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Taxability of on-line auction sales

Categories Tax Tips (Fed)

Online Auction Sellers:

If you are an online auction seller, you may have tax responsibilities. You may be subject to liabilities for income tax, self-employment tax, employment tax, or excise tax. Your sales may result in capital gains, nondeductible personal losses, or you may have ordinary business income.

Did You Have an Online Garage Sale?
If your online auction sales are the Internet equivalent of an occasional garage or yard sale, you generally do not have to report the sales. In a garage sale, you generally sell household items you purchased over the years and used personally. If you paid more for the items than you sell them for, the sales are not reportable. Losses on personal use property are not deductible, either. However, see Did You Sell Appreciated Assets at an Online Auction for gain reporting.

Did You Start a Home-Based Online Auction Seller Business?
If your online garage sale turned into a business and/or you have recurring sales and are purchasing items for resale with the intention of making a profit; you may have started an online auction business.

Are Your Online Auction Sales a Trade or Business?
If you are operating a viable online auction seller business, you may be entitled to deduct business expenses.

Do you have an established business and you are augmenting your sales with online auction sales?
Then, remember to include the online auction sales in your business income.

Did You Sell Appreciated Assets at an Online Auction?
Examples of appreciated assets often include art, antiques and collectibles. If you have online auction sales of property where the sales price is more than your cost or other basis, you usually will have a reportable gain. These gains may be business income or capital gains.

Did You Sell Depreciated Business Assets?
If you sell business assets or close your business you may have capital gains, ordinary gains and depreciation recapture to report. An example is the sale of an automobile used for business.

Don’t Be A VICTIM OF A TAX SCHEME!
Some promoters are targeting home-based businesses including online auction sellers for abusive tax schemes.

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