Do I Have to Pay Taxes on My eBay Business?
The majority of people doing business on eBay believe they are exempt from paying tax on those earnings. In order to justify this claim, most would tell you that their eBay buying and selling is just a hobby and that their earnings do not justify having to report the income.
In actuality, this income should be reported. The only organization that can exempt you from reporting income is the Internal Revenue Service. If you have any question as to whether or not your earnings on eBay need be reported, you can consult them. I’m sure you can already guess what they will tell you. So, how about if I tell you, for now?
The standard is that any income generated through buying and selling must be reported as income because it is earned. If you paid $100 for a collectible and then sold it on eBay for $150, you earned $50 that should be reported as income.
Now, if you do something like this collectible sale infrequently, can you get away with not reporting the $50 you earn here and there? Probably, yes. Is the Internal Revenue Service going to track you down over a couple of hundred dollars a year you make on eBay? Probably, not.
However, if you are a consistent trader on eBay, you may already meet the qualifications on an on-line business as opposed to a hobby.
Yours is probably a business if you conduct yourself like a business person in the course of your trades, spend at least part time hours weekly conducting your trades, and rely upon the income from your eBay trading to support yourself.
If you meet these standards, then you have an on-line business and you are responsible for reporting the income this on-line business generates.
In order to be sure where your eBay selling is leading you, you should consult with a tax professional. Explain to them, in depth, what you do on eBay, how much time you spend doing it, and what sort of revenue flow you are receiving from eBay trading. Together you can determine how best to handle this income in terms of how it relates to filing your federal income tax return with the Internal Revenue Service.
Based on the information provided, your tax consultant may be able to help you find applicable tax credits and deductions applying to your eBay selling business and help you to make it more profitable for you, along with making it legitimate.