Do I have to pay
taxes selling on Ebay?
A lot of questions have
arisen about whether or not sellers need
to report their income to the IRS.
Making money is always
great, paying taxes is always not great.
According to the IRS 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.
-
Do you carry on the
hobby in a businesslike manner?
-
Do you spend
considerable time working on the
hobby?
-
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.
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.
How about collecting sales tax
selling on Ebay?
I wish I could provide
you the specifics of tax regulations,
but the subject is much too vast, varied
and complex. There are so many
government entities involved in creating
and enforcing tax regulations that we
are unable to offer advice in this area.
The best thing to do is contact a local
CPA or accountant. They will be able to
give you the specifics of your local,
state and federal tax requirements.
Another information source is your
local, state and federal tax
commissions.
