Elmo TMX PS3 Ebay, Taxes, and Elmo

Ebay, Taxes, and Elmo

Added on 11/25/06 by Betsy

Question: I found your sight in my search to find if my tmx elmos would still sell well
closer to Christmas (I'm sure you noticed the expected drop over the holiday).
I sold pretty heavy for a month or two last year and then bought heavier on ebay
than I sold. I stopped buying do to a couple really bad experiences and and
back to the selling side; when I started my biggest concern was taxes (When to
charge, when to declare, what forms, etc...) and at what point I became a
business versus an individual selling a couple items on ebay. I didn't know
what it all entailed and just decided to drop selling for a while. Stay at home
mom as well, knowing my ebay options would be helpful. What have you learned
about declaring taxes at the end of the year, etc / and at what you become a
business and need to start worrying about legalities.
Thanks for your time
Amy

Answer:

Without fail this is THE cocktail party question I get asked once I cop to selling on Ebay as a mommy profession: "Do you have to pay taxes on that?

What people really want to know is:
"Do YOU pay taxes?" Though generally, people are far to polite to be that forward.

According to my accountant, tax year '05 was the first year the IRS had a professional category named "online auction sales".

I pay taxes. It is income and in this country you have to pay taxes on income.

Now, when do you know that you are a business.

If you go to the IRS site or the Small Bus. Admin. site there are a lot of in depth questionaires to help you answer that question.

Once again, according to my accountant if you are conducting yourself like a business then you are a business.

For instance, if you go to Walmart and buy your kids clothes for $7 a piece, then later have a garage sale and sell them for $1 a piece- though you may feel like you are rollin in the dough actually you are in the red.

However if I go to your garage sale and buy your Garanimals for $1 for Ebaying and sell them to a Garanimal collector for $25 then I have conducted myself as a business.

Keep in mind that the mileage between my house and your driveway, the $1 item cost, Ebay fees and Paypal fees are now all costs of doing business and therefore deductible.

Local and state stuff varies a lot.

So if you find yourself in line at Toys R Us at 5am waiting for an Elmo TMX or PS3 to sell, do yourself a favor and find an accountant to help you out.