Tax Basics for eBay Sellers
You cannot run and hide from the tax man. Hopefully it won't be news
to you that as an eBay seller, you are required to pay tax
on your earnings.
I'm not sure why many people believe that just because they are doing business over the internet that that means
they are exempt from paying taxes.
It is a business and most countries understand that you are trying to make a profit on the items that you are
selling on eBay,
there therefore, tax is due.
If it has a "paper" trail, it can be taxed. With that being said, the US, UK, New Zealand, Canada, and
Australia, all require tax payments when you are selling items to make a profit.
If you reside and do business from the US, then you are subject to a sales tax. Not only that, but you may even
have to pay sales tax for the county that you live in. To do this, you are going to need an ID. To get a Sales Tax
ID, visit http://www.thestc.com/ta.cgi?STRates to find your local state office. On the website, you
will see your state, the tax rate, and any exemptions that you may rate.
To see if your county demands a sales tax, do a simple search of "Your county's name + tax." Some people believe
that eBay is responsible for delivering 1099's after the seller has reached a certain amount by the end of the
year. This is NOT true.
eBay is only the facilitator for auctions. Since they own PayPal, however, PayPal is responsible for keeping all
records of transactions.
What you do is request a transaction history for the year - or print it off - and start inputting all
transactions of sales of which you received a profit.
If you took a loss on an item, you do not need to claim it on your taxes. But everything that is transacted
through your PayPal account should be claimed and presented.
This is why it is highly recommended to have a bookkeeper. If you are not good at keeping the books in proper
order, you probably will get flagged for audit if you move a certain volume of product.
The tax man just seems to love making examples of naughty sellers who do not pay their taxes. Be
sure that one PayPal account is strictly for your eBay store and keep it organized. The way you are going to do
that is to open a Business PayPal account.
There is a reason why eBay bought PayPal. They knew that people would have this problem and they are trying to
make this a smooth process. But, of course, there are some complications.
There is legislation taking place, in the US in 2011 that requires PayPal to report anyone with over $20,000 in
payment volume or 200 transactions a year.
If you are all over the place with mixing personal purchases and
transactions with your business account, then you are going to need to have somebody go through each and every
transaction for the year and file it correctly.
This won't come cheap, as you will need a chartered accountant to do this for you. This is
precisely why I recommend keeping all personal costs and PayPal transactions separate. That means if you want to
buy something on eBay, you should use a separate 'buying' eBay and PayPal account.
Every country has certain changes in legislation and rules for filing taxes. The biggest thing to remember is
that if you make a profit on any transaction, you have to report it to the tax man in whichever country you
I would highly suggest that you get yourself a tax professional to look over your income and
Disclaimer: I am not a tax professional. All above content is for informational purposes only and should not be
used in place of counsel from a professional financial adviser.
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