Online Sales and Tax

Anyone selling items or other goods on the Internet is responsible for reporting any sales income on their tax income returns excluding online garage sales. Everyone has a different means of making a living these days and selling goods or products via the Internet have become extremely popular. This new method of generating income can be very lucrative but most people don’t know that they must report income made on the online. One of the hardest parts of selling products online is determining whether or not the income made from those sales should be reported on a person’s annual income tax return. People that run Internet ‘garage sales’ do not have to report the money that they pull in from these sales. An Internet ‘garage sale’ is when people sell their personal belongings over the Internet instead of using the traditional garage sale outside of their home on the front lawn. Such items for sale during and Internet ‘garage sale’ are an old bicycle, old t-shirts, old books, or old baseball cards. The only catch here is that people selling personal use property that take losses on the sale cannot deduct those losses on their Internet sellers’ tax return.

Are you or a loved one making their primary income from selling goods and products over the Internet?

Contact an experienced online sales and tax attorney regarding the proper way to file your Internet sellers’ tax return today.

Many people also sell goods or products via the Internet for their hobby. Income made from hobby sales does not need to be reported on an annual income tax return for Internet sellers. The item being sold has to qualify as a hobby. For example, the sale is made without the intention of making money. If the seller has not made any income from sales in two of five years of selling stuff on the Internet then the income is considered to be solely for the hobby. Internet sellers can deduct expenses used for the hobby from the income. Not many people realize it but they may be running an online business without evening knowing they are running one. For instance, a person begins selling one or more of the following over the Internet:

• Greeting cards
• Self help books
• Software programs
• Video games
• DVD players
• Camcorders
• CD players

If someone begins selling one of the items mentioned above and gains a clientele that continues to purchase goods from the seller or continues to grow in number, this is considered an online business. Any income made from this online venture must be reported when the seller files their annual income tax return. Since the seller has to report this income on their annual return they can also deduct a certain amount of business expenses on their return as well. Any money gained from selling items over the Internet should be reported to the IRS even if the sale does not occur as part of a business. For instance, a classic car collector sells one of his or her cars on the Internet and received more money for the car than the person originally paid for it. The money made from the sale of the car should be reported on the tax return as business income or capital gains. Other examples of these types of appreciated assets sole online are antiques, art, and other collectibles.