So theoretically, I am guessing you would have to go through and do a whole business expenditure worksheet and schedule for the tax return, where you would show actual cost, minus mileage to post office, cost of wrapping materials, shipping, etc, to determine whether or not it is actually a profit that you would have to pay income tax on, or a loss. And you would have to have proofs (assuming), and if it is a loss, oh well. But they will expect tax on the profit.
