When Do I Know That I Have a Real Business on eBay?
A lot of people make money on eBay and they don't realize that they have to pay taxes, complete tax returns, keep accurate books and records and so on.
So when do you know that you have a real business on eBay? This is a question that you can separate into 2 questions'
' When do I have to pay taxes on the money I made selling on eBay?
' Is my eBay business just a hobby or a real business? For the first question the answer is relatively simple' if you made at least one dollar of profit (profit means the total income that you made from a sale, less the money that you have spent on the product, the eBay fees and the PayPal fees), you will have to report this money as an income on your tax return and you pay taxes on it.
The Internal Revenue Service (IRS) doesn't care if you are selling on eBay as a hobby or as a business as long as you have some financial benefits from this. It doesn't matter if you sales on eBay as a business or as hobby, both income's are taxable.
The second question depends on if you are making any money from what you sell. As I stated above it doesn't matter if you are making sales as a business or as a hobby as long as you make money, because you will have to pay taxes.
The difference between selling on eBay as a hobby and as a business is that if you are selling on eBay as a business you will have a lot of business expenses that you can deduct from the total income.
If you incurred a loss (you made less in eBay profits than what you paid for the goods you sold) and you sell on eBay as a business, you can apply that loss to reduce the income you made from other sources (such as the salary from your day job).
If you incurred a loss and your eBay selling is a hobby, you can apply that loss only to reduce the income you might have earned from other hobbies. However, you cannot apply a hobby loss against income you earned from other sources (such as the salary from your day job).
If you are willing to take you're eBay business seriously and are disciplined about record keeping and documenting your eBay transactions, you should treat your eBay business as a real business for tax purposes.
A good source where you can find a lot of training material about how to start your eBay business is by going to Worldwide Brands. They have the biggest wholesale database available on the internet and they are a certified eBay Solutions provider. Make sure you talk with a certified CPA or lawyer. This article in not meant to provide financial advices. You should treat them only as an entertainment. We do not assume any responsibility for your losses or gains.
About the Author:
Tudor Ciurescu is a eBay enthusiast. He owns and maintains eBay Triangulation Method a resource for eBay hobbyists.