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Bluepeace123
Level 2

@How do deductions work with regards to selling on online stores ?

Im not sure if I'm going to ask these questions the correct way but here goes.

I sell a lot of things on ebay.  Things that I purchase at thrift shops, garage and estate sales.  So, I typically sell them for more than I paid.

 

Q1. The receipts from the thrift stores do not say what the item is, only what department it might be from and the amount.  Will this cause a problem when filing taxes?  Example:  I paid $5 for a vase.  The receipt only says home decor $5. 

 

Q2.  Do I have to itemize every single item I've sold or just do lump sum profit and expenses?  How do deductions work when filing taxes?  I sell an item on ebay for $30 plus S&H. I only paid $5 for the item.  The customer pays $38 ($30 for item)/ $5 for S&H/ $3 for taxes).  Ebay takes their $4 fee and the $3 for taxes. I pay $5 to ship.

 

Q3.  What happens to the sales tax that ebay takes from each sale?

 

Q4. On items that I've purchased this year and plan to resale, but do not actually sell them until next year... do I write off that item in my deductions this year or wait until next year when I actually sell it and make a profit from it?

 

Thank You!

1 Reply
LaunieR_EA101
Employee Tax Expert

@How do deductions work with regards to selling on online stores ?

According to the IRS "If you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, your gain is taxable as a capital gain. Report it as explained in the Instructions for Schedule D (Form 1040). You can't deduct a loss.

However, if you sold an item you held for investment, such as gold or silver bullion, coins, or gems, any gain is taxable as a capital gain and any loss is deductible as a capital loss." https://www.irs.gov/publications/p525 

 

It sounds like you may purchase the items with the purpose of re-selling them. In this case this would be considered a business activity. You would then need to file a Schedule C with your personal tax return to report money you made or lost in your business. 

 

In both instances your thrift store receipts are sufficient for reporting the cost of the items you sell. 

 

For a business return you can just lump the income together. You can also lump like expenses together for each category of expenses for the year. 

 

You can include the e-bay sales tax as an expense for your business. 

 

Most businesses are run as a cash business meaning you would include the expenses and income in the year they are made. So in your Q4 you would include the expense in 2022 and the income in 2023. 

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