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.
If you are like me, making more money does not hurt. In fact, the only reason that I am able to write this article regarding the expertise that I have gained, is that I want to make money. Ebay is a great way for many to make money. And over the course of a few years, I have been able to make a lot of money selling e-books on eBay. In fact, I have been named as the #1 Google eseller on the Internet. In this article, I would like to talk to you about how making money with digital media products is something that you may want to consider taking on.
I'm sure that I do not have to tell you this. Information products is the best moneymaking medium you can find out there right now. Do you watch TV? On many of those TV commercials, you can see tons of products being sold, and the best ones that make the most money, or those that are selling information products. From teaching you how to overcome anxiety toteaching you how to make real estate riches, all of these products are information products.
How do these companies actually make all the money that they do? They typically do not just write content and post it on a website for people to view for free. What most of them do is to take the first step -- writing an e-book. With the e-book, they can easily sell their items on eBay or through a website that they create on their own. This is a good way to make money, however, this is only half of the full pie.
The other half of the pie, that most people who sell e-books never desire to take up, is to actually transform their e-book content into hard shippable goods. By hard shippable goods, I'm talking about making the e-books into CD or DVD format -- digital media products. There are many consumers out on the market that don't want to just play around with the computer all day. There are a lot of commuters who would rather listen to an audio cd that teaches them how to accomplish a specific task. There are many elderly folks who would rather learn how to do a specific task by watching a DVD on their couch. That is the reason that the best selling information products on the market today are all in digital media product format.
To demystify, you must understand that all information products can be transformed into CD or DVD format. Whether you decide to use audio or video, is your decision. However, the best way to make the most money out of your Internet business, your information product information business, is to do both -- sell e-books via downloadable links, and also to ship products to consumers who are interested in hard products instead.
There are many ways to make Money on the Internet and this is just one. But I found that using information products to skyrocket your profits and to make a living (instead of working a job from 9 to 5), is a far better way to make money quickly and efficiently.
Both Arma Jon & Ray Johnson are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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Ray Johnson has sinced written about articles on various topics from Online Marketing, How to Sell on Ebay and Internet Marketing. Join me, Ray Johnson - Google.Com no.1 ranked information product eseller. Let me show you how to build a massive digital media & internet marketing business with step-by-step mentoring all the way! Join me at:. Ray Johnson's top article generates over 74000 views. to your Favourites.