Cox: Little-known provision closing the door on aspiring Arizona entrepreneurs

Arizona has experienced a tremendous economic comeback from the initial disruption of the COVID-19 pandemic, recovering 100% of private sector jobs — the nation’s third-fastest recovery.

Cities and towns across the state are slowly beginning to find their footing with the help of the “American Rescue Plan Act of 2021” which allocated $2.6 billion in direct budget support. Yet despite this positive news, many Arizonans are still facing economic challenges. And while the COVID-relief bill directed assistance to struggling Arizonans, it also has a provision that will place a burden on many of those same people.

The little-known provision is aimed at an unlikely target: casual online sellers. Previously, sellers only had to inform the Internal Revenue Service if they hit above the $20,000 threshold in annual payments. At that point they would receive a 1099-K tax form. The “American Rescue Plan Act of 2021” drops the threshold to just $600 starting this year. How the bill’s authors decided on such a low-ball number is anybody’s guess.

Millions of Americans use platforms like eBay, Poshmark or Tradesy to sell used and pre-owned goods. Search any one of these sites and you’ll find everything from clothes to dinnerware to golf clubs — and likely items you didn’t even realize you needed. It is a flourishing marketplace driven, not by big-box retailers, but by average Americans. Some sellers are just looking to put a little extra cash in their pockets, but for many others, it’s the only way to make ends meet.

I have been an online seller for over a decade, and I know that the people who will suffer the most consequences from this misguided provision are the ones who are most dependent on the online marketplace. For example, single moms are able to supplement their income by selling used goods on various online platforms, easing some of the economic stresses brought on by the pandemic. A study by eBay found that 73% of women surveyed said that a top motivating factor for selling on the platform was to earn an income for themselves.

Women, in general, have shouldered the lion’s share of the pandemic’s burdens with many either quitting their jobs or taking unpaid leave to deal with child care issues. Lowering the taxable threshold unreasonably penalizes them, adds confusion and stress, and severs a much-needed cash stream. Arizonans feeling the pinch of inflation and supply chain issues, and looking to budget their expenses by buying secondhand, may also find themselves out of luck if sellers are deterred from using online marketplaces. The market for used clothes, textbooks, and toys — all items that women with children are looking to buy so they can save money — could end up severely limited.

Online marketplace platforms also allow people of all ages and from all walks of life to be their own boss. With hard work and determination, others could also realize their dreams. The new tax reporting requirement, however, could close the door on aspiring Arizona entrepreneurs. Americans who are considering dipping their toe into selling previously owned goods online to test the waters may reconsider once they become aware of the lower tax threshold and IRS paperwork.

Congress should revisit and change this provision to ensure it is carefully targeted to ensure Arizonans are not forced to bear yet another burden.

Editor’s note: Theresa Cox, a resident of Gilbert, has been an active member of the reseller community for more than a decade.