Taxes

[jogood6007]

I am looking into becoming a seller as a hobby and have a hypothetical question. Lets say I was making enough money a year off of eBay to have to pay taxes ( I live in the US). Then let's also say I purchased an item off of eBay for say 50$ including shipping. Then let's say I resold this item and made a profit of 10$ after fees and other costs. Would I be paying taxes on the actual profit (the 10$) or the total amount I sold the item for? Any help is appreciated!!

[rebell45 · Accepted solution]

The profit only. As long as you keep records of the purchase price.

[clemowbooks]

You do not pay taxes if you are buying for personal use, and then later sell the used item. (Or even the unused item, if it turned out not to be useful for some reason.)

However, do keep careful records, even of your hobby business, just in case you accidentally become filthy rich selling stuff out of your basement. 😎

Seriously, get in the habit of making a record of all your costs, from printer ink to eBay fees, to bubblewrap.  You may never need it, but if you do, you will want to have that record.

[slippinjimmy]

The previous poster is correct, selling price less expenses equals taxable profit.

It's a little different when it comes to reporting sales.

If you are only selling things that you currently own and they were purchased for your own personal use then you can sell them and for lower value items not need to report anything or be potentially liable for taxes.

On the other hand if you buy items with the intent to resell you should be reporting ANY income you derive. Of course it's still a revenue less expenses equals taxable income.

Can you sell a small amount as a "business" and get away without reporting anything? Yeah probably but if you get an audit from the IRS (for any reason) they may want to see your financial records (bank accounts etc) which might lead them to a place you don't want to go to.

[nobody*s_perfect]

It doesn't matter whether you source  your items from eBay or from your attic: If you have a net profit, then you have reportable income.  Used personal items usually sell for less than you originally paid for them.

Take a look at IRS Schedule C and its instructions to see how they look at it: Your net income fro eBay sales would be the total amount of money that buyers sent to you minus all of your expenses, which includes not only postage and eBay fees but also the original purchase price of the item.

[jogood6007]

So the bottom line is that I should keep records of everything, thanks for the help!

[luckythewinner]

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I am looking into becoming a seller as a hobby and have a hypothetical question. Lets say I was making enough money a year off of eBay to have to pay taxes ( I live in the US).

There is no amount that is "enough" to pay taxes. If you are selling with the intention of making a profit, you are a business and your sales are reportable as income. It is not the volume of your activity that matters, it is the nature of your activity that matters. 

Then let's also say I purchased an item off of eBay for say 50$ including shipping. Then let's say I resold this item and made a profit of 10$ after fees and other costs.

You don't pay taxes on each sale individually. You report all your business activity and calculate your taxes on the sum total of your business.

 Would I be paying taxes on the actual profit (the 10$) or the total amount I sold the item for? Any help is appreciated!!

You would report the amount you received as income, and report all your expenses (the cost of the item and shipping, your eBay fees, your postage costs, your shipping supplies, your PayPal fees, etc.) on the appropriate lines on your tax return.  

In other words, you don't just report your profit to the IRS - you report all your income and all your expenses. 

[09buynsell_store]

Thanks for the answers in this chat thread. I've been selling now for over a year. All items are used. I'm downsizing and just looking to make a few bucks for items that I imagined someone else could put to good use.

So from what I'm reading in this thread it appears regardless if item is used and sold at a lesser value it's still considered income to the seller in the eyes of the IRS. I'm trying to find other answers to this issue of selling used items that has depreciated in value but it seems it comes back the how the IRS sees it. 

Please advise if I am wrong in how I am reading this. Best of luck to everyone.