Reseller Taxes - Helping a Friend, I'm Stumped On This One!
Lets say you buy a couple things on ebay and you accumulate Ebay bucks. You use those ebay bucks to purchase an item from ebay. That item in turn happens to be worth some money so you decide to sell it. Now under Paypal's 1099-K form they report all ebay earnings to the IRS (after selling a certain quantity and amount). Let's say that item is listed on that 1099-K form. You have to list your "Cost of Goods Sold". Would you list the ebay bucks that you used to purchase the item as your COGS? Lets say you accumulated $100 in ebay bucks, buy an item on ebay for $100 (using the ebay bucks) then sell that item for $110. If you don't report any COGS it would be like you profited $110 on the item.
Any accounting or tax pros here or resellers? What do you do in this scenario? My friend and I are a bit confused!