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