Don't you have a tax exemption based on 'casual income'
in England? Here if you derive your living income from
any activity, (work, business, trust fund) then any extra
income from say a lotto win, or selling stuff on the internet,
there is no tax charged.





edit:
Sales tax is not collected yet.
(VAT)

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As a private individual you have $50 of untaxed income.

How is that income? He didn't get the item he sold for free.

Because you don't start with the price you paid for an item when claiming income tax. What you paid for it might be what it was worth when you bought it, but when you sell it, the price you sell it for is income. It might be a net loss for you, but the sale still adds to your overall income.

That's not how my accountant says it works.

Then your accountant is wrong. But don't just take my word for it, read the IRS publication yourself.

While most people are aware they must include wages, salaries, interest, dividends, tips and commissions as income on their tax returns, many don’t realize that they must also report most other income, such as:

cash earned from side jobs,
barter exchanges of goods or services,
awards, prizes, contest winnings and
gambling proceeds.

This fact sheet, the 18th in the Tax Gap series, will help taxpayers better understand miscellaneous income and what they are required to report as taxable on their Form 1040.
The tax gap, or the amount of taxes that go unpaid each year, results from taxpayers underreporting their taxable income. Fortunately most people want to pay their fair share of taxes and many simply need a better understanding of their obligations.

What is Taxable?

Taxpayers must report all income from any source and any country unless it is explicitly exempt under the U.S. tax code. There may be taxable income from certain transactions even if no money changes hands.
Generally, the IRS considers all income received in the form of money, property or services to be taxable income unless the law specifically provides an exemption. This document discusses a few types of reportable income. Information on how to report other types of income can be found in Publication 525, Taxable and Nontaxable Income.

Furthermore, you can read more about it directly on eBay's site and from various tax professionals across the US.

I think you forgot to read this...

For tax purposes, your cost basis...

That was preceded by:

If you call selling stuff on eBay a business, different rules apply,

For deducting expenses related to selling while running a business.

And what I quoted is about a person, not a business.

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I think you forgot to read this...

For tax purposes, your cost basis...

That was preceded by:

If you call selling stuff on eBay a business, different rules apply,

For deducting expenses related to selling while running a business.

And what I quoted is about a person, not a business.

No it wasn't. It was all part of the preceding section.

First paragraph:

If you call selling stuff on eBay a business, different rules apply, but you can still deduct expenses from your business income. You may not want to go through the paperwork to call it a business, though, if you don't expect to have a lot of profit or expense from future eBay-ing.

The second paragraph continues the thought:

The simplest way to report this would be as a gain on the sale of property – provided you had a gain. If the total amount you received for the item is equal to or less than the total cost of buying and selling it, then you had no income. When you calculate a gain on the sale of any property, don’t forget to include all of the expenses associated with the sale when you figure what’s called the ”cost basis.”

The third paragraph, where you quoted from, provides an example to properly explain the first two:

For example, say decided to unload that Meet the Beatles LP you found at a tag sale for $5 and sold it for $30. For tax purposes, your cost basis could include the cost of listing it, the gas you put in your tank to get to the tag sale, and any other direct expenses associated with the transaction.

They were not separate statements. They were all relating to selling on eBay as a business, and how you can claim your expenses in doing so. The last paragraph there was not a separate thing pertaining to individuals only.

And again, the very first statement in that article points out clearly:

It is against the law not to report all income to the IRS.

Income is not net, its gross. So again, it doesn't matter if you had a net loss on the sale. The income from the sale must be reported.

[Edited to fix error]

Don't you have a tax exemption based on 'casual income'
in England? Here if you derive your living income from
any activity, (work, business, trust fund) then any extra
income from say a lotto win, or selling stuff on the internet,
there is no tax charged.

Licensed lotteries are "taxed at source" in Canada, meaning whoever runs the lottery pays taxes on the winnings before handing out the prizes. Therefore there is no need to report your winnings as income. Once you start earning interest on the winnings that is taxable.

Odd job earnings are very much taxable income, there is a line on the annual tax form for "tips and miscellaneous". Unless a big portion of your income is tips (like a waiter/waitress) the government doesn't track these too closely. But they could, if they decide they don't like you.

Not sure about Internet / garage sales, need to look into this.

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But they could, if they decide they don't like you.

Bill, do you know people that they do like?






edit:
Yeah right, Brian Mulroney...

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The simplest way to report this would be as a gain on the sale of property – provided you had a gain. If the total amount you received for the item is equal to or less than the total cost of buying and selling it, then you had no income. When you calculate a gain on the sale of any property, don’t forget to include all of the expenses associated with the sale when you figure what’s called the ”cost basis.”

Thanks, you made my case.

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The simplest way to report this would be as a gain on the sale of property – provided you had a gain. If the total amount you received for the item is equal to or less than the total cost of buying and selling it, then you had no income. When you calculate a gain on the sale of any property, don’t forget to include all of the expenses associated with the sale when you figure what’s called the ”cost basis.”

Thanks, you made my case.

Again, that was for running a business. You keep taking parts of the article out of context then believing it supports your case when it does not. Again, the full context is both paragraphs:

If you call selling stuff on eBay a business, different rules apply, but you can still deduct expenses from your business income. You may not want to go through the paperwork to call it a business, though, if you don't expect to have a lot of profit or expense from future eBay-ing.

The simplest way to report this would be as a gain on the sale of property – provided you had a gain. If the total amount you received for the item is equal to or less than the total cost of buying and selling it, then you had no income. When you calculate a gain on the sale of any property, don’t forget to include all of the expenses associated with the sale when you figure what’s called the ”cost basis.”

The "this" that I've highlighted in bold, in the second paragraph that you believe supports your case, is in reference to the first's paragraph's explanation of running a for-profit business. That statement immediately precedes your statement, indicating that they are related in context and not to be taken separately.

Indeed Chris, and I agree. If you're not making much off your sales, at least certainly not enough to affect your tax bracket to where you should pay more, I'm sure the IRS really isn't going to come after you.


I simply think it would be socially irresponsible of me to not correct bad information if I see it. Apologies if I'm ruining the thread.

The simplest way to report this would be as a gain on the sale of property – provided you had a gain. If the total amount you received for the item is equal to or less than the total cost of buying and selling it, then you had no income. When you calculate a gain on the sale of any property, don’t forget to include all of the expenses associated with the sale when you figure what’s called the ”cost basis.”

Thanks, you made my case.

Again, that was for running a business. You keep taking parts of the article out of context then believing it supports your case when it does not. Again, the full context is both paragraphs:

If you call selling stuff on eBay a business, different rules apply, but you can still deduct expenses from your business income. You may not want to go through the paperwork to call it a business, though, if you don't expect to have a lot of profit or expense from future eBay-ing.

The simplest way to report this would be as a gain on the sale of property – provided you had a gain. If the total amount you received for the item is equal to or less than the total cost of buying and selling it, then you had no income. When you calculate a gain on the sale of any property, don’t forget to include all of the expenses associated with the sale when you figure what’s called the ”cost basis.”

The "this" that I've highlighted in bold, in the second paragraph that you believe supports your case, is in reference to the first's paragraph's explanation of running a for-profit business. That statement immediately precedes your statement, indicating that they are related in context and not to be taken separately.

I know...

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Ok. I did some additional digging to further support my case, and I am wrong. BladeD is right. Don't let it be said that I can't back down when I'm incorrect. ;-)

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Tax-Tips-for-Online-Auction-Sellers

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 Sales of Appreciated Assets at an Online Auction below for gain reporting.

IRS Publication 525, Page 29 wrote:

Activity not for profit.
You must include on
your return income from an activity from which
you do not expect to make a profit. An example
of this type of activity is a hobby or a farm you
operate mostly for recreation and pleasure. En­
ter this income on Form 1040, line 21. Deduc­
tions for expenses related to the activity are
limited. They cannot total more than the income
you report and can be taken only if you itemize
deductions on Schedule A (Form 1040). See
Not-for-Profit Activities
in chapter 1 of Publica­
tion 535 for information on whether an activity is
considered carried on for a profit.

<ed>Seems like the IRS is two faced.

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<ed>Seems like the IRS is two faced.

Heh. Or we're stuck on "income" and "profit". Apparently the IRS defines "income" as "profit", so you must make money on the sale for it to be considered taxable income. It would seem that any personal property sold at a net loss is not a profit, and therefore not taxable income.

[Edit] Then again, the link I gave above is to the Small Business and Self Employed section of the IRS publications and tips. The issue might still not be settled?

<ed>Seems like the IRS is two faced.

Heh. Or we're stuck on "income" and "profit". Apparently the IRS defines "income" as "profit", so you must make money on the sale for it to be considered taxable income. It would seem that any personal property sold at a net loss is not a profit, and therefore not taxable income.

Actually I think it is the word "activity." The activity of occasional sale of personal property seems to be exempted, but but other activities are not.

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Looks like I picked a good time to be away.
But the IRS has a page just for online auction sellers.

"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."

So the sale of my $1,000 chip for $50 is not reportable income.

But it does talk about current market values too. So a $1000 CPU sold 5 years later is certainly not still worth $1000. So it begs the question: if the current market value of that $1000 CPU, for sake of argument, is $40 and you sold it for $50, wouldn't that be $10 of income because you profited $10 off the sale?

[edit] And again, that link you linked to, is the same one I linked to, and that link leads to the Small Business and Self-Employed section of the IRS website. Does that still apply to individuals selling off personal property who are not running small businesses and are not self employed?

But it does talk about current market values too. So a $1000 CPU sold 5 years later is certainly not still worth $1000. So it begs the question: if the current market value of that $1000 CPU, for sake of argument, is $40 and you sold it for $50, wouldn't that be $10 of income because you profited $10 off the sale?

[edit] And again, that link you linked to, is the same one I linked to, and that link leads to the Small Business and Self-Employed section of the IRS website. Does that still apply to individuals selling off personal property who are not running small businesses and are not self employed?

I suspect that again "activity" is the key. If you are doing a one shot garage/internet sale they aren't interested. If you are having a garage/internet sale every weekend they are. Somewhere in between is the fuzzy line. I doubt there will be any bright line guidance on it from the IRS and I doubt there will be many cases taken to tax court either.

Now taking something say closer to Seti@home, say you are building crunch boxes for others, but not taking money for labor only to offset cost of parts and shipping, is the IRS going to call that a hobby and demand you list it as income and if you are able take the cost of parts off on schedule A?

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The other side of the tax coin involves the buyers. Most ebay sellers, unless they are large businesses, do not collect any sales tax.
Here in my state, technically we are supposed to pay our state sales tax of 5.5% on any purchases made online, if the seller does not collect them and return them to our state.

Whilst I don't keep any accurate records of my ebay or online purchases, if I know that during a given year I estimate that I bought x dollars worth of non-taxed goods, I give the state a token sum on my tax return just to try to stay within the spirit of the law.

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"Freedom is just Chaos, with better lighting." Alan Dean Foster

I think Mark is that 1%. When they really want those sale taxes, they will do it the right way...

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More interesting points.
If I bought my chip at retail, which I did, I paid sales tax on the $1,000 but I did not charge sales tax when I sold it for $50. 9% tax here in CA. So the government got $90.
If I was a business I would have to get a reseller's permit. The permit would allow me to buy my goods, tax free, but I would have to pay the 9% on sales. So I would have bought my $1,000 chip tax free and paid 9% on the $50 sale. So the government get $4.50
There might be a reason the government is not going after ebay sales. Once they declare the activity to be commercial resale, they could end up with huge loses.

The majority of ebay is a pig's fare...farm market...garage sale.
And there are sometimes many treasures to be found....I have.
There are few hardcore profit engineered enterprises there.
I mean, who can really profit much from selling a NOS piece for a 1990 Olds Ciera? These are just in that case, dealers trying to unload junk from their old inventory, and if you want to get into a pissing match about it, their cost of holding it in inventory since the '90s long since outweighed their cost of profit on the piece.
Most are just now finding ebay is a place to find a buyer for something they would otherwise have just tossed out the back.

There is not much use in debating who lost or profited from the NOS 1990 Olds 2.5 liter engine water pump that I bought a few months ago on ebay.
It was from GM, unobtainium. Discontinued, NLA. Found it, bought it.
No tax paid. I'll send a couple of tiddys to the state coffers in honor of the purchase...LOL. Very glad to.

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"Freedom is just Chaos, with better lighting." Alan Dean Foster