"Also why do we have to pay a percentage on shipping to ebay as part of the total sale and i dont have a sales tax in montana just to clarify that my 1099 shows total shipping included as part of my tax liabiliry to the irs"
Is punctuation illegal in Montana?
Just to clarify: NO, nobody's 1099 shows the total shipping included as part of their tax liability to the IRS.
The 1099-K form shows all the money processed by eBay for you as a specific seller.
That total shown on the 1099-K is NOT your federal income tax liability.
That total shown on the 1099-K is not even the amount to which your federal income tax percentage is applied.
In general:
That total amount shown on the 1099-K is what you're supposed to list on the Income section on the front page of the 1040 federal tax return form.
THEN you may be eligible to itemize deductions.
For your eBay sales, the shipping costs that you paid as an eBay seller are deductible.
Other deductible costs include the fees you paid to eBay, the prices you paid for purchasing shipping boxes, bubble wrap, packages of blank mailing labels, shipping tape, even mileage for the distances you drove to and from a store to purchase those supplies and mileage you drove to and from your post office to drop the packages off.
Again, very oversimplified: What is left after you subtract all those deductions from the total on the 1099-K is your taxable income from your eBay sales. That amount is added to all the rest of your taxable income (like from your regular day job, all your dividend income on your huge stock holdings, etc.) and then you look at the IRS's tax tables to determine your tax liability.
The total on the 1099-K is not your tax liability.
Your tax liability is the amount you owe to the IRS.
Depending on the rest of your own financial situation (such as that day job and all those stock dividends), you might owe income tax to the IRS on a very low portion of your total eBay sales shown on the 1099-K or even none of your total eBay sales.
