Many people today are turning to internet as a way to connect with potential buyers for all kinds of things, like clothing, electronics, cars, antiques, collectibles, and even used household items. Depending on the situation, you could have tax obligations if you sell online.
Is It a Business?
The IRS draws a distinction between what it calls “the Internet equivalent of an occasional garage or yard sale” and an “online auction seller business.”
Richard is moving and decides to sell online a plant stand and a snow blower he won’t need anymore through an online auction site. He sells the items for less than what he originally paid for them. Richard’s “losses” are not deductible because he sold “personal use” items, and he need not report his sales for tax purposes.
In contrast, an individual who has recurring sales and purchases items for resale with the intention of making a profit may be operating an online auction seller business.
Maria routinely scours the city where she lives looking for bargains on handmade jewelry and scarves. She puts her weekly finds up for sale on an Internet auction site, hoping to make a profit. Maria has started an online auction business and needs to report her business income and expenses on her tax return.
Selling Appreciated Assets
Online auction sales of art, antiques, collectibles, or other assets for more than they cost result in reportable gains. Depending on the specific situation, the gains would be considered either business income or capital gains.
Selling Depreciated Business Assets
If you sell online depreciated business assets you might have ordinary gains or capital gains, depending on the situation. You will need to include Form 4797, Sales of Business Property with your tax return.
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