How to Sell on eBay | How to Make Money on eBay | Pay Your Taxes Like a Real Business

Thank you for visiting Lizard Wisdom! If you haven't already, please subscribe to our RSS feed. This will allow you to be the first to know when there are new posts on Lizard Wisdom.

Also, please make sure you grab a copy of our FREE e-book on How to Make Money on eBay!

Enjoy your visit!

-Joli & Marshall

It has been said that the only two certainties in life are death and taxes. Of these, taxes are the only thing that you will have to worry about while you are alive, so let’s talk about them for a minute.

If you are going to run your eBay business like a real business, and you should, then you need to act like a real business and pay your taxes. Yes, we know, there is nothing you like to do less than pay your taxes, but they are a fact of business (and life). There are, however, some benefits to playing by the rules. For example, when you operate as a legit business, you get all sorts of tax deductions that the average person on the street isn’t able to take advantage of (consult a tax professional regarding allowable deductions or anything else discussed in this post.)

The Internal Revenue Service (IRS) has recently taken to educating the average American about what they are calling the Tax Gap. The Tax Gap is simply the difference between what taxpayers should have paid and what they actually did pay on a timely basis. The latest estimate of the Tax Gap is for Tax Year 2001 (why are these kind of reports always based on such old information?) and puts the Tax Gap at a mere $345 Billion. Yes, that is Billion with a “B”. Chump change, right?

Part of this education process involves the IRS putting out a series of fact sheets on the Tax Gap. The latest fact sheet, from September 2007, is entitled Reporting Auction Income and the Tax Gap. This is a must-read fact sheet for those of you sellers who reside in the US and/or otherwise get to deal with the IRS.

Another very interesting and highly relevant IRS article is entitled Online Auction Sellers. Sounds like a very good article to read, doesn’t it? This article discusses if your online sales are the equivalent of an Internet garage sale, or if you are an actual living, breathing business. Of course, all of you who want to earn a living selling on eBay fall into the latter category, which means you get to pay taxes!

Another article that you might find interesting is the Tax Gap fact sheet from April 2007 entitled Business or Hobby? Answer Has Implications for Deductions. This fact sheet speaks about how deductions are handled differently if your activity (in your case, selling online) is a business or hobby. It gives you a brief overview on the subject from which you can clearly see how it is much more beneficial to be set up as a business when you are engaged in making money online.

The above three IRS articles give you plenty to chew on for now. We hope that you see the benefits in filing your taxes and, more importantly, setting up a business structure so that you can take advantage of all of the tax benefits that a genuine business enjoys.

Related Posts:
Why You Should Set up Your eBay Selling as a Legal Business
While you can sell on eBay out of the back of your car and never claim any of your sales to the taxman, this is not the best way to go about pursuing e-commerce as a career. There are many
A Little Rant About eBay’s Detailed Seller Ratings
Last week we wrote about ChannelAdvisor’s new tool that allows you to easily and quickly see what your, and your competitor’s, eBay Detailed Seller Ratings stats are. This got us thinking a bit about the (fairly) newly introduced eBay Detailed