buyer should research.

Just make sure all levels are addressed.