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I buy and sell cars for a living but I do not have my own dealership.

Customer Question
I rent a tag from...
I buy and sell cars for a living but I do not have my own dealership. I rent a tag from someone who holds their own license. Everything I purchase is bought with my own money and I keep the proceeds but every vehicle I sell is sold under his dealership name. I pay him a monthly flat fee. At the onset, he had me fill out an application for employment with his dealership but not an I-9. How should I be handling my taxes? I think my proof of income needs to come from him as my employer in some form. He says not since he doesn't actually pay me any salary or pay rate. Can I get some clarification? If he is correct, how do I file since I don't have my own entity for this?
Submitted: 6 years ago.Category: Tax
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6/3/2011
Tax Professional: Stephen G., Sr Income Tax Expert replied 6 years ago
Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7,239
Experience: Extensive Experience with Tax, Financial & Estate Issues
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Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Customer:

gocha

Stephen E. Grizey :

What did the "Application for Employment" consist of?

Customer:

it's been a while but I believe it was a standard application with normal questions like name, address, ect... I don't believe I gave my ssn. is that what you were asking?

Stephen E. Grizey :

It sounds to me as if you're operating your own sole proprietorship. You are handling both sides of all of the transactions and simply "renting" the right to do business under his dealership license from him. One thing I would question is the legality of the arrangement in terms of the license.

Stephen E. Grizey :

You would be responsible for keeping your own books & records & reporting the activity to the IRS on a Schedule C. Who do the customers make their checks out to?

Stephen E. Grizey :

You are the "entity".

Customer:

you are basically correct. im running my own business but trading on his name. I operate on cash. So on my schedule C, what do I use as the source of the income if I do not have my own ein or tax # XXXXX this business?

Stephen E. Grizey :

You report under your social security number. How does a dealership licensed in Indiana get to do business in PA without being licensed there? Why don't you get your own license?

Customer:

Indiana's dealer requirements are a little looser than most states, making it easier to operate on a small scale. I have grown tremendously and am looking to set up a PA dealership on my own. this was a low risk dry run for me.

Stephen E. Grizey :

OK, I understand; just don't know how you can operate in PA without a license, assuming a license is required for what you are doing.

Customer:

it is. I cannot operate a retail dealership here being licensed as I am. We rent a "office" in IN to keep our license and can operate anywhere. I sell on ebay.

Customer:

its a bit of a gray area

Stephen E. Grizey :

Seems so.

Stephen E. Grizey :

Please remember to "Accept", it is the only way we get credit for our work. Feedback, if you have time, and bonuses, where you think they are warranted, are always most appreciated.


 


I'll be happy to answer any follow-up questions you may have.

Customer:

one more thing...he keeps bugging me for a list of purchases and sales. seeing how everything goes through his dealership, it seems as if he would also end up paying tax on my income. how can he disburse my income so he isnt taked also?

Stephen E. Grizey :

I doubt that he wants the list for income tax purposes. I thought you said you handled your own receipts and disbursements; so he wouldn't be making any payments to you?

Customer:

I do. I guess maybe he is curious as to how I'm doing. It's gotta be rough when the guy you rent a tag to is whipping you in volume and profit, lol. i don't know.

Stephen E. Grizey :

I wouldn't be too concerned about his taxes; worry about getting your own correct. I presume basic license requirements include keeping track of all the cars bought & sold.

Customer:

they do. my worry was that he would have to report all of the purchases I have made under his license and have to explain where they went and where the proceeds from those sales is...

Stephen E. Grizey :

He probably would have to do that, but there's no problem with that is there?

Customer:

not from my perspective...

Stephen E. Grizey :

Right.

Customer:

thank you for your help. i will "accept" and give a good feedback.

Stephen E. Grizey :

Thanks very much

Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7,239
Experience: Extensive Experience with Tax, Financial & Estate Issues
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