eBay Sales May Be Subject To Taxes

IRS Has No Clear Separation Between Hobbies And Businesses

(AP) 
It often is best to ask a tax professional, said Bob Miller, who says he spends about 18 hours a day on eBay, selling collectable postage stamps and advising other buyers and sellers from his home in northern Utah.

"When the person that you owe the money to can throw you in jail, it's always a good idea to get professional advice," he said.

eBay Inc. spokesman Chris Donlay said the company does not report individual sales to the tax authorities. eBay urges users, in the site's educational materials and seminars, to learn about tax issues.

"It's really up to the seller, just like offline," he said. "We are just a venue, really. We're sort of like the mall landlord or the owner of the parking lot where the flea market happens."

It takes so little effort to set up shop on eBay that some might overlook the tax issues, Miller said.

"If you have an e-mail address, you can start selling. If you're a U.S.-based seller, you need to have a credit card and a bank account," Miller said.

"People have a feeling that they're selling on eBay, they're not a business. It's not true. If you are selling and making a profit, you have to declare it."

An eBay survey last year found that 430,000 of its U.S. sellers make a significant portion or all of their revenue from selling on eBay.

While it might sound like nothing good can come of the headache involved in claiming a small profit from online auctions, consider the perks. Business expenses can be deducted from profits. That includes the cost of the goods sold, fees, supplies and maybe a home office — if the qualifications are met.

Wojnarowsky said she plans to report her eBay profits, which she estimates at roughly $2,000, but she is not looking forward to it.

Last year, the Wojnarowsky paid a $400 tax preparation fee, which included a business schedule to report online auction earnings. This year, they will crunch the numbers themselves using tax preparation software.

"I talked to a friend of mine who does eBay, and she's not filing because she said it's not regulated," Wojnarowsky said. "But my fear is, yeah, but what if you're wrong? I don't want to pay the fine."