Feature article: Taxes
Online Auction Sellers
Reviewed and adapted with special permission from the IRS by: Andrew Zumwalt, Associate State Specialist, Personal Financial Planning, University of Missouri Extension
If you are an online auction seller, you may have tax responsibilities. You may be subject to liabilities for income tax, self-employment tax, employment tax, or excise tax. Your sales may result in capital gains, nondeductible personal losses, or you may have ordinary business income.
Did You Have an Online Garage Sale?
If your online auction sales are the Internet equivalent
of an occasional garage or yard sale, you generally do
not have to report the sales. In a garage sale, you
generally sell household items you purchased over the
years and used personally. If you paid more for the
items than you sell them for, the sales are not
reportable. Losses on personal use property are not
deductible either. However, see
Did You Sell Appreciated Assets at an Online Auction
for gain reporting.
Did You Start a Home-Based Online Auction
Seller Business?
If your online garage sale turned into a business and/or
you have recurring sales and are purchasing items for
resale with the intention of making a profit; you may
have
started an online auction business.
Are Your Online Auction Sales a Trade or
Business?
If you are
operating a viable online auction seller business,
you may be entitled to deduct
business expenses. Do you have an established
business and are you augmenting your sales with online
auction sales? Then, remember to include the online
auction sales in your
business income.
Did You Sell Appreciated Assets at an Online
Auction?
Examples of appreciated assets often include art,
antiques, and collectibles. If you have online auction
sales of property where the sales price is more than
your cost or
other basis,
you usually will have a reportable gain. These gains may
be
business income or
capital
gains.
Did You Sell Depreciated Business Assets?
If you sell business assets or
close your business you may have
capital gains,
ordinary gains, and
depreciation
recapture to report. An example is the sale of an
automobile used for business.
Don’t Be A VICTIM OF A TAX SCHEME!
Some promoters are targeting home-based businesses
including online auction sellers for
abusive tax schemes.
For more information see the Small Business and Self-Employed Tax Center.
Source: http://www.irs.gov/businesses/small/industries/article/0,,id=163622,00.html
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Last update: Tuesday, May 05, 2009
