Paying Taxes on Ebay Earnings

Any profits earned on Ebay or similar auction sites is considered taxable income and faces the same Federal Income Tax, State Income Tax, and possibly Self Employment Tax that all other income is subject to. One thing worth mentioning right away though is that you only pay taxes on PROFIT, not gross sales. This means that if you’re simply selling “older products”, you most likely won’t be paying a dime in taxes on those revenues, as you’ll most likely be selling them for less than what you originally bought them for. I’ve personally sold old computer hardware, trading cards, and other items on ebay without every paying a dime in taxes. The reason being is that I paid much more for my old stuff than what it was able to fetch on eBay. So if you’re worried whether to report eBay sales as taxable income or not, just remember – only put it down as income if sold something for more than what you paid for it.

If you’re selling products on eBay for a profit though – those profits must be reported as business income on your tax return. You can deduct the costs of the products you sold from your total revenues on the “Cost of Goods Sold” on Schedule C (Form 1040). Other business expenses (such as marketing) can also be reported on Schedule C (Form 1040). Profits earned from eBay, as well as eCommerce, is tax in the same fashion as all other profit made online whether it’s as a webmaster of a content site or a freelance programmer. The only difference between business types is the business expenses / deductions they may be eligible for. As an eBay seller or the owner of an eCommerce site your biggest business expense will likely be “Cost of goods sold” and Marketing.

Leave a Reply