Tax Basics for eBay Sellers

Are you confused about taxes on items you sell online? Heard rumors about 'hobby' businesses not being liable for tax? Paying taxes is not something any seller should bury their head in the sand and forget about. As you probably know, tax fraud comes with serious consequences, including prosecution... and if you get into trouble, pleas of ignorance won't help you.

 

Q. Do I need to pay tax when I sell on eBay?

A. Yes! In the US, UK, Canada, Australia, and New Zealand, tax laws require all eBay sellers to pay taxes when they are selling with the intention of making money. In some countries, for instance the US, Canada and Australia, you are technically supposed to pay tax even when you sell your own second hand items and make a profit on them (e.g. sell them for more that what you paid).

 

Q.  What taxes do I need to pay?

A. US sellers will need to pay Sales Tax, unless they are based in one of the five states which do not charge Sales Tax (Alaska, Delaware, Montana, New Hampshire, and Oregon). To get a Sales Tax ID,   visit http://www.thestc.com/ta.cgi?STRates to find your local state office.  Some sellers may also be up for city and/or county tax depending on your local laws (find out more by visiting your city's or county's official webpage. If you don't know the URL, find it in a simple Google search by searching for 'your county's name + official website'.

 

Q. What should I tell the IRS?

A. Everything! Never forget that you cannot hide from the IRS. While it is unlikely that they will come after you if you make $50 on selling your old motorbike, when it comes to importing or buying items with the intention of selling to make money, it's so important that you tell the IRS about your earnings.