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Is Selling On eBay Just A Hobby Or A Real Business?


Q: I made extra money selling things on eBay last year. These were items I picked up at yardsales mostly. My husband says I am responsible for paying income tax on the money I made, but I disagree. This is just my hobby, not a business. What do you think? -- Gladys A.

A: With so many people selling on eBay these days this is a question I get all the time. To many eBay sellers the thought of running an actual business is about as appealing as getting negative feedback, so they go out of their way to convince themselves that selling on eBay is really "just a hobby" and therefore, should not be susceptible to income tax laws.

While you might think selling on eBay is just a hobby and the extra money you're making is not reportable as income, depending on the circumstances, the IRS just might disagree with you.

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 mean that if you buy a 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 lose much sleep over 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.

The IRS uses a number of factors to determine if a hobby is really a business. These factors include:

1. Do you carry on the activity in a business-like manner?

If you conduct your eBay activities in a business-like manner, i.e. you keep business records, track profit and loss, keep a separate checking account, etc. then whether you think so or not, your hobby is really a business.

2. Do you spend considerable time working on your hobby?

If you put considerable time and effort into your eBay sales, the IRS may contend that you do so for profit and not fun. It seems the folks at the IRS don't believe in doing things strictly for pleasure. My guess is, neither do you. If you weren't making money selling on eBay I doubt you'd bother getting up at 4 a.m. to hit all those yardsales.

Then again, maybe you would... :o)

3. If you depend on income from your eBay activities for your livelihood?

If so, it's a business, not a hobby.

There are a number of other factors the IRS uses to determine if a hobby is really a business, but that covers the basics.

You can learn more at the IRS website at www.irs.gov.

What's eBay's take on all this?

eBay is vehemently opposed to anything tax related (especially the forced collection of sales tax, which is a whole 'nother issue). It's understandable that eBay is not a fan of the IRS since trying to enforce tax rules on buyers and sellers would undoubtedly be detrimental to the way eBay does business.

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 a faciliator, i.e. they provide a marketplace in which buyers and sellers come together to do business.

However, since eBay is not directly involved in the transactions that take place between buyers and sellers, it would be impossible for eBay to report sales figures. Furthermore, eBay does not track if a seller actually gets paid by the buyer, so they have no idea how much money actually changes hands, making it impossible for eBay to issue accurate 1099s to sellers.

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.

I'm not accountant (nor do I play one on TV), so please do not take any of this as tax advice or legal opinion. 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

Small Business Q&A is written by veteran entrepreneur and syndicated columnist, Tim Knox. Tim serves as the president and CEO of three successful technology companies and is the founder of DropshipWholesale.net, an online organization dedicated to the success of online and eBay entrepreneurs.

Related Links:
http://www.prosperityandprofits.com
http://www.smallbusinessqa.com
http://www.dropshipwholesale.net


TODAYS NEWS BY OFFICEJAX FREE ADVERTISING AND AD EXCHANGE SOLUTIONSMORE RESOURCES updated Mon. November / 28 / 2022

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As Dinosaur Fossils Fetch Millions, There’s Many a Bone to Pick  The New York Times

Rotary Auction raises over $35,000 | Atlantic | swiowanewssource.com - The Audubon County Advocate Journal
Rotary Auction raises over $35,000 | Atlantic | swiowanewssource.com  The Audubon County Advocate Journal

Online State Surplus property auction starts Thursday, Nov. 3; See list of items available - Elmore Autauga News
Online State Surplus property auction starts Thursday, Nov. 3; See list of items available  Elmore Autauga News

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1974 Alfa Romeo GTV 2000 Is Our Bring a Trailer Auction Pick of the Day  Car and Driver

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Queen Elizabeth II portrait by Andy Warhol sells for record $853,000 at auction  The National

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Steve Ditko's Personal Copies of His Spider-Man Comics, at Auction  Bleeding Cool News

Queen Elizabeth letter fetches $8,600 at auction in Germany | Daily Sabah - Daily Sabah
Queen Elizabeth letter fetches $8,600 at auction in Germany | Daily Sabah  Daily Sabah

AUCTIONS Coming Soon - West Bend News
AUCTIONS Coming Soon  West Bend News

Sports memorabilia auction includes a lewd handwritten note from Yankees great Mickey Mantle - The Mercury News
Sports memorabilia auction includes a lewd handwritten note from Yankees great Mickey Mantle  The Mercury News

Sold for $3,341, This was Michael Jordan’s Weirdest Possession Sold at Auction, Apart from Earning More than $2 Million through Memorabilia Over the Years - EssentiallySports
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ACV Auctions predicts slowed growth as auto industry remains constrained  Buffalo News

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49ers Foundation Announces Details for Annual Holiday Sports Auction  49ers.com

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Luka Doncic rookie card sells for record $3.12 million at auction  ESPN

Michael Jordan's game-worn 1985 Air Jordan 1s ready for auction - NBC Sports
Michael Jordan's game-worn 1985 Air Jordan 1s ready for auction  NBC Sports

Government Auction Sites Are A Cheap And Easy Way To Invest In Real Estate - Yahoo Finance
Government Auction Sites Are A Cheap And Easy Way To Invest In Real Estate  Yahoo Finance

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Chelan County to Auction Off $4.75 Million In Surplus Property - KPQ
Chelan County to Auction Off $4.75 Million In Surplus Property  KPQ

Green Bay area former UnitedHealth Group headquarters up for auction - Green Bay Press Gazette
Green Bay area former UnitedHealth Group headquarters up for auction  Green Bay Press Gazette

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State to auction surplus items from decommissioned COVID care facilities  WRGB

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Dealers Auto Auction Group makes another acquisition, expands reach to Arkansas  Auto Remarketing

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