my hobby : Is Selling On eBay Just A Hobby

Q: I made extra money selling things on eBay last year. These
were items I picked up at yardsales mostly. My husband says I
am responsible for paying income tax on the money I made, but
I disagree. This is just my hobby, not a business. What do you
think?
-- Gladys A.

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... :o)

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

If so, it's a business, not a hobby.

by Nicholas Dixon