Predictions on Discontinuing Sets and their Secondary Market Value

LegoFanTexas

richo said:

gmpirate said:

^ there is no difference. Total income + inventory - expenses = income you will be taxed on.

that makes no sense, as you might be taxing yourself on piece sales that are less than the cost of the set (expenses). It makes even less sense if you plan to only part, part out the set, if that makes sense.

Lets say a set cost £50, and you sold 17% of the set for £20, what would you treat as profit?

This complication is one of the main reasons I have never set up a bricklink store to sell off the huge amount of spare parts I have knocking about. It's a total minefield.

Take a step back for a second...

Lets say you buy a total of $500 worth of sets and part them all out. Then you do $1,000 worth of sales.

You could simple COGS the entire $500 worth of inventory and take the $500 profit.

Or you could COGS 50% of the inventory and take $750 profit.

Accounting is not as black and white as you'd think, which is why you read about funny business accounting scandles. Think Enron...

You don't actually have to keep track of every single item in your inventory, a total dollar figure can work as well, depending on the items.

Stores like Half Price Books does this, they don't keep track of every book in the store and what every single book cost, they simply keep running totals.

At the end of the day, it all works out sooner or later and the tax man is usually happy enough with this.

dougts

avoiceoreason said:

So another tax question for those who may know...

As an example: let's say I buy set A for $50 and sell it for $100. I make a $50 profit. Then I use that $100 of revenue (original investment + profit) to buy two Set B's at $50 each. Do I owe taxes on the $50 profit?

I ask because I just end up rolling all of my profits into additional inventory, so I don't really net any cash, my inventory just grows.

yes, you owe the taxes for that $50 in the year the profit was realized. assuming you are using the case method of accounting (probably a safe assumption for small time sellers), inventory purchased can only be deducted in the year the inventory is actually sold.

so, let's say you bought that $50 set in December of this year but did not sell it until January of 2013. You can not deduct the $50 when you file 2012 taxes, you have to wait until you file 2013 taxes. In essence, the profit and the cost will always be reported in the same year.

LegoFanTexas

richo said:

Also, imagine if you parted out the Death Star with its xxxx parts. It might take you 10 years to sell them all. I just don't understand whether you pay tax from the world go, or whether you pay once you sell enough parts to cover the original outlay.

Keep in mind that the reason it is called "accounting" is that you are actually accounting for the money.

You can do it more than one way. There is something called GAAP (generally accepted accounting principles) and for many businesses that is what they use.

But you can do it another way as well. So long as you could show the IRS that you are consistant with how you do it and that you are not cheating them in the long run, they probably will accept almost any method you choose.

richo said:

Having said all that, I get the impression that a huge amount of UK bricklink stores are not registered as businesses with HMRC, even though it is a legal requirement to do so within 90 days of starting a business, which is exactly what an online shop is, no matter what size.

Ahh, my information and advice is for the USA only, I don't know enough about tax and legal issues outside the USA and those rules are probably different in many ways.

cloaked7

And, get this. You can use two sets of accounting principles. One for internal accounting and another for tax accounting. LIFO internally, FIFO for taxes. One method of deprecation for internal use, another for tax use. As LFT stated, as long as you are consistent with how you keep your books and you follow generally accepted accounting principles you're fine. Course, bookkeeping for a hobby type of business is usually very simple. Be Zen - Less is More. Be as simple as you can about it. :-)

Sharifa

It is kind of OT I guess but I've enjoyed the past few pages of tax talk- very useful information!

Thanks to all who gave advice and encouragement :) I've actually been able to make a few purchases this week for resale later on, and it'll be interesting to see how they go. Some have suggested Craigslist, I have been checking it daily but so far haven't seen any good deals. Gonna try the yard sale/ thrift store thing too but of course will then have to factor in the cost of gas/ time spent etc.

I saw that WV Bakery had changed back to "call for availability" earlier today but checked it again just now and it's "sold out" again. :(

mathew (sorry I don't know how to do the "@name" thing- is that just turning the name into a link?)- I too think it might be cool if they did limited re-releases, I would for sure love the chance to get Cafe Corner at a reasonable price! But some time ago they did a series of "Legends" re-releases that apparently did not go over too well, so it's doubtful they'll try it again.

jasonord69a

To keep everything really simple I would recommend that each month you keep a record of everything spent (cost of goods, travel, storage etc. etc.)and also a record of all sales.

Total £/$ sales - total £/$expense = profit.

Of course there will be months when you spend more than you sell and vice versa, but over the course of a year it would balance itself out. This is also the easiest way of working out VAT if you are selling enough to have to be registered (£73,000 per 12 months I think).
I try wherever possible to keep under this limit as it is a pain in the arse!

Just my opinion of course and obviously different countries have different methods they prefer but from my experience, as long as you have a clear method for working out your taxable income, the taxman will be happy as long as you file your return and pay any amount owed on time.

Ma1234

thornie said:

^ I find it interesting and somewhat disappointing the LEGO store wont sell to you tax free given you have presented them with all the proper paperwork.

Why? It depletes inventory from their store, that is then resold at a higher price, which can affect precieved value of the product and annoy average customers. I wouldn't sell tax free at my retail store for my own product, either.

LEGO has zero incentive/benefit from a secondary reseller market, especially of new/recent product.

And for the record I have nothing against resellers - if I had the time and energy I'd consider it, too, but from LEGO's point-of-view, resellers are bad for business.

Farmer_John

I read on the other EOL thread that MMV may be gone shortly. The MMV set is a really good value considering how long it's been around without a price increase. Has anyone else heard anything about the MMV retiring lately? It seems to be going strong on Amazon now.

BTW, Amazon has it now for less than $90...

richo

^ yes, it's sold out from Lego UK, so is going.

thehockeyboy

Is the appeal in 7913 Star Wars Battlepack over 7914 a difference in Clone Troopers vs Mandolorian minifigs? Or are the orange trooper commanders the key?

Both these small sets are obviously EOL (been out for 2 years, there have been consistently 4 battle packs for SW and we have the 2 new incoming ones) but 7913 is considerably harder (and more expensive) to find.

Yodalicious

^From my POV it's because the Mandolorians are all the same. No variety in the pack.

But in my area, both are the same price and available in large amounts.

LegoFanTexas

jasonord69a said:

Just my opinion of course and obviously different countries have different methods they prefer but from my experience, as long as you have a clear method for working out your taxable income, the taxman will be happy as long as you file your return and pay any amount owed on time.

^ This is a great way to sum it up...

I've actually been told this by more than one CPA, that one of the "tests" that a taxman will do is to see that if you followed your current accounting practices all the way out to the rollup of the business, would the taxman get their share of it all.

If the answer is yes, they are likely to accept whatever accounting system you follow.

thornie

Ma1234 said:

thornie said:

^ I find it interesting and somewhat disappointing the LEGO store wont sell to you tax free given you have presented them with all the proper paperwork.

Why? It depletes inventory from their store, that is then resold at a higher price, which can affect precieved value of the product and annoy average customers. I wouldn't sell tax free at my retail store for my own product, either.

LEGO has zero incentive/benefit from a secondary reseller market, especially of new/recent product.

And for the record I have nothing against resellers - if I had the time and energy I'd consider it, too, but from LEGO's point-of-view, resellers are bad for business.

Tax does not stop experienced resellers like LFT from buying large quantities of stock. As he stated in his reply to me, he just deducts the purchases on his own. It's merely a minor inconvenience. So your point is invalid. LEGO is in the business of making money. What difference does it make if one guy buys 50 of one set, or 50 different people all buy one of the same set? It doesn't. LEGO and the store gets it money any way. LEGO doesn't care about resellers, if they did they would have come up with ways of discouraging it long ago. Folks around here grossly over estimate the impact resellers make to LEGO's bottom line.

tmgm528

/\ I have been waiting for someone to make sense.

rocao

thornie said:

What difference does it make if one guy buys 50 of one set, or 50 different people all buy one of the same set? It doesn't. LEGO and the store gets it money any way.

There is a difference, though. In the latter case, the store has met the need of 50 different customers, who hopefully will continue to be patrons of the store. If the entire stock went to one person instead, and it became a common occurrence that the store could not be relied upon to have stock, the customer base would erode.

It's a balancing act, of course. There are unpopular items that the stores would be glad to be rid of and probably wouldn't enforce purchasing limits. However, these targeted products are often popular and brisk sellers such that the store has the luxury of enforcing limits without risking revenue.

tmgm528

/\ the store gets one customer which they can count on making large purchases in the future or 50 that they can count on making small purchases. Either way the store gets money. Economics

y2josh

For a sole proprietorship at least, Schedule C basically holds your hand through exactly what you need to report, what you can deduct, etc. So until you get into a pesky situation where you have employees, it should actually be pretty simple to file your taxes, even for the small time reseller.

Where I think a lot of people probably get into trouble is not having kept track of expenses throughout the year... though even that can be easily maintained via a basic Excel document.

y2josh

tmgm528 said:

/\ the store gets one customer which they can count on making large purchases in the future or 50 that they can count on making small purchases. Either way the store gets money. Economics

This is flawed logic. One customer making a huge purchase is not even close to the equivalent of fifty customers making smaller purchases. Fifty customers, no matter how small the purchase, give you fifty opportunities to upsell. One customer, no matter how large the purchase, gives you exactly one opportunity.

Now if the one customer is buying up ALL of my stock, great. If they're only cleaning me out of what's desirable, that's extremely bad for business.

Hardrada

Okay, but then the logical thing would be imposing buying limits on desirable sets, not charging sales tax on someone who is exempt from it. Or am I thinking wrong?

tmgm528

No your right. But they don't have limits. The companies care about making money not making kids happy. That's just marketing.

rocao

^^ They can and occasionally do impose limits on desirable items. They've done it with CMFs and grab bags to name a few.

I believe the tax exemption that was under discussion was specifically a reseller license. LBR haven't outrightly declared war on resellers, but I'm not surprised when I hear a decision has been rendered that is unfriendly to resellers.

xeeeej

If you plan on keeping your business small, the cash basis of accounting is probably the simplest. If you want to have a bigger business, go with accrual.

http://en.wikipedia.org/wiki/Comparison_of_cash_and_accrual_methods_of_accounting

For those people talking about how to cheat the tax system, be careful! You are posting on a public forum. If someone really wanted to screw you over (and make no mistake, people in this thread are competitors), a few calls to the IRS would cause some headaches.

(CPA by day, AFOL by night)

tmgm528

/\ if your talking to me that's not what I meant. I meant the buying limits not the sales tax.

Pitfall69

As far as the DS. It is a long standing joke on here to say that it is EOL. We are just being sarcastic "people that are concerned" :)

Pitfall69

A lot of great info in here. Maybe the tax information can be put into another thread to be discussed further.

The question is: Is the "tax man" hated more than the reseller? :)

xeeeej

tmgm528 said:

/\ if your talking to me that's not what I meant. I meant the buying limits not the sales tax.

No, just a general comment to the tax evaders out there.

Ma1234

My point is in no way invalid. Not allowing it absolutely deters people. Just because LFT doesn't mind the extra steps, does not mean everybody does. I personally would simply not shop at the LEGO Store.

And LEGO does care about resellers. It likely strongly detests them - they give the LEGO product a bad image, like it or not.

thornie

Ma1234 said:

My point is in no way invalid. Not allowing it absolutely deters people. Just because LFT doesn't mind the extra steps, does not mean everybody does. I personally would simply not shop at the LEGO Store.

And LEGO does care about resellers. It likely strongly detests them - they give the LEGO product a bad image, like it or not.


The kinds of buyers that would be deterred by having to preform basic end of year accounting are not the people who are buying at the quantities we are discussing here.

Secondly, your last point is COMPLETE conjecture. Agree to disagree.

tk79

^TRU actually gives LEGO a bad image.

Resellers on the other hand just give themselves one as they stare in the mirror everyday counting all that money and then making it rain as they laugh maniacally for a good 5-10 minutes (I've always assumed that's what LFT does on a daily basis, please correct me if that's not the case!)

y2josh

Ma1234 said:

And LEGO does care about resellers. It likely strongly detests them - they give the LEGO product a bad image, like it or not.

I can't imagine that TLG "detests" the perceived collectability of their product. Beyond that, the only way a reseller could even moderately harm TLG is if they were offering up sets currently still available at a significantly lower price. Otherwise, the reseller is offering a product the company no longer provides, and isn't taking business away from LEGO.

Understand I'm with you insofar as resellers taking advantage of an opportunity (whether that's good or not is certainly debatable), but to say they're harming LEGO's image seems ludicrous.

Pitfall69

tk79 said:

^TRU actually gives LEGO a bad image.

Resellers on the other hand just give themselves one as they stare in the mirror everyday counting all that money and then making it rain as they laugh maniacally for a good 5-10 minutes (I've always assumed that's what LFT does on a daily basis, please correct me if that's not the case!)

I'm sure he does, but mostly at every other comment in the forums :)

y2josh said:

Ma1234 said:

And LEGO does care about resellers. It likely strongly detests them - they give the LEGO product a bad image, like it or not.

I can't imagine that TLG "detests" the perceived collectability of their product. Beyond that, the only way a reseller could even moderately harm TLG is if they were offering up sets currently still available at a significantly lower price. Otherwise, the reseller is offering a product the company no longer provides, and isn't taking business away from LEGO.

Understand I'm with you insofar as resellers taking advantage of an opportunity (whether that's good or not is certainly debatable), but to say they're harming LEGO's image seems ludicrous.

I agree. Lemme see. Collectible Minifigures should squash that argument.

I would never buy from a reseller that had lower prices than Lego had. It screams fraud to me. When buying from Lego, you also get exceptional service with their product.

BlueMoonUSA

Is the Dino theme done? Seems to all be sold out at Lego.com. Walmart/Amazon/Target don't have any but the small sets it seems....some HQ's going for $140+ on Ebay!?! What is the likelihood of any of these sets getting another production run at Lego?

Hardrada

Well, if you were shopping for parts that would be blatantly untrue. First, most parts are cheaper on Bricklink than on PAB, or they are not even available at the latter. Also when a BL seller sends an order out packaged similarly to a PAB order he can surely expect a neutral or negative feedback from the buyer.

Also how buying up Lego sets at deep discount and selling them at a smaller discount sounds fraudulent? This happens a lot, though not nearly on a big enough scale to even scratch Lego.

Pitfall69

^First I'm not talking about parts. Second, there is a thread solely for the purpose of making fun of ridiculous auctions and pointing out obvious fraud. If an EBay seller is selling a Death Star for $199.99...I would steer clear from that auction. I wish you good luck in purchasing from these type of people.

Diggydoes

BlueMoonUSA said:

Is the Dino theme done? Seems to all be sold out at Lego.com. Walmart/Amazon/Target don't have any but the small sets it seems....some HQ's going for $140+ on Ebay!?! What is the likelihood of any of these sets getting another production run at Lego?

Don't you dare to ask a question which is topic-related ;)

Hardrada

Pitfall69 said:

^First I'm not talking about parts. Second, there is a thread solely for the purpose of making fun of ridiculous auctions and pointing out obvious fraud. If an EBay seller is selling a Death Star for $199.99...I would steer clear from that auction. I wish you good luck in purchasing from these type of people.

That was some mighty sweeping generalization, from fraudsters selling sets for prices that only people with low intelligence or low knowledge of Lego would fall for to everyone selling below Lego's prices.

And yes, I'd gladly purchase from a legit looking reseller for 20-30% under RRP. In fact I do sometimes sell at such prices myself.

Pitfall69

^That's fine. It is my opinion. You don't have to like it. I'm from the old school of "if it's too good to be true..." That way I don't get burned and if I miss out on a great deal from "legit looking" seller so be it.

I don't see how you can sell 20-30% under rrp and make any money especially when there's 20% in just fees and shipping.

Pitfall69

Anyway, we need to get back on topic.

FatMatt

Does anyone know when the DS is going to EOL?

Diggydoes

Pitfall69 said:

Anyway, we need to get back on topic.

Exactly! So what are your predictions on #10231 (shuttle adventure)? I'm pretty sure somebody already said something about it,but i couldn't find that one post between all those tax/shipping option/packaging posts!
No seriously,i'm really curious to know when it will EOL,and especially how it will perform! Any wild guesses?

Pitfall69

Oh man...lol...and so it continues :)

Pitfall69

I feel bad because there are some people with legit questions about Lego sets and they have to read all of this and on top of that get the occasional. When is DS EOL or DS is EOL. It makes me laugh.

FatMatt

I've had my share of laughs from this forum today.

BlueMoonUSA

Dino? Aherm....

Pacific493

LegoFanTexas said:

FatMatt said:

^^I don't think this thread is intended to tell others how to circumnavigate federal laws. You and I are all obligated to taxing laws. Whether we like it or not, we live here, we pay taxes which are used to run our nation(that's another heated topic). Point is, "render unto Caesar".

I don't like taxes as much as the next person, but I do like the police department, the roads, the sewer system, national defense, and a lot of other things.

Taxes buy civilization. There are places to go in the world you can avoid a lot of this, but you wouldn't want to live in most of them.

As I believe Oliver Wendell Holmes said: "taxes are the price we pay to live in a civilized society." Taxes may be painful to pay, but it beats the alternative.

Bumblepants

Dino should be headed out the door for good. As to if it will do well... maybe the big dino parts will hold value but there won't be AFoLs lining up to buy them for 1.5-2x MSRP next year

dougts

Dino and 10231 are done. What's left in the supply chain is it. In the case of Dino that could be a lot

Penkid11

I smell Pharaohs Quest syndrome from Dino. Really unappealing, tons of stock after EOL, can barely sell MSRP in the after market. Call it hunch, but I have a feeling...

gmpirate

Dino is not a hot collectable, but it is not Pharaoh's Quest either. Kids dig dinosaurs and the vehicles were cool. I'd buy Dino at 50% but not otherwise.

gmpirate

Anyone got any feelings on the Ninjago green boxes? Think they will get restocked after Christmas? I know a place that has a stack and just wondering . . .