Small seller on Ebay - Do I need business liscence

[hopinnshop]

I was a seller on Ebay last year and I made less than $5000.

I want to start selling again but keep it low profile and make some extra cash.

I was wondering if I need to get a business liscence if my revenue is less than $5k.

Thank you!

[partial*eclipse]

No, you don't.

[rixstuff]

No.  You would only need a license if you were going to take profit/loss off your taxes (the amount you spend acquiring the items and if you made back your money or lost money), which would also obligate you to collect state sales taxes.  If you are just selling items you find in your own closet, you are already selling them for less than you paid and are on par with a yard sale.**

**Though...there are some psycho jurisdictions that require licenses and sales tax from yard sales! most dont though.

[orangehound]

I'm not exactly sure what you mean by license, but I think the answer is "it depends".

If you are clearing out the closets, like a person would do to hold a garage sale, then the answer would be "no".  The reason the answer is "no" is because most things you sell are bought, personally used, and then sold for something less than you paid for them.  So, the IRS and local jurisdictions don't consider that a business ... it is an "on-line garage sale".

But, if you are buying things and then selling them on eBay to make money (e.g., buy items for $10 to resell for $20), then this is business activity and you enter into the business world.

• You would file a Schedule C on your taxes if you have net income (you can also file if you had business losses).
• If your net income from Self Employment is over $400, you are subject to Self-Employment taxes (15.3%).
• You would need to collect sales taxes are relay these to the state where you do business, and any other state where you might have a business "nexus".
• Depending upon your local jurisdiction, you may need to get a "license" ... where I live, $5,000 of sales would not require a license, but you would need to check your local laws.

By the way, at $5,000 you will probably not get a 1099-K from PayPal ... the threshold is $20,000 (although I have heard people saying that this year they are getting them for income under $20,000).

Also, as a small business operation, you don't need an EIN or get any special incorporation documents ... you can operate as a sole proprieter and use your SSN for filing.

[thallidguy]

A reseller's license allows you to purchase goods from wholesalers. If you acquire your goods by other means, you don't need a business license.

[amricons]

Excellant reply, thou you should also check your local , city and county rules.

[debbie3369]

Depends on where you live. My state requires me to collect sales tax from any customer who resides in North Carolina or I pay a fine. I don't need a business license but if I purchase merchandise and don't pay sales taxes, I have to file that on my use and sales tax and yes, pay tax on it. Check with your local government office and see what your state requires.

[tealt]

Since I buy used items and sell them for a profit (I hope), my city and state require that I have a business license and a state sales tax collection permit.

You won't get a proper answer to your question until you inquire of your own city/county and state about their laws and regulations.

[sam9876]

Don't get any licenses or permits.

[tealt]

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@hopinnshopwrote:

I was a seller on Ebay last year and I made less than $5000.

I want to start selling again but keep it low profile and make some extra cash.

I was wondering if I need to get a business liscence if my revenue is less than $5k.

Thank you!

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Keeping a low profile while making extra cash on eBay is certainly possible, although I've always been too chicken to try it.

PayPal is now required by law to issue 1099's if your total incoming transactions on their site are more than $20,000, with more than 200 transactions.

However, last month some eBay sellers in MA and VT were surprised to receive PayPal 1099's for total transactions of more than only $600.  These 1099s will be submitted to the states.  I could be wrong, but these two states may be cracking down on the "underground" economy, and it's hard to stay underground and low profile with an online business and an online payment processor.

Will other states that collect state income taxes follow the lead of MA and VT? 

Who knows, but I'd hate to suddenly pop up on my state's radar with thousands of dollars of transactions on PayPal and no previous record of paying taxes on business income or collecting state sales tax .  It might trigger an audit and possibly penalties for unpaid back taxes.

Maybe I worry too much, but...

[hopinnshop]

First of thanks for replying. 

I would be buying wholesale and selling on ebay. 

So as long as my income is less than 20K per anum then I might not require a business license?

If I need to get a license then is there a specific type of license that I need to get? 

Since I am new to the business world my knowledgeis limited. 

I recide in Minnesota. I will also check with the state laws to make sure what I might have to do. 

[chrysylys]

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@lonestartrends wrote:

then I might not require a business license?

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No one said that.  People advised you to contact government offices in your area that deal with those matters.

[thallidguy]

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@hopinnshopwrote:

First of thanks for replying. 

I would be buying wholesale and selling on ebay. 

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Then you need to get a reseller's license. Legitimate wholesalers will not sell to you unless you have one.

[livadia]

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@thallidguywrote:

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@hopinnshopwrote:

First of thanks for replying. 

I would be buying wholesale and selling on ebay. 

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Then you need to get a reseller's license. Legitimate wholesalers will not sell to you unless you have one.

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@hopinnshop -  The same info was noted in one of the links I provided your in your other thread about Macy's liquidation selling.   Might want to take a look when you have a chance...

[thallidguy]

Looking at the OP's other thread: I have to take a deep breath out of concern.

If she needs to make money in in the short term because of an emergency, this really isn't a great strategy. She's talking about setting up a serious business, with all of the risks and requirement for patience that come with it. She's going to have lay out real money up front and count on making it back later.

Plus, I've heard it said that if you're buying wholesale you can't make much of a profit on eBay. I suppose it depends on what you're selling, but it's probably true. The price competition is very steep in many categories. In my category, there are some items that I just won't sell because I'm probably competing against sellers who are themselves wholesalers, meaning that they get their product at publisher's cost.