| Q: I made extra money selling things on eBay last year. | | | | sales, the IRS may contend that you do so for profit |
| These were items I picked up at yardsales mostly. My | | | | and not fun. It seems the folks at the IRS don't believe |
| husband says I am responsible for paying income tax | | | | in doing things strictly for pleasure. My guess is, neither |
| on the money I made, but I disagree. This is just my | | | | do you. If you weren't making money selling on eBay I |
| hobby, not a business. What do you think? | | | | doubt you'd bother getting up at 4 a.m. to hit all those |
| -- Gladys A. | | | | yardsales. |
| A: With so many people selling on eBay these days | | | | Then again, maybe you would... :o) |
| this is a question I get all the time. To many eBay | | | | 3. If you depend on income from your eBay activities |
| sellers the thought of running an actual business is | | | | for your livelihood? |
| about as appealing as getting negative feedback, so | | | | If so, it's a business, not a hobby. |
| they go out of their way to convince themselves that | | | | There are a number of other factors the IRS uses to |
| selling on eBay is really "just a hobby" and therefore, | | | | determine if a hobby is really a business, but that |
| should not be susceptible to income tax laws. | | | | covers the basics. |
| While you might think selling on eBay is just a hobby | | | | You can learn more at the IRS website at |
| and the extra money you're making is not reportable | | | | What's eBay's take on all this?eBay is vehemently |
| as income, depending on the circumstances, the IRS | | | | opposed to anything tax related (especially the forced |
| just might disagree with you. | | | | collection of sales tax, which is a whole 'nother issue). |
| The IRS rules are clear: you must pay taxes on all | | | | It's understandable that eBay is not a fan of the IRS |
| personal and business income and that includes money | | | | since trying to enforce tax rules on buyers and sellers |
| you make selling on eBay. | | | | would undoubtedly be detrimental to the way eBay |
| In its most basic sense, the IRS rules mean that if you | | | | does business.eBay does not does not issue 1099 tax |
| buy a vase at a garage sale for $10 and sell it on | | | | forms to sellers, nor does it report seller's sales figures |
| eBay (or elsewhere) for $20 you made a $10 profit | | | | to the IRS. eBay considers itself a faciliator, i.e. they |
| and therefore must report it as income and pay Uncle | | | | provide a marketplace in which buyers and sellers |
| Sam his fair share. | | | | come together to do business. |
| In reality, if you are a casual seller who only sells a few | | | | However, since eBay is not directly involved in the |
| items on eBay every now and then it's doubtful the | | | | transactions that take place between buyers and |
| IRS is going to lose much sleep over the few bucks | | | | sellers, it would be impossible for eBay to report sales |
| you make. | | | | figures. Furthermore, eBay does not track if a seller |
| However, if you consistently sell on eBay the IRS may | | | | actually gets paid by the buyer, so they have no idea |
| deem your activities to be business oriented and you | | | | how much money actually changes hands, making it |
| will be required to file a Schedule C and claim the | | | | impossible for eBay to issue accurate 1099s to sellers. |
| income. | | | | On the bright side, if you do sell on eBay as a business |
| The IRS uses a number of factors to determine if a | | | | you can deduct a number of business expenses, |
| hobby is really a business. These factors include: | | | | including the cost of inventory, listing fees, shipping, |
| 1. Do you carry on the activity in a business-like | | | | envelopes, packing materials, etc. You might also be |
| manner? | | | | able to deduct things like the purchase of a computer |
| If you conduct your eBay activities in a business-like | | | | for business use, office space (even if it's a home |
| manner, i.e. you keep business records, track profit and | | | | office), office supplies, and more. |
| loss, keep a separate checking account, etc. then | | | | I'm not accountant (nor do I play one on TV), so please |
| whether you think so or not, your hobby is really a | | | | do not take any of this as tax advice or legal opinion. |
| business. | | | | Talk to your accountant if there's any doubt as to |
| 2. Do you spend considerable time working on your | | | | whether you should or should not be paying taxes on |
| hobby? | | | | your eBay earnings. |
| If you put considerable time and effort into your eBay | | | | Here's to your success! |