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    1. Cath01's Avatar
      Cath01 is offline

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      #1

      Do I have to charge sales tax for my eBay sales?

      Hi. I am starting to sell a few things on eBay but Im not sure if I should charge my customers sales tax. I noticed some sellers do and some dont, why is that? This is really confusing.
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      #2
      Youre right, this is a very confusing subject. When it comes to sales tax sellers will come out with different viewpoints, which is why some will charge sales tax and some wont. Some believe that if you sell anything on Ebay at all that taxes are mandatory, others will not charge because they only sell semi-occasionally. Of course, there are those who think that they can just get away with cheating the system as well.

      Currently, there is a federal ban on sales tax on internet sales until November 1, 2014, however this does not apply to retail goods (i.e. tangible property sales). Whether a seller should charge sales tax depends on the sellers location and extent of their selling activities.

      Casual eBay sellers are not required to collect taxes and would be considered hobbyists.
      eBay Business sellers are required to collect taxes depending on the state in which they reside.
      eBay Business sellers need to obtain a resale certificate from their state in order to report sales tax collections to avoid paying sales tax when purchasing resale items.
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      #3
      Thanks! So, does this mean I should be charging my customers? Whats the difference between a hobby and a business?

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      #4
      This depends on how much you sell. If you are someone who only lists once in a great while to get rid of a few things, you might consider yourself a hobbyist. A business would constantly be selling and earning quite a profit. I am not a tax professional so I would recommend you check with your state and federal authorities but those are the guidelines I follow.

      The guidelines are quite grey when it comes to determining whether it is a hobby or business but here are some things to consider:

      Are you making a profit?
      Do you depend on this profit to pay your bills?
      Is your profit more than you are spending?
      Do you spend a lot of time selling on eBay?

      In my opinion, being a hobbyist generally applies to those who are crafters of some form. Their supply cost will normally out weight their profit because they often only sell to make room for more creations. If that person is a crafter who produces and sells a great amount through different venues such as flea markets, auction sites, street fairs, etc. in order to make a profit they would be considered a business. Some find that creating a business entity will provide them greater tax benefits than that of a hobbyist because they must report their sales but wont receive the tax benefit of deductions for much other than materials/supplies. As a business it is possible to deduct supplies, space, fees, and even the computer you need to work from.

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      #5
      Hi! This is great information. I have a question though. Why do some sellers only charge certain states or whatever? I don’t really get the whole thing so I’m kind of confused.

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      Some sellers may or may not charge because of their location. For example, if a customer makes a purchase who is in California and the seller is also in California, that sale would be subject to a tax. If that same seller were to have a sale with a customer who lives out of their state, they may not charge a tax depending on what the laws are in California. Some states will require that any and all sales are subject to tax regardless of their nature. There are also some states that do not have a sales tax at all and they have no need to collect any.

      These would be:
      Alaska
      Delaware
      Montana
      New Hampshire
      Oregon

      It mainly depends upon your states tax laws and your activity. Because of the Internet ban, small businesses are not required to tax sales online but as you might notice, larger corporations/big box stores will. There is also a use tax, which is paid by the consumer when they file their taxes to reimburse their state for purchases they made where there was a lesser or no tax.

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      #7
      I always charge sales tax because I don’t want to get harassed or audited later. There can be some hefty fines if you get caught trying to avoid the system. I’d rather be safe than sorry.

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      #8
      WOW, this is way more complicated than I thought it would be!

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      Yes, it is quite complicated because each state can set its own guidelines. Just remember, beginning 2012, transactions from 2011 and on from credit card companies and 3rd party transaction companies ( i.e. eBay) must report to the IRS any seller that has more than 200 transactions and $20,000 in sales per year.

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      #10
      This is really helpful. Thank you for your help! So all items need to be taxed that are sold? Are there any exceptions?

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