Hello17287_03404
I see you want to know about the e-bay tax.
Do I have to pay taxes selling on Ebay?A lot of questions have arisen about weather or not sellers need to report their income to the IRS.
Several
folks argue that just because their little eBay hobby generated a
little cash, that didn't make it a full blown business. It seems they
consider the income from their little hobby to be financial manna from
Heaven and thereby not taxable by earthly tax collectors. I've always
been amused by folks who talk about their "little side business" but
when the subject turns to taxes they suddenly refer to it as "my little
hobby."
All kidding aside, the conclusion that I came to after
doing some research and reading was always the same: while you may think
selling on eBay is just a fun pastime and the money you're making is
not reportable as income, depending on the circumstances, the IRS would
probably disagree with you.
It seems that everyone likes making
money, but hates carving off a piece for good old Uncle Sam. Welcome to
free enterprise, folks. If you're going to come to the dance you have to
pay the fiddler.
The IRS rules are clear: you must pay taxes on
all personal and business income and that includes money you make
selling on Ebay.
In its most basic sense, the IRS rules can be
interpreted to mean that if you buy an old vase at a garage sale for $10
and sell it on eBay (or elsewhere) for $20 you made a $10 profit and
therefore must report it as income and pay Uncle Sam his fair share.
In
reality, if you are a casual seller who only sells a few items on eBay
every now and then it's doubtful the IRS is going to let loose an army
of agents to collect taxes on the few bucks you make. However, if you
consistently sell on eBay the IRS may deem your activities to be
business oriented and you will be required to file a Schedule C and
claim the income.
The IRS uses a number of factors to determine if an
eBay hobby that generates sales revenue is actually a business. These
factors include:
1. Do you carry on the hobby in a businesslike manner?
2. Do you spend considerable time working on the hobby?
3. Do you depend on income from your hobby for your livelihood?
If
the answer to any or all of these question is yes, you're running a
business, not carrying on a hobby, and you are responsible for paying
taxes on your income.
What's eBay's take on all this?
Naturally
eBay is vehemently opposed to anything that might rock the eBay boat.
eBay does not does not issue 1099 tax forms to sellers, nor does it
report seller's sales figures to the IRS.
Ebay considers itself
merely to be a facilitator, meaning that they provide a marketplace in
which buyers and sellers come together to do business.
Furthermore,
under it's current system it would be impossible for eBay to issue
accurate 1099s to sellers. eBay does not track if a seller actually gets
paid by the buyer, so eBay has no idea how much money - if any -
actually changes hands at the end of each transaction.
On the
bright side, if you do sell on eBay as a business you can deduct a
number of business expenses, including the cost of inventory, listing
fees, shipping, envelopes, packing materials, etc.
You might also be
able to deduct things like the purchase of a computer for business use,
office space (even if it's a home office), office supplies, and more.
Talk to your accountant if there's any doubt as to whether you should or should not be paying taxes on your eBay earnings.
I hope that this helps.
Calvin