Do ebay sellers pay taxes base on profit or what ?

Question

Well, as you know, there are thousands people who's selling stuff on ebay and there are hundreds people who can make enough money for living just by ebay.

But one thing that I'm wondering right now is how do they pay for taxes.

For example: If I could sell about 5 laptops in a month ($2000/each), I'd received a large amount of money in my Paypal/Debit card/Bank account. But it's not my profit because I have to pay for the cost of the laptop, and shipping supplies, etc ... So, let's say my profit is just $100 for each laptop.

So, is the IRS gonna look at the money goes to my Bank account or they will look at my profit?

And how to they believe me? I mean, there is about $10000 in my account every month but my income is only $500.

If the IRS just force me to pay taxes base on the money I received, it is not fair at all.

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I hope you know what I'm talking about. I appreciate for all the answers. :)

Answer 1

You pay tax on your profit, not on your gross sales.  On your tax return you show your gross sales and also your expenses, including what you paid for the items you sold.  Keep good records, and all receipts - you'll need them if you are audited.

Answer 2

I believe if you make over a certain amount in sales on EBay, they will file a form 1099 with the feds for you.  That means, the IRS will know what you earned via EBay sales (minus shipping, since I think EBay figures that out for you).  However you're not forced to pay taxes based on that.  If you plan to run this as a business, you need to keep business documentation (ie. receipts for purchases and shipping and so forth, perhaps get QuickBooks to track expenses etc.).  When you file the actual income amount you can then prove to the IRS that it wasn't all income.  They will ask you for your net income, and may ask for the info that contributes to that net (ie. gross income from 1099 and expenses from receipts).  The tax forms will have places for you to fill all that info out to determine what your actual, taxable income is.  you won't need to send your 1099 forms or receipts to the feds but you MUST keep them in case you're audited.

You may benefit from consulting an accountant for further information.

Answer 3

You'll have to fill out a tax return showing the expenses of your business and then calculating the profit or loss.

For example, if you sell a laptop on eBay for $2000, but you bought that laptop for $1500, then your expenses would be $1500 and your income would be $2000 and your profit would be $500. You would pay taxes on that $500  profit.

(Note: The above is a GREATLY simplified way of explaining how it works. You'll need to sit down with the actual tax forms to see exactly what needs to be reported and what your bottom line will be.)

Answer 4

Getting tax advice over the Internet is a bad idea.  You could go to jail for filing a false return.

Remember.  We're all jerks who get off on schadenfreude.  That's right, schadenfreude.  Look it up.  We want to see people go to jail unexpectedly, because the suffering of others makes us feel better about our crappy lives.  We're all bad people.  That's why we're on the Internet.

So go and get a tax professional to explain it to you.  Not random Internet idiots.  The best you're going to get from us is a lemonparty.  Look that up too.