posted on July 12, 2001 09:29:33 AM
Ok. I know that if I sell my shoes to someone else, I don't have to claim that as income, because the shoes were personal, I already paid taxes on them, etc.
I'm sure this could get many varied answers and the question is NOT DO YOU PAY TAXES. The question is ON WHAT SHOULD YOU PAY TAXES FOR AUCTIONING?
If I got to a garage sell and buy inventory (ebait), then that is a business expense and selling that is a business transaction and thus I would claim as a business deal.
However if I choose to sell personal items via the same avenue, do I need to pay taxes on these? Even if they sell for a profit?
It's a fine line and I'm sure you could technically get away with not claiming any of this as income, but I like to do the right thing -- so I'm asking.
posted on July 12, 2001 09:55:51 AM
Assuming you're in the US, the rule of thumb is "if you make a profit on a sale, that's income and should be reported". Doesn't matter where the item came from or whether you bought it for resale. Many small sellers, tho, will be able to offset most of their profit with expenses - so keep very detailed records on everything.
posted on July 12, 2001 09:57:13 AM
ok -- so just treat everything like a regular sale? Unless I can prove that it cost me more originally (like the shoes example)?
posted on July 12, 2001 09:58:42 AM
1. Do not worry about this if your annual sale total is under $600.
2. If it's a going concern(above $600), err on the side of the government. If you make a profit, the government has no compunctions about whether it is a personal item or if you paid sales tax. If you paid taxes on your income, spent a nickel afterwards for something and resold it for six cents, they want to tax that penny. Retaxing citizens is the Federal way of maintaining a nation of people who give more to them then medieval serfs gave.
posted on July 12, 2001 10:02:44 AM
ok -- so I'll just pretend that I was blessed with a bunch of free starting inventory ( $0 expense, everything profit - sales fees).
posted on July 12, 2001 10:35:07 AM
treat everything like a sale, and keep records on everything.. you can use the losses on your shoes to offset some of the income on the items you bought at the garage sale and reduce your taxable income that way.
Get receipts every time you make a purchase for resale on Ebay - if its a garage sale, just carry a little notebook with you, write down what you purchased and the price and have the person running the garage sale sign and date it - works just fine. 8)
posted on July 13, 2001 10:38:59 PM
so, if I bought a magazine for $3 5 years ago, sold it online for $1, could I claim a loss without the original receipt for it? Or, would it be a $1 profit?
posted on July 14, 2001 12:56:18 AM
Without a receipt, is there a price on the cover of the magazine, or on a sticker on the magazein? It not, then yes you'd probably show a profit of a $1 IF AUDITED. If you know the magazine cost you $3.50, you can probably treat it as a COGS and be fine - chances of an audit are slim. Plus, if you bought it off a news-stand, you could probably go back and say that magainze sold for $3.50 news-stand price, and they'd allow it...
posted on July 14, 2001 08:45:33 AM
It really depends on your activity and intent. If you have a garage sale to sell off some personal items, reporting profits if any isn't worth the hassle for average random household items. You had your sale, you sold regular stuff, you're done.
If you hold a garage sale every weekend, that's a different story, because the IRS draws a distinction between different "types" of activities...An every weekend garage sale seller isn't just having a garage sale each weekend, they're operating a business...usually by actively purchasing itmes to sell at their weekend sales.
The difference is the intent...to sell off some stuff you don't want anymore vs. selling stuff every weekend to give yourself extra income.
The same concept translates to selling in online auctions..Are you dumping some items you'd otherwise throw away or box up in the basement? Or are you selling on eBay to earn extra income on regular basis?
If you buy things for resale, you're in business, period, and so you should pay taxes...As others said here, lots of things can be offset via your expenses...though writing off your shoes as a cost of doing business, well, I imagine the IRS would ask you if you used those shoes only for business? And if not, what percentage of time you used those shoes for business vs. what percentage for personal? And whether or not they were ever used under a full moon...for business
For the best answer, short of paying an accountant, it might be worthwhile going to irs.gov and printing out some publications on the subject.
posted on July 14, 2001 09:36:01 AM
1. Do not worry about this if your annual sale total is under $600.
Opps..this is not always true. If you file jointly with your hubby..for instance. Although you may not owe tax on $600 if this is your only income (which would be doubtful), you certainly will if you combine this income with your regular job or hubby's income(unless you have lots of deductions). Don't mix up income tax with self employment tax. You may not owe self employment tax, but the durn ol' government taxes from $1, after deductions.
Keep track of all you buy (including the gas/mileage to those garage sales if you are purchasing for resale), and all it costs (are you paying an internet service just so you can sell on eBay? Keep track of all costs you incur to sell). The diff between what you paid (including all expenses), and what you sold for will most likely be what you owe taxes on.
