GC Reselling Tax Implications

projectx

Level 2 Member
In an effort to diversity my miles and points strategy I'm wading into the GC reselling arena. I've made a few small sales already as I get my feet wet, but I'm looking for info on the taxes of all this. Granted, the CC rebates earned will not be taxable, but any profit on the cards are.

I haven't found much out there, other than this useful post:
Code:
http://moneymetagame.com/metagame/making-the-gift-card-business-official-gift-card-ark-llc-is-born/
...as you can see in the comments there are differing opinions on functioning as a sole prop vs an LLC. As I get deeper into all this I can't help but wonder about other risks out there I may have overlooked.

Anyone out there with experience card to share some advice on how to approach this?
 

Matt

Administrator
Staff member
In an effort to diversity my miles and points strategy I'm wading into the GC reselling arena. I've made a few small sales already as I get my feet wet, but I'm looking for info on the taxes of all this. Granted, the CC rebates earned will not be taxable, but any profit on the cards are.

I haven't found much out there, other than this useful post:
Code:
http://moneymetagame.com/metagame/making-the-gift-card-business-official-gift-card-ark-llc-is-born/
...as you can see in the comments there are differing opinions on functioning as a sole prop vs an LLC. As I get deeper into all this I can't help but wonder about other risks out there I may have overlooked.

Anyone out there with experience card to share some advice on how to approach this?
How much profit?
 

thepaul500

Level 2 Member
My wife and I have 2 sole props (each in our own name) and 1 LLC where we do our non-reselling business. We are both employed full time elsewhere.

The sole props are for reselling. They have EIN's, taxes are simple are to do. Profits are low, but revenues high. It stinks since we are already in high tax brackets, but its done for the CC points, so any taxes on profit we don't mind paying. I see no reason to get fancy on the GC reselling, but that's not tax advice, just my opinion.

The LLC we formed due to selling some items where a person could potentially hurt themselves and sue us (push pins as an example). Having the stand alone business made things like business insurance and banking much simpler. Taxes are a little more complicated, but still easy enough to do by ourselves. Are we 100% protected from a lawsuit? No. Even insurance won't cover everything.
 

projectx

Level 2 Member
That remains to be seen, @Matt . Like I said I'm just getting into this. My comfort level is somewhere in the $5-$10k a month range of gift card purchases, so whatever profit I can get from that. Outside of CC points/cashback that won't be much, but it's a starting point.
 
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Matt

Administrator
Staff member
That remains to be seen, @Matt . Like I said I'm just getting into this, but I'd like to profit a couple thousand bucks in 2017 from the profit of the sale alone (outside of any CC cashback). That will put revenues well into the six figure range.
Revenue doesn't really matter, it's more about how much is left over 'free and clear' as profit that will be taxable. I tend to reduce this amount quite a lot before I call it 'profit'.

If the total profit is marginal, a few thousand, then you could just eat it and put it on the Schedule C. If the profit is getting more substantial, you could consider incorporating, running a payroll, funding a 401(k), etc.

The whole LLC doesn't protect liability is theoretically true, but you have to visualize where you are at risk... if you sell a giftcard via a third party company like Raise, how is that going to result in someone coming from your home? Not saying it can't... but it is more of a stretch than being a builder who has a LLC who builds with asbestos, or with bad concrete so the house falls on someone.
 

Mountain Trader

Level 2 Member
My wife and I have 2 sole props (each in our own name) and 1 LLC where we do our non-reselling business. We are both employed full time elsewhere.

The sole props are for reselling. They have EIN's, taxes are simple are to do. Profits are low, but revenues high. It stinks since we are already in high tax brackets, but its done for the CC points, so any taxes on profit we don't mind paying. I see no reason to get fancy on the GC reselling, but that's not tax advice, just my opinion.

The LLC we formed due to selling some items where a person could potentially hurt themselves and sue us (push pins as an example). Having the stand alone business made things like business insurance and banking much simpler. Taxes are a little more complicated, but still easy enough to do by ourselves. Are we 100% protected from a lawsuit? No. Even insurance won't cover everything.

I like this approach and the thinking behind it.
 
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