AJA-Online

Q: I read your last column about paying income tax on eBay sales if you are doing it as a business’ but as someone who only sells on eBay occasionally I’m still confused if the IRS rules apply to me. Can you tell me more? — Norman L.

A: Last week’s column on whether you were required to report income earned from eBay sales to the IRS sparked a number of additional questions and comments from eBay sellers who were hoping that I could somehow validate that their eBay activities were mere hobbies instead of actual businesses and therefore not susceptible to IRS taxation.

Several folks argued that just because their little eBay hobby generated a little cash’ that didn’t make it a full blown business. It seems they consider the income from their little hobby to be financial manna from Heaven and thereby not taxable by earthly tax collectors. I’ve always been amused by folks who try to impress me with talk about their “little side business” but when the subject turns to taxes they suddenly refer to it as “my little hobby.”

All kidding aside’ the conclusion that I came to after reading each email was always the same: while you may think selling on eBay is just a fun pastime and the money you’re making is not reportable as income’ depending on the circumstances’ the IRS would probably disagree with you.

It seems that everyone likes making money’ but hates carving off a piece for good old Uncle Sam. Welcome to free enterprise’ folks. If you’re going to come to the dance you have to pay the fiddler.

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 can be interpreted to mean that if you buy an old 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 let loose an army of agents to collect taxes on 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.

As mentioned last week’ the IRS uses a number of factors to determine if an eBay hobby that generates sales revenue is actually a business.

These factors include: – Do you carry on the hobby in a business-like manner? – Do you spend considerable time working on the hobby? – Do you depend on income from your hobby for your livelihood?

If the answer to any or all of these question is yes’ you’re running a business’ not carrying on a hobby’ and you are responsible for paying taxes on your income.

What’s eBay’s take on all this? Naturally eBay is vehemently opposed to anything that might rock the eBay boat. 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 merely to be a facilitator’ meaning that they provide a marketplace in which buyers and sellers come together to do business.

Furthermore’ under it’s current system it would be impossible for eBay to issue accurate 1099s to sellers. eBay does not track if a seller actually gets paid by the buyer’ so eBay has no idea how much money – if any – actually changes hands at the end of each transaction.

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.

Talk to your accountant if there’s any doubt as to whether you should or should not be paying taxes on your eBay earnings.

Here’s to your success!

Tim Knox

Tim’s latest book is “The 30 Day Blueprint For Success!” We asked 58 Top Internet Money Makers: If you lost is all tomorrow and had to start from scratch’ what would you do to be back on top in the 30 days? Their answers just might make you rich!

Related Links:
http://www.prosperityandprofits.com
http://www.dropshipwholesale.net

“Who’s Suzie?”

My wife Katrina had been acting strangely ever since I had returned home from my Native American cultural class’ not to mention the weird phone call I received just before I left’ full of little pauses instead of our usual fast-paced communication. Now that I was home she had been pretty much ignoring me completely’ then comes this strange question. Katrina was calm but I could tell there was something under her skin as she chopped up the vegetables for the night’s dinner.

“I don’t know anyone named Suzie.” I replied. “Well come to think of it’ there’s my old friend Peter’s wife Suzie.”

My wife remained calm’ ” Do you want to tell me anything?” she replied. “There is nothing to tell Kat.”

Katrina was heating up; her trademark rosy cheeks had evolved to boiling teapot. Still however’ no steam or whistle had been emitted from her pretty spout.

She looked at me thoughtfully’ “Well’ I looked at your cell phone today. It seems you’ve been sending text messages to a woman named Suzie. I’ve read around thirty of her texts in the archive; they’re all like “I love you heaps” and “Thinking of you right now”. Who is she Tom?” A strange feeling overcame me. Katrina seemed absolutely sure that I was guilty of something. Accused yet innocent’ her eyes spoke of the obvious evidence that was piled against me. The thing is’ we were really having serious relationship problems at the time’ with many arguments and rarely seeing eye-to-eye.

Katrina was on the brink of tears and I simply didn’t know what she was talking about. Looking down I could see the cell phone gripped tightly in her hands. Funny’ I hadn’t thought about the fact that I own two phones and she was holding the one that I rarely use. A few months back I bought it off eBay as it is extremely small and I don’t want to have to carry my big expensive “computer” phone on me when I am riding my mountain bike. It was actually my second ‘extra’ phone as my wife had killed the first when she had put it through the washing machine.

“Are you talking about that phone Kat? Give me a look at it.” She handed the phone over reluctantly’ as if it were evidence in a murder trial. I looked at the messages and sure enough there were a whole bunch from someone named Suzie. Some of the messages were quite raunchy indeed. Straight away I started to search for the dates of the archived messages’ as they would surely prove my innocence. “Look Kat’ the dates of these messages were several months ago. I’ve only had the phone for a couple months. They are obviously someone else’s.”

Her look of disbelief was starting to rattle me. It is a really horrible feeling when somebody you love so much doesn’t have trust in you. I then searched and found the receipt from eBay for when I bought the phone. After showing the date on the form to her I could tell she was starting to see that I was telling the truth’ but the wall of disbelief still hung over’ clouds covering her bright face.

Finally I decided to search for the guy who sold me the phone. If this didn’t prove my case nothing would save me from eternally sleeping in the doghouse. Using the email address he had used in the sale proved fruitless as my message kept coming back ‘Return to sender.’ Let me tell you I was really beginning to panic! Then’ bang! The sound of the gun rang in my ears…just joking. It didn’t get that serious! No’ the bang was the sound of the flash of inspiration that suddenly entered my mind. I went back on the Internet and eBay and searched for the guy’s name. I found it with a different email address’ as he must have changed his Internet Service provider. A huge feeling of calmness rushed over me like the first wave at the beach when you have been in the heat all day.

Next I sent him a message asking him about the archived messages to ‘Suzie’ and asked him to ‘Carbon Copy’ (Cc) his response to my wife’s email address so she would see that it was authentic.

The man then replied with a message that said he was very embarrassed about not deleting the messages on the cell phone. All right’ pay dirt! He also went on to say that his wife was named Suzie and gave her address so Kat could then contact her if necessary. He seemed especially nervous about the content of the messages and said that he hoped nothing too x-rated was there as he and his wife often used risque language to keep their relationship’s fire ‘stoked up!

O.K. So there’s my story. My main message to you from the whole experience is that if you are buying or selling a product on eBay’ make sure you clean up any unwanted information. It can really cause problems! Let me also tell you that now I am back searching on eBay as my new phone has also been sent on a mission back to the creator as it too has been on the ‘Quest for the spin cycle’!

*This story is based on a true story of someone (not the author) with names changed.

Jesse S. Somer
http://www.m6.net

Jesse S. Somer is a creative writer working at M6.Net: ‘The web-hosting company for humans.’ M6.Net is working hard to help humanity experience the power and freedom to develop their own part of the Internet’ to share their information and connect with anyone’ anywhere’ anytime.

Hearing that there are more than 1.2 million registered eBay users’ that more than 25’000 members make five figure income as full time eBay entrepreneurs’ and that more than 250’000 part timers make several thousand dollars a year of supplementary income from eBay enterprises would make anyone comment in disbelief with’ "No Way". But the correct response to this is’ "Yes’ way." In fact’ it has also been reported that the number one eBay entrepreneur makes over a million dollars a year. As Austin Powers would say’ "Yeah’ Baby." Or should we say’ "E-Baby."

So what’s the deal with eBay’ anyway? There is a lot more to it than one would think. It can be simple for an occasional buyer’ but it gets increasing complex as users/sellers become more entrenched at deeper levels of use. Here are 10 key ideas or themes for sellers to consider about this phenomenon called "eBay".

1. What ‘s for sale? While some sellers are out scavengering the garage sales and their own garages’ others are purchasing quantities of items wholesale to put up for auction. One would think that the right product is of paramount consideration’ and most sellers agree that the unusual or the hard to find is the best bet. However’ this is not always true either. Timing’ meaning the right person at the right time seeing your item’ is where it is at. You have to be visible and be out there with a clear message or product that seems like a steal’ or at least reasonably priced. With the thousands and thousands of items for sale’ there is no shortage of competition. However’ the good thing is that there are a lot of buyers out there that should enable the sale of just about anything.

2. Communication and descriptive details about your product is a key in getting noticed. The description of your item and the pictures to display it will get the buyer’s attention. If a person is a serious seller’ having an adequate digital camera is a must. Again’ photos are extremely important.

3. The well written detailed description to accompany the item is of great benefit. Being open and honest about the item will demonstrate integrity as a seller and will keep people coming back. Being available to answer questions for prospective buyers and remembering to be courteous and helpful follows along with the never-to-be forgotten premise of "the customer is always right."

4. With customer feedback being a key element in the ratings statistics that will promote you or haunt you during your eBay career’ it is important for a seller to be professional and kindly in all business dealings. People like and appreciate personal attention. Take the time to give it. Being positive’ accommodating and helpful is a winning combination for good customer relations.

5. Shipping information and how you present it can win over a customer because they notice when a buyer is tying to take advantage and ask an unreasonable amount for shipping. Of course’ a seller must take into account time spent’ the handling charge’ when pricing the shipping. Time is money’ and a seller should be compensated for all aspects of the service that is provided.

6. Some advice about setting up your auction items would be to consider having your item run seven days with an end of bidding time somewhere between 7 PM and 9 PM on a Sunday night. That seems to be the consensus amongst the top sellers. There has been much dialog on just how to increase the amount and number of bids’ but there are too many variables to consider. Suffice to say’ it really does depend on the product itself (and what the condition and competition is our there).

7. Some of the most unique aspects of selling have to do with the seasonal items that permeate the auction block at certain times of the year. If a seller wants to work year-round’ he or she will have to broaden the horizon by finding seasonal items for all seasons. Yes’ you can sell Christmas items and move right into Valentines Day and Easter and so on. Why not? These are what people are looking for.

8. One controversial topic is drop shipping. If a seller is getting a product from a third party’ drop shipping is a convenient way for the seller to deliver the product. It keeps them out of it. However’ that means that a back ordered item could result in a poor rating for the seller because the item was delayed. Most buyers picture the item in the hands of the seller and expect to receive it within a few days. The pros and cons of this arrangement need to be carefully considered.

9. Now to the fun part. How do you get the money? More and more people are using PayPal. It is quick’ efficient and simple. A seller can make other arrangements and accept a check or money order’ but the wave of the future is setting up an account with PayPal. In addition’ setting up an online account with the United States Postal Service will also save countless hours in the lines at the post office. Work smarter’ not harder’ etc.’ etc.

10. A seller can look at other things to sell besides a physical product or item. Many are getting into self publishing or offering a service. Some expanding entrepreneurs are opening up a consignment shop situation’ which helps those who want to sell but "don’t do computers." The possibilities are unlimited.

Selling products and services from a home-based business can be an exciting’ and hopefully profitable’ situation. Go into it with a solid plan based on accurate information and with the knowledge that it is going to be hard work’ just like any other job.

For more on eBay selling and using online auctions visit the How To Sell On eBay Resource Page located at http://www.sbmag.org.

Copyright usage: No permission is needed to reproduce this story. The About the Author statement with hot links must remain in tact. Request for reciprocal links will be considered. mailto:barb@sbmag.org.

About the Author
Barbara Snyder is a retired California Distinguished School Principal and Coordinator For Human Resources. She has a master’s degree in Curriculum and Instruction. She holds elementary education’ secondary’ community college’ and administrative credentials. She is currently the publisher of http://EducationResourcesNetwork.com‘ co-publisher of Strictly Business Magazine’ http://www.sbmag.org.