A: With so many people selling on eBay these days this is a question I get all the time. To many eBay sellers the thought of running an actual business is about as appealing as getting negative feedback’ so they go out of their way to convince themselves that selling on eBay is really “just a hobby” and therefore’ should not be susceptible to income tax laws.

While you might think selling on eBay is just a hobby and the extra money you’re making is not reportable as income’ depending on the circumstances’ the IRS just might disagree with you.

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 mean that if you buy a 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 lose much sleep over 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.

The IRS uses a number of factors to determine if a hobby is really a business. These factors include:

1. Do you carry on the activity in a business-like manner?

If you conduct your eBay activities in a business-like manner’ i.e. you keep business records’ track profit and loss’ keep a separate checking account’ etc. then whether you think so or not’ your hobby is really a business.

2. Do you spend considerable time working on your hobby?

If you put considerable time and effort into your eBay sales’ the IRS may contend that you do so for profit and not fun. It seems the folks at the IRS don’t believe in doing things strictly for pleasure. My guess is’ neither do you. If you weren’t making money selling on eBay I doubt you’d bother getting up at 4 a.m. to hit all those yardsales.

Then again’ maybe you would… )

3. If you depend on income from your eBay activities for your livelihood?

If so’ it’s a business’ not a hobby.

There are a number of other factors the IRS uses to determine if a hobby is really a business’ but that covers the basics.

You can learn more at the IRS website at www.irs.gov.

What’s eBay’s take on all this?

eBay is vehemently opposed to anything tax related (especially the forced collection of sales tax’ which is a whole ‘nother issue). It’s understandable that eBay is not a fan of the IRS since trying to enforce tax rules on buyers and sellers would undoubtedly be detrimental to the way eBay does business.

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 a faciliator’ i.e. they provide a marketplace in which buyers and sellers come together to do business.

However’ since eBay is not directly involved in the transactions that take place between buyers and sellers’ it would be impossible for eBay to report sales figures. Furthermore’ eBay does not track if a seller actually gets paid by the buyer’ so they have no idea how much money actually changes hands’ making it impossible for eBay to issue accurate 1099s to sellers.

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.

I’m not accountant (nor do I play one on TV)’ so please do not take any of this as tax advice or legal opinion. 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

Small Business Q&A is written by veteran entrepreneur and syndicated columnist’ Tim Knox. Tim serves as the president and CEO of three successful technology companies and is the founder of DropshipWholesale.net’ an online organization dedicated to the success of online and eBay entrepreneurs.

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

The City Police Departments handle and store all evidence and property that is seized or found until it is needed for court’ returned to its owner’ or can be destroyed. Destruction’ disposal’ or return of property is determined by the property and evidence officer in accordance with federal’ state’ and local law. Destruction’ disposal’ or return of evidence is to be determined by the officer who is assigned to the case.

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The first step is to buy a digital camera. You can use a film camera’ get the prints developed and then scan them in’ but you can now buy an entry-level digital camera for the same price as a low-end scanner’ and it’s a lot easier to use!

A few example cameras that have a good reputation’ from Amazon: A very inexpensive camera – on sale currently – is the Digital Concepts VGA Camera (currently $49)’ and if you want to get a known brand’ as I’d recommend’ then you can’t go wrong with the Fujifilm FinePix 1400 (about $70)’ the Kodak DC215 (about $60)’ or the slightly more expensive Epson PhotoPC 750Z (about $100).

Getting good results from a digital camera isn’t trivial’ however’ particularly if you’re trying to take a picture of a book’ statue’ CD cover or item of clothing. That’s where it’s nice to be able to take fifty pictures’ download them all to your computer’ and pick the best one of the lot. Unlike film photography’ this won’t cost you a nickel. Just time…

A general tip for taking good product shots is to have lots of light. If you’re in a room with ceiling lights’ turn ‘em all on. If you have floor lamps’ move them over and point them directly on the item. In addition’ use a neutral color blanket or sheet as a background for the item: you don’t want to distract potential buyers with your household clutter. Then hold your camera very’ very steady (consider having it on a chair or’ ideally’ a tripod) and slowly click the button to take the shot. If your shots are blurry’ try moving back a foot or so and taking another photograph.

Once you’ve taken a product photograph you like (and don’t be discouraged if it seems hard. There are professional photographers who specialize in product and catalog photography and it’s quite an art!) then crop it tightly so that the photograph is about the product and as little else as possible. If you’re using a blanket as a background’ for example’ it should only be visible on the edges of the photograph. Bidders will appreciate a product photo that reveals a lot of detail about the product and nothing else.

Finally’ within your photo editor (Photoshop’ Paintshop Pro’ Graphic Converter’ iPhoto’ whatever)’ make sure that the final image resolution is 75dpi’ not 300dpi’ then resize the image down to a maximum width of 400 pixels and a maximum height of 300 pixels: and do it with “keep image proportions” enabled so that you don’t distort the photo. Save it as a JPEG‘ not a GIF’ since it will keep the nuances of color much better.

Great. Now you have a photo ready to upload to eBay with your next auction! When you’re entering the auction information’ you’ll get to a step where it offers you the chance to add a photograph’ and that’s what you want to do. Click on “upload photo” and pick your saved image’ then it’ll automatically be sent to the eBay servers along with your other auction information’ and you’ll be well on your way to becoming a true Powerseller!

When I add photographs to my eBay auctions’ I use a rather more expensive (about $2000) camera setup’ a Nikon D100 digital with studio lighting and similar gear. You can see some of my photographic work at Colorado Portraits.

Dave Taylor has been involved with online auctions for almost a decade’ including having written the book “The eAuction Insider”. His latest projects are startup info and Ask Dave Taylor!.