posted on March 8, 2002 04:22:46 AM new
The post by kraftdinner recently has certainly stirred up a hornet's nest...and a timely one for me. I finally got tired of a few bidders either ignoring or not reading my shipping terms in my auction page and began including a an explanation along with the terms.
My problem with those who expect me to charge only the postage is simple...they're asking me to pay related expenses out of my pocket and to work for them for free. Do they really believe it takes no time or money to package and send them their book?
Here is what I have been saying to those who feel they've been overcharged......
"Occasionally I'm asked by a bidder why the shipping cost is more than the postage he or she sees on the package, typically $3.25 against $1.78 postage for a book sent as media mail. The answer is simply that I won't work for free...that's disguised servitude.
In the past, before I started this business on ebay, I wondered sometimes about a shipping charge greater than the postage.
However, now that I've been selling books for almost 3 years I understand that my total shipping costs are far from the postage costs.
I pay a part time person, a senior citizen at an embarrassingly low rate, to drive to the supply house (for boxes, bags, wrapping paper, tape, bubble wrap). Also, I must pay for the supplies themselves. Then I pay for his time wrapping, addressing, driving to the post office and waiting in line there. The fact is that the small amount over the postage that I add doesn't cover these costs.
What I charge for shipping is well under true cost and comparable to what Borders and Amazon.com require.
I have tailored the business to keep my expenses, and the buyer's cost, as low as possible. I doubt my shipper would work for no pay and I doubt my suppliers would give me supplies for free."
[ edited by okcat5 on Mar 8, 2002 04:25 AM ]
posted on March 8, 2002 05:37:27 AM new
You couldn't have made it more clear. I try to sell items that have a value high enough to hide the shipping cost in the final price. All the things I sell are used or NOS from auctions. Priority mail really helps cover expenses of packing materials but there is also the time factor. Now if you are selling a book for $5 you surely can't charge priority mail rate of $5.50 to ship it. So then as you say you have to buy the packing materials. Some people would be advised to go to local auction and house sales and garage sales to look for packing materials. You can often get the stuff for pennies.
Regards
Prepare for the worst but hope for the best!! Spuddy98
posted on March 8, 2002 06:00:26 AM new
I don't think that labor costs should be part of the shipping charge. This should be factored into the price of the item. I realize that this is more often than not, something that is difficult to do, but it is one reason why someone pays more for a used book in the store than they might from an online seller.
On Half.com sellers are often forced to raise the price of the book to cover for the minimal postage allowance. This is not an enviable position, but it does prove it can work.
Shipping is the closest thing to sales tax. It adds nothing but an expense and a delay to the transaction experience. Keeping the cost hidden from the buyer as much as possible reduces the likelihood that they will complain about it later.
posted on March 8, 2002 06:09:35 AM new
Well said.
To those who cry out "I never overcharge for shipping", what you are really saying is "I am losing money! Someone stop me please"...
Costs involved:
Listing fees
Final Value fees
Credit Card Fees
ISP connection
Electricity
Office supplies.
Packaging Supplies
Travel to buy goods, ship goods, buy supplies, etc...
Fuel
Time
and so on and so on.
If postage is $2.25 and one charges $3.00, it should be understood and expected. If one charges $10, one has the right to complain.
posted on March 8, 2002 07:08:36 AM new
When I was a newbie I was one of those that charged only actual postage but fear not! I am not that naive anymore LOL. My final shipping cost includes listing fee and most often then not, the FVF as well. This is easy for me because 99% of what I sell is under $50.
MEOW
posted on March 8, 2002 08:11:49 AM new
okcat you are saying that when you were buying you paid only the shipping charges and didn't quabble about the prices. The prices were just fine with you, but now that your selling you must charge higher. It was allright for you to buy at the actual shipping but you can't sell at the actual shipping. Double edge sword.
I can understand charges that you need to charge because you are paying someone but remember you are not amazon or barnes and noble. I think that charging $3.20 for media mail that costs you $1.78 to mail is a little exsessive. Maybe you need to word your auction saying Shipping by media mail will be xxx for postage and xxx for handling for a total of xxx. I try and charge very close to the shipping charge because I know that that is the reason people bid but then I don't pay anyone to do my otherwork and if I was that senior working for you I would want at least a % of the profit instead of the low wages. Just because your helper is a senior doesn't mean they work for nothing or what you say is a small amount.
posted on March 8, 2002 08:23:01 AM new
masujoviga- The items that you are listing are all tax deductable, that is if you pay taxes on your ebay sales. Or maybe that is if you claim your ebay sales. I pay taxes on my sales. At the end of the year I print out my ebay list, auctionwatch list and paypal list, add the total sales, subtract all the other misc items like listing fees, credit card fees, packaging materials etc. Everything that goes with a business. That is another reason I don't charge excessive shipping charges, but then I also work at a garden center where they throw away their boxes, bubble wrap and I get those free. I do agree with you about the added 75 cents. I don't think that is exsessive...
posted on March 8, 2002 08:40:37 AM new
This topic never dies. It always brings out diverse opinions.
The seller has a RIGHT to set up their fee structure any way they please, eBay rules notwithstanding. A seller can decide to tack on a whopping service fee, or donate all the benefits to charity. As long as the View Item page says, "add $10 for shipping" (or whatever) the buyer shouldn't complain. No one is forcing the bidder to enter into a contract.
In my opinion, given the auction-style venue and considering eBay's fee structure, all associated costs should be charged separate from the final value of the item. A reasonable handling fee IS ALLOWED by eBay. Sellers who charge excessive or hidden fees are eventually weeded out via the feedback forum. It makes perfect sense and is allowed by eBay to start bidding at $1 with a $5 shipping fee.
okcat5, do you really post that information for your buyers? As long as all fees are plainly stated in the ad, you don't owe anyone an explanation. Buyers don't NEED TO KNOW where every little penny goes. My ads state, "shipping and handling $4" and that is all the information I care to give. Anyone who thinks I'm getting rich off of handling fees is naive.
posted on March 8, 2002 09:20:28 AM new
LIBRA63 hit it on the head. Almost all the costs of shipping (and running your ebay business) are tax deductions. If you're filing your taxes (as you should be), you already take these expenses as a cost of doing business.
I also manage to find some of my packing supplies free. I use priority mail when appropriate, and I buy other materials as needed.
Twinsoft is correct as well, that you don't owe your buyers any explanation of why you charge what you do. But when you ask for $7.00 to mail a sports card or a single silverplate teaspoon, buyers know you are adding a pretty substantial "handling charge" onto the postage cost. If you're going to do that on a regular basis, you might indeed want to offer some explanation so you don't lose bidders.
posted on March 8, 2002 09:47:08 AM new
If you are getting paid for shipping it is not a tax expense. And even if it is an expense because you foolishly think Uncle Sam will underwrite it, it's not written off entirely.
I figure, on average, that it costs me about .50 to ship a book over the costs of postage. If I sell it on eBay, I'll charge enough to cover this. I typically ask $3.00 to ship a book. I've never had anyone complain because of the cost.
[ edited by mballai on Mar 8, 2002 10:25 AM ]
posted on March 8, 2002 10:09:59 AM new
No, shipping is not a taxable deduction if you are getting paid for it. But, if you are filing correctly, you include the amount you charge for shipping as income to you, then you deduct the COSTS of shipping (postage, supplies, etc.) as legitimate costs of doing business.
As an example, if the item costs $10 and shipping is $5, you have $15 in the "gross income" column. In the "expense" column, for shipping, you might have $3.95 for priority mail. Under office supplies you might have the cost of 100 mailers. Under miscellaneous expenses, you might have printer cartridges and paper, and so on. You also deduct your mileage to and from the post office.
All these are legitimate business deductions. That $5.00 charge for shipping is nearly (or completely) written off by the time you get to the "net income" area of your return. Uncle Sam doesn't "underwrite" your expenses, he allows you to deduct them entirely BEFORE you calculate your net profit.
The only thing you cannot deduct is the value of your own time...unless you have a much more complex arrangement than most of us are willing to bother with, which would involve setting up a corporation or holding company and paying yourself a wage (with all the attendant expenses and hassles).
posted on March 8, 2002 10:22:52 AM new
Do people really think that if you write if off, you get it back? If you have a $50,000 gross income against $20,000 in expenses, you aren't getting $20,000 back! You are only going to pay taxes on $30,000 instead of $50,000, that is worth a few thousand at MOST. Yes, deduct your expenses, but you also have to pay taxes on gross income, including the shipping/handling fee. You don't get it all back from the IRS, not even close!
posted on March 8, 2002 10:28:34 AM new
But you don't pay tax on GROSS income, only on NET income...after expenses are deducted (which includes all expenses you incur to ship items).
If you routinely add a handling charge to your shipping amount, and it is more than what your real costs are, yes, you WILL pay taxes on part of it, since it's profit to you and not expense. Just another reason to keep shipping charges as close to actual costs as possible. You pay less in tax in the long run.
posted on March 8, 2002 10:33:07 AM new
"Just another reason to keep shipping charges as close to actual costs as possible. You pay less in tax in the long run."
Huh? That's like saying "sell fewer items, you pay less tax in the long run."
posted on March 8, 2002 10:37:25 AM new
Precisely why one should make sure your customer is paying for what you sell upfront.
Even IF the government were to pay you back in full, you'd be sitting on the expenses for more than a year. Doesn't take a genius to calculate that as a loan for which you would pay the interest.
There are enough expenses which are not readily captured in the course of doing business, but there's no reason why someone selling on eBay should be running up a tab for shipping/postage that is not paid off each and every month.
posted on March 8, 2002 10:37:48 AM new
I agree to keep them to actual costs - I don't believe it is right to tack on a $5 handling charge on a small sale, I just think estimating what all costs are is the way to go.
My point about the taxes is that if you deduct $20,000, you don't get a $20,000 refund from the IRS - You pay taxes on $30,000 instead of $50,000, which will be lower, but not $20,000 lower. You don't get it all back.
posted on March 8, 2002 10:46:37 AM new
"My point about the taxes is that if you deduct $20,000, you don't get a $20,000 refund from the IRS - You pay taxes on $30,000 instead of $50,000, which will be lower, but not $20,000 lower. You don't get it all back."
What you're not getting is that your costs are deducted before you pay ANY tax! The IRS doesn't refund your expenses, it simply ignores them in tax calculations, as they are already taken out of the equation.
"Huh? That's like saying "sell fewer items, you pay less tax in the long run." "
Morgantown, I was replying to the above statement. If you don't want to pay more tax on shipping charges, then keep them as close to actual cost as possible.
OTOH, many retailers (and eBayers) consider shipping charges to be a profit point and operate with that in mind. In that case, you WILL pay more tax because you have created more profits that can be clearly identified, without offsetting costs.
It's up to you how you work the shipping charges, in terms of taxes and profits. But it's pretty obvious that if you treat shipping charges as another way to create profits you will pay more in taxes than if you consider them to be expenses and treat them as such.
posted on March 8, 2002 11:26:44 AM new
I list and sell for a company for the purpose of making a profit. We list shipping cost as a flat fee in the terms of each listing and yes we build some extra cash into the fee. Everything is above board and clearly printed for bidders to read and Understand Before Bidding. I also include a blurb in the terms that states: Shipping and handling is a Flat fee disclosed on this listing. The amount in excess of metered postage stamped on the parcel is our Handling charge and is not refunded. (The amount of the charge is whatever I feel the item will take - Why go thru all the work of listing and tracking auctions to Give your profits away on shipping. Id rather go fishing than work for free.
posted on March 8, 2002 11:53:26 AM new
I suppose I'll weigh in here with a few thoughts.
First of all, s/h is a traditional profit center in mail-order. Just as there are various costs associated with sales, so too are there various profit centers in sales.
Bricks and mortar take advantage of rebates from the manufacturer, placement allowances, pull-through allowances, shared-mark-downs and a host of other schemes..and while they may not be directly reflected in the retail cost, they are reflected in the gross and net selling costs and expenses of the manufacturer, which, eventually is realized in the retail marketplace.
I have been in sales over 35 years and have been party and witness to some rather unbelievable scenarios.
For example: Wal-Mart( as do all large retailers) has a penalty associated with in-bound, incorrectly labled shipments from manufacturers....and the definition of incorrect takes up and entire book...it can be as little as the wrong size master carton or one digit off in the SKU...at any rate, the charge to the manufacturer was $10,000 per offense. You lie down with an elephant, the elephant doesn't lose any sleep.
I've had auctions where the shipping was free via Fedex Ground and still have had complaints..the point being that retail,, IMHO, is not so much a morality play as it is a competition. Great service is rewarded, if and only if, it produces sufficent, sustainable profit.
Ebay offers the buyer a quite powerful, innate advantage;that being relentless, downward price-pressure...more often than not, quite materially abetted by we sellers collapsing our offering price at the first sign of competition. Of course, there are exceptions with more esoteric goods, but by and large, the customer, if patient and willing to do some research on historicals, has the advantage.
The fact that there is a percentage of buyers in a marketplace as vast as Ebay, who are impatient/ignorant/gullible is simply a reflection of their percentage of the population as a whole....just as we sellers are for the very same reasons.
If I do not offer, in the final analysis,competitive goods and service..I will suffer the consequences....how I address my competition and the marketplace is a subjective issue with quantifiable results.
I enjoy reading everyone's input. I believe it has made me a better seller.
posted on March 8, 2002 02:07:14 PM new
All this reminds me of when I went to a garage that wanted to add charges to my bill for such things as rags and waste oil disposal.
I guess you could break down all your business expenses and itemize them to the customer so detailed you would have a number for your toilet paper even.
However nobody really wants to know all that - they just want a set price and all the details of your operation are of no interest to them. That is your problem to set a price that covers all these things.
posted on March 9, 2002 10:03:04 PM new
The complete lack of logic regarding the tax issues of this thread amaze me. Lets say I sell 1000 widgets at $10 each that cost me $5 each. Okay, that's $10,000 (with an cost of $5000)... now lets say I have expenses of .30 per listing fee, .60 per transaction for PayPal, .50 FVF, and .50 for packing materials. AKA $1.90 per item (for a total of $1900). Now, each item costs $2.00 to mail.
If I charge $2 shipping, Then the $1.90 per item comes out of the $5000 I made, which brings me down to $3100. YEAH! I got a tax savings! I only have to pay taxes on $3100 instead of $5000.
If I charge $4 shipping & handling, I take in $4000 for shipping and handling. That's enough to pay postage and all those miscellaneous fees and have $100 left over. For a profit of $5100.00. Oh poor me. I have to pay taxes on $5100 now. But at least I have $5100 to pay taxes on.
Assuming a 15% tax rate, by charging $2 shipping, my tax will be $465, leaving me with $2635.00
by charging $4 shipping my tax will be $765 (oh my, $300 more), leaving me with $4335.00.
Everything I paid for shipping is still considered a business expense. But I'm taking in an extra $2 per order. which gives me $1700 more for the year. Yeah, a percentage of the handling $$ went the government, but I'd rather have 85% of my handling $$ than 0% of it.
posted on March 9, 2002 10:42:15 PM new
Now if I read your post right. You cannot charge for shipping as the buyer is paying for it. That is not an expense of yours. Also if your buyer is paying for the handling charge you cannot put that on your taxes either. I would be happy to pay a S/H charge that goes along with the widget. I never object to a reasonable S/H. Now I am at an advantage because I get a lot of my materials free. Really the only thing I pay for is Tissue Paper, tape, and bubble envelopes. When I sell an item and I can send it in a bubble envelope I never use a used one. I charge my buyer 3/4th the cost of the envelope but I start my auction higher to make up for it. When I sell a book I put it in a box, that I got free from Walgreens. I use peanuts around it to protect the edges that I get free when my daughter orders mail order and I wrap in brown paper which is a bag I get from my supermarket turned inside out. Yes, I am out to make money but on the items that I sell, mostly from the thrift store I feel that I can't charge a bundle because it is used. This will always be a touchy subject but we as sellers have an opportunity to be fair and as buyers I can back out of an auction with excessive S/H charges.
posted on March 10, 2002 06:12:49 AM new
Libra63, all funds collected from customer, including shipping, is income. Funds paid out to shippers are a seller expense.
posted on March 10, 2002 07:37:49 AM new
I have to add to drbrownauctions post. In the example, the seller is left with $1700 more after taxes by charging the handling vs just the postage. The seller can use that money throughout the year to pay down credit cards (saving 14-20% interest), invest, buy inventory in bulk paying less per item, or buy that steal of a deal that you otherwise couldn't afford. Many of these things outweigh what you'd pay extra in taxes.
posted on March 10, 2002 09:35:46 AM new
I don't understand. I am probably calculating wrong, but if a buyer pays for the postage it is considered income? I have never thought of it as that. I thought if they paid for it I can't deduct it. I suppose you can calculate that either way. I charge actual postage, well as close as I can get and then I put a small (really small) handling charge. You see I am a senior and I don't get paid much for my services as stated in the first post.
I have to be a little humerous with the USPS because I think of the long lines, waiting then finding out from the person behind you, that has a million? packages that they have made $72,000 on ebay since January. Where did I go wrong.
posted on March 10, 2002 10:47:03 AM newLibra63: If you charge $5.00 for shipping, you have just collected $5.00 in income. If you pay $5.00 to ship said item, you write it off, and they wash each other out.
However, if you charge $6.00 for shipping, you collected $6.00 in income. If you pay $5.00 to ship, you still have $1.00 in TAXABLE income.
Add up those dollars over the course of a year, and that is called NET INCOME. The more NET INCOME you make, the more you have in the bank. That is the whole idea of capitalism - to have more NET INCOME in the bank.
However, if any of you feel so strongly about keeping those extra dollars, please send them to me. I will gladly count them as NET INCOME on my taxes. I'll even pay the INCOME TAX on them!
posted on March 10, 2002 10:51:20 AM new
I wish I had the extra income. But I charge actual shipping. I ship an item that costs $2.25 and that is what I charge. My handling fee is 3/4th of the price of the bubble envelope and then the rest is in the auction price. If I had extra I would send it but I don't sorry.
