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Do You Pay Taxes On eBay Income?


Q: I read your last column about paying income tax on eBay sales if you are doing it as a business, but as someone who only sells on eBay occasionally I'm still confused if the IRS rules apply to me. Can you tell me more? -- Norman L.

A: Last week's column on whether you were required to report income earned from eBay sales to the IRS sparked a number of additional questions and comments from eBay sellers who were hoping that I could somehow validate that their eBay activities were mere hobbies instead of actual businesses and therefore not susceptible to IRS taxation.

Several folks argued 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 try to impress me with 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 reading each email 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.

As mentioned last week, the IRS uses a number of factors to determine if an eBay hobby that generates sales revenue is actually a business.

These factors include: - Do you carry on the hobby in a business-like 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.

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.

Here's to your success!

Tim Knox

Tim's latest book is "The 30 Day Blueprint For Success!" We asked 58 Top Internet Money Makers: If you lost is all tomorrow and had to start from scratch, what would you do to be back on top in the 30 days? Their answers just might make you rich!

Related Links:
http://www.prosperityandprofits.com
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TODAYS NEWS BY OFFICEJAX FREE ADVERTISING AND AD EXCHANGE SOLUTIONSMORE RESOURCES updated Thu. January / 28 / 2021

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MaxSold offers zero-commission online auctions to assist charitable sector fundraising efforts  Yahoo Finance

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Business owner auctions off Bernie Sanders doll for a good cause  WKYC.com

Tom Brady's Rookie Card Sold At Auction For $555988 - NPR
Tom Brady's Rookie Card Sold At Auction For $555988  NPR

Bristol 405 Drophead Coupe Heads to Auction, and It's Even Left-Hand Drive - Autoweek
Bristol 405 Drophead Coupe Heads to Auction, and It's Even Left-Hand Drive  Autoweek

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Onshore Wind Closes In On Solar in Spanish Auction  Greentech Media News

Blackwell Auctions Disperses Floridian's Lifetime Hummel Collection - Antiques and the Arts Online
Blackwell Auctions Disperses Floridian's Lifetime Hummel Collection  Antiques and the Arts Online

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Lou Gehrig 1938-39 bat to be auctioned by SCP Auctions  97.1 The Ticket

A rare Botticelli portrait could fetch $80 million in Sotheby's auction - CNBC
A rare Botticelli portrait could fetch $80 million in Sotheby's auction  CNBC

Watertown’s heavy rescue truck stripped, readied for auction - WWNY
Watertown’s heavy rescue truck stripped, readied for auction  WWNY

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Solar wins big in Spain's renewables auction with more than 2GW awarded  PV-Tech

Nashville commercial real estate set for auction by court order including Murfreesboro Pike hotel - WKRN News 2
Nashville commercial real estate set for auction by court order including Murfreesboro Pike hotel  WKRN News 2

How To Read Japanese Auction Car Condition Grades And Inspection Reports - Jalopnik
How To Read Japanese Auction Car Condition Grades And Inspection Reports  Jalopnik

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Clothing, books from artists up for auction  WILX

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Ready Your Paddles for This Rare John Rosselli Auction  Architectural Digest

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These are the most expensive items at the Roadside America auctions (so far)  pennlive.com

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Auction Calendar: January 29, 2021 - Wisconsin State Farmer
Auction Calendar: January 29, 2021  Wisconsin State Farmer

'Remarkable rarities' from closed Guinness World Records Museum go up for auction - WGRZ.com
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C-Band Auction Set to Move Into Assignment Phase  TV Technology

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Storage Auction: Vermont Self Storage, Williston, February 11, 2021 | Storage Auctions - Seven Days
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What's This Off-Road Mazda Miata Doing at a Government Surplus Auction?  The Drive

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Wild At HeART Online Auction Benefits The Chattanooga Zoo  The Chattanoogan

$20 bill with Del Monte banana sticker auctioned for almost $400,000 - KGW.com
$20 bill with Del Monte banana sticker auctioned for almost $400,000  KGW.com

Major auction of agricultural land with development potential set for February 25 - PRNewswire
Major auction of agricultural land with development potential set for February 25  PRNewswire

Part of downtown's Kimpton Hotel Monaco heads to auction - Baltimore Business Journal
Part of downtown's Kimpton Hotel Monaco heads to auction  Baltimore Business Journal

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Rare V-Bomber Cockpits Collection Up For Auction  The Aviationist

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Spain places 3.034 GW in RES auction at Eur24.75/MWh  S&P Global

Mecum breaks own sales records at huge Kissimmee, Florida, auction - The ClassicCars.com Journal
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Roadside America's parts go at auction as many lament the demise of the iconic attraction  Reading Eagle

Magical Mix Kids auction will be online this year, with 1st ever virtual fundraising event - kwwl.com
Magical Mix Kids auction will be online this year, with 1st ever virtual fundraising event  kwwl.com

First GMC HUMMER EV could raise millions at charity auction - Fox News
First GMC HUMMER EV could raise millions at charity auction  Fox News

Ligonier Valley Historical Society's first online auction features Valentine's Day theme - TribLIVE
Ligonier Valley Historical Society's first online auction features Valentine's Day theme  TribLIVE

Two Day Estate Sale January 30th & 31st Time: 9:00 - Olean Times Herald
Two Day Estate Sale January 30th & 31st Time: 9:00  Olean Times Herald

Sweden operators get ready for mass 5G cover after spectrum auctions - Reuters
Sweden operators get ready for mass 5G cover after spectrum auctions  Reuters

Gillian's Wonderland Pier ordered to be put up for auction - Press of Atlantic City
Gillian's Wonderland Pier ordered to be put up for auction  Press of Atlantic City

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Autographed Tom Brady rookie card sells for $556K at auction  Patriots Wire

1963 Chevy Impala Previously Owned By Kobe Bryant Headed To Auction - GM Authority
1963 Chevy Impala Previously Owned By Kobe Bryant Headed To Auction  GM Authority

10-Year-Old Tesla Roadster Sport Sells for $112,000 at Auction - Automobile
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Creighton Pink Out auction ends Wednesday - KMTV - 3 News Now
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Trump auctions drilling rights to Arctic National Wildlife Refuge - The Washington Post
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Auction of estate of Southern author, journalist Julia Reed - WBRZ
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Brazil's Bolsonaro to allow China's Huawei in 5G auctions: newspaper - Reuters
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KSCVK Announces Auction Winners - COLlive
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C-band auction assignment phase to start February 8 - Light Reading
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C-Band auction winds down, officially hits $80B mark  Connected Real Estate Magazine

Sea Turtle Rescue Group's Virtual Auction Set - Coastal Review Online
Sea Turtle Rescue Group's Virtual Auction Set  Coastal Review Online

Ocean City Amusement Pier, Owned by Mayor, in Jeopardy of Sheriff's Auction - NBC 10 Philadelphia
Ocean City Amusement Pier, Owned by Mayor, in Jeopardy of Sheriff's Auction  NBC 10 Philadelphia

Gillian's Wonderland Pier to go to Auction Jenn & Bill Daily - Talk Radio 1210 WPHT
Gillian's Wonderland Pier to go to Auction Jenn & Bill Daily  Talk Radio 1210 WPHT

A rare collection of cockpits from legendary British 'V-bombers' is going up for auction - Business Insider - Business Insider
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Mecum Auctions returns to Kissimmee with collector car auction  Orlando Sentinel

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Cake auction and more at the Key Training Center - Citrus County Chronicle
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Lou Gehrig bat, linked to 1938 World Series, could sell for $1 million at auction: report - Fox Business
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Mecum Auctions to offer 48 Corvettes from man's collection - Business Insider - Business Insider
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EPEC prepares for 'epic' auction in place of annual sock hop fundraiser - Martinsburg Journal
EPEC prepares for 'epic' auction in place of annual sock hop fundraiser  Martinsburg Journal

NFL Najarian Cleat Auction Winners Donate to Armenian Museum of America - The Armenian Mirror-Spectator
NFL Najarian Cleat Auction Winners Donate to Armenian Museum of America  The Armenian Mirror-Spectator

IPL 2021 player auction to be held on February 18 - ESPNcricinfo
IPL 2021 player auction to be held on February 18  ESPNcricinfo

FCC to Start Assignment Phase of C-Band Auction on Feb. 8 - Via Satellite
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Künker Auction 346 Offers Gold Ducats, River Gold Issues, Military Orders - CoinWeek
Künker Auction 346 Offers Gold Ducats, River Gold Issues, Military Orders  CoinWeek

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Hair Auction continues fight against childhood cancer in virtual setting - St. Marys Daily Press
Hair Auction continues fight against childhood cancer in virtual setting  St. Marys Daily Press

Mecum Auctions to sell vintage pickups from Muscle Car City - Business Insider - Business Insider
Mecum Auctions to sell vintage pickups from Muscle Car City - Business Insider  Business Insider

Acker puts Delaware on the fine wine auction map - Del. Business Times - Delaware Business Times
Acker puts Delaware on the fine wine auction map - Del. Business Times  Delaware Business Times

Last Holden Built In Australia Heads To Online Auction - GM Authority
Last Holden Built In Australia Heads To Online Auction  GM Authority

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2021 Modernism Week goes online with events, tours and auction in February  The Mercury News

Georgia weekly cattle auction summary | Livestock Markets | hpj.com - High Plains Journal
Georgia weekly cattle auction summary | Livestock Markets | hpj.com  High Plains Journal

A Watch Auction Site Designed to Trim the Overhead - The New York Times
A Watch Auction Site Designed to Trim the Overhead  The New York Times

Spanish renewables auction secures lowest price of €0.01498/kWh - pv magazine International
Spanish renewables auction secures lowest price of €0.01498/kWh  pv magazine International

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Magic: The Gathering Black Lotus card sells for $320,000 at auction  Polygon

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Auction slows as it surpasses $80 billion  RCR Wireless News

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Beargrease Silent Auction Goes Virtual Ahead of Sunday Race Start  FOX 21 Online

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Verizon Posts Solid Q4 Results as C-Band Auction Looms  Morningstar.com

IPL 2021 Trade Window Live Updates: IPL 2021 Auction date announced, to be held on Feb 18 in Chennai - InsideSport
IPL 2021 Trade Window Live Updates: IPL 2021 Auction date announced, to be held on Feb 18 in Chennai  InsideSport

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C-Band auction nears the $80B mark  Connected Real Estate Magazine

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