Do You Have to Report Online Sales?

The short answer is Yes. You always have to report online sales. Online sellers, including those selling through online sales websites such as eBay.com and Amazon.com, are responsible for reporting sales income to the Internal Revenue Service (IRS) in their income tax returns. If you’re running a business, that’s one thing. But what if you’re simply selling a few used items through a community message group, just trying to earn a few bucks? It’s important to know when you may owe taxes for your online sales. Learn more about whether you need to report your online sales to the IRS below.

Online sales of personal, used items do not generally have to be reported. Selling your old bicycle on Craigslist is an example of these types of sales. Losses on personal use property are not deductible on online sellers’ tax returns. The rule of thumb is that if you used the items and then sold them for less than you bought them for, then you owe no taxes on the sale. However, if you sold an antique or collectible that had appreciated since you first acquired it, you likely would be on the hook for taxes on the profit.

Income made from online sales can be reported to the IRS as “hobby income” if the sales activity qualifies as a hobby according to the IRS, i.e. sale without the intention of making money. For example, a recreational photographer selling a photo on eBay should report the sale as hobby income. One test is whether the seller has made no profit from the hobby in two of five consecutive years. If the income does qualify as a hobby income, sellers can deduct hobby expenses from the income but cannot use hobby losses to offset other non-hobby income.

Where there are recurring sales involving purchase of items for resale with the intention of making a profit, sellers may be a small business and are subject to business taxes. For example if you start selling greeting cards online and then begin filling orders from regular clients and continue expanding your online inventory you likely have an online business. Viable online sales businesses are entitled to deduct certain business expenses. If the online sales are part of an established business, the sales should be included as business income.

Reportable gains on online sales of items such as antiques, art, and collectibles should be reported to the IRS where the sales price is more than the cost of the item. If, for example, you sold a vintage automobile online for a profit, you should report this gain. Depending on the nature of the online sale, the gain may be reported as business income or capital gains.

Sale of depreciated business assets, such as selling cookbooks on Amazon.com used in a catering business, or closing of the business altogether may require reporting of capital gains, ordinary gains, and depreciation recapture.

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Michael Anderson

People who want a lot of Bull go to a Butcher. People who want results navigating a complex legal field go to a Lawyer that they can trust. That’s where I come in. I am Michael Anderson, an Attorney in the Salt Lake area focusing on the needs of the Average Joe wanting a better life for him and his family. I’m the Lawyer you can trust. I grew up in Utah and love it here. I am a Father to three, a Husband to one, and an Entrepreneur. I understand the feelings of joy each of those roles bring, and I understand the feeling of disappointment, fear, and regret when things go wrong. I attended the University of Utah where I received a B.A. degree in 2010 and a J.D. in 2014. I have focused my practice in Wills, Trusts, Real Estate, and Business Law. I love the thrill of helping clients secure their future, leaving a real legacy to their children. Unfortunately when problems arise with families. I also practice Family Law, with a focus on keeping relationships between the soon to be Ex’s civil for the benefit of their children and allowing both to walk away quickly with their heads held high. Before you worry too much about losing everything that you have worked for, before you permit yourself to be bullied by your soon to be ex, before you shed one more tear in silence, call me. I’m the Lawyer you can trust.

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