In this quick video, we are going to look at your tax obligations when you sell on eBay by answering the 3 most common questions we get about paying tax. Your tax obligations apply wherever you sell online, so even if you sell on a marketplace or your own website, this video will apply to you, too.
Many retailers are confused about taxes on the sales they make online. You might have 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.
The first of the 3 questions we get asked most is:
Q. Do I need to pay tax when I sell on eBay?
A. The answer is “yes!”
In the US, UK, Canada, Australia, and New Zealand, tax laws require all eBay and online 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. For example, if you buy a pair of jeans for $50 and manage to sell them for $70, you would need to pay tax. This usually comes as a surprise to sellers.
The second question is:
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 which are Alaska, Delaware, Montana, New Hampshire, and Oregon.
To get a Sales Tax ID, visit the URL on screen 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'.
Sellers in the UK will need to pay VAT. VAT, or Value Added Tax, is a consumption tax charged on most goods and services in the UK and Europe, and in some other countries. Businesses need to register for VAT so they can reclaim VAT on any goods or services they have purchased, and so they can collect it when they sell products or services to a customer. In some cases, a supplier may ask to see your VAT registration as proof you are a genuine reseller.
If you are based in Australia and New Zealand, you will need to register for and collect GST for your sales. eBay.com.au and Trademe.co.nz have some information on their sites that will answer your questions. You should also get in touch with either the Australian Taxation office or in New Zealand, the Inland Revenue Department, to find out more about your tax obligations.
If you don’t live in the US, UK, Australia or New Zealand, contact your local tax authority to learn more about your tax obligations.
The other common we get asked is:
Q. What should I tell the IRS?
A. This is for our US members. The answer is, 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.
I hope this helps to clear up some of your questions about paying tax when you sell online!