Chris,

I think there's alot more to this than just the sales. We are simply enjoying a hobby. I am not a dealer and am not about to start reporting my eBay sales to the IRS. Here's why.

How about a scenario where I spend my money (already taxed once in my paycheck) on an item for $500. Let's say the item loses value due to a bad year by the player or an injury and I want to get rid of it. I sell it for $300. I'm no accountant, but selling an item for less than what you bought it for, plus paying tax on it again just doesn't jive with me.

On the flipside, I may make a profit on an item to make up for my $200 loss in my previous scenario. I'm not about to give a penny to Uncle Sam on dollars already taxed and I hope I'm never forced to.

If this was my living, and I was taking the tax advantages of a business owner, then it's a whole different ball of wax. As a collector, I'm not paying a dime.

Ned
Milwaukee, WI

Ned,
I hear you, but from what I understand, if you buy a piece of memorabilia for $100 and sell it tomorrow for $50, you wouldn't be expected to pay tax on it (because it was a loss). But, assuming you still took that $50 loss, but bought another piece for $100 and made $50 on it, it does not cancel out your loss... The IRS still expects you to pay tax on the profit on the one item.
That is according to what I have been told and what I have read.

I think it is not entirely fair, especially if you are a collector and not a business.

That said, there are clauses that separate a collection that doesn't need to be taxed as heavy because you have had it for a certain amount of years...
I don't know how long you have to have owned an item for it to be considered your collection, but from what I understand, you still would have to pay tax on that item, but would be forced to pay less.

Chris-

I just don't see how the government can wrap their arms around this beast. May I ask why you wrote about this topic? Did you hear of something or someone that ran into a scenario that wasn't a legitimate LLC, Company, etc? As a collector not reaping the tax benefits of a business, I can't see how the government can justify taxing collectors for spending their already taxed income on cards & memorabilia that they sell.

Thanks,
Ned

Ned,
I just wrote about this because like you, I sell items on and buy items on eBay on a consistant basis. Some I buy because I am going to keep them for a long time, and some things I buy with the intent to turn a profit, but almost always spend the profit to buy more memorabilia.

I personally know of a handful of people who buy and sell on eBay as a hobby and they report the income that comes in because of their sales.

I actually think you're more apt to getting audited if you itemize a bunch of eBay sales, rather than reporting any of it.

I think that there should be some type of monetary threshold for taxing ebay sales. Some people sell hundreds of dollars every month, maybe every week, and others like me sell here and there and maybe sell a couple of hundred in a year or less. I think it should be taxed like gambling, where you pay taxes on your winnings but can write off your losses. :)

This is a complicated issue with several domino effects. I guess the IRS could force EBAY sellers to be some kind of small business, sellers can learn the rules of the tax game, and then start to write off their computer, work room, etc. But the IRS code needs overhauled and simplified foremost. Oh yeah, then bring all fifty states and their tax codes in the EBAY picture.

There should be a double jeopardy rule with taxes. Once money is taxed, it should not be taxed over and over and over again. I can tell you that I pay taxes at times I am not even aware of, have you ever read a utility bill? Also, how can you pay taxes on a $1 sale item when you spent .40 cents to list it, have a final value fee taken out, and especially if it was something you originally paid $20 for? I have several starting line ups on EBAY right now that I know I am going to take a bath on, what does the IRS think of that? Probably nothing. In November, I had some decent sales, but with some decent items. That money ironically went to pay for school and property taxes.

The government would have much more reserves financially if they looked at their own spending side of the coin, no pun intended. Dumping more money in the government coffers does not encourage more prudent government spending.

Selling on EBAY takes alot of time with write ups , photos, scans, collecting money, and shipping. There is a certain amount time and labor that goes into the process. Often times, that time and labor is not well compensated in the final analysis.

Most people on EBAY are not selling and making millions. For many, the money just helps bridge a gap for some families. Some people go to EBAY and sell when they are pressed. There could be many more people knocking on the governments door for assistance if the EBAY safety valve were not there. Signs on the wall read that 2008 is not going to be good for the economy. Peoples' salaries are not keeping pace with the rise in price of goods, gasoline, and well, taxes. The housing foreclosure rate is skyrocketing. This is a sign of many people with their back up against a wall. Do we really want to throw some more gasoline on this scenario?

The US Postal service benefits from EBAY too.

Dave,
All very good points.