I intend to sell merchandise on ebay in the near future above the 1k mark. I want to keep it all legal so I dont get a knock at my door several years down the road. Keep in mind I am a novice when it comes to ebay as I’ve only sold a few low priced nicknacks. So does ebay handle the tax part or is that all up to me?
If you are talking about income tax, it’s all up to you. eBay is just a venue, they don’t get involved with the seller’s responsibility to report income to the IRS.
Ditto for sales taxes. eBay maintains that they’re not really a party to the sale - they just provide the place in which the sale occurs. If you’re really a business, you have to register with TX and get a license. Then, it’s up to you to collect sales taxes on the items you sell. (I gather that in Europe, however, eBay has started collecting VAT on the items sold on its website.)
It’s all pretty murky, frankly. At what point do you cross the line from being just some Obvious Guy peddling some trinkets on eBay to being Obvious Guy Auction Sales, Inc.?
The income tax situation can also be puzzling. If I sell my old desk for $100, I don’t report that as income, since it’s not salary, pension, tips, interest, etc. But if I bought the desk for $50, do I now have a $50 capital gain? Is that old desk a “capital asset, held for personal use?” Probably not.
Of course, if you really have become a retailer, then your tax situation changes completely, since a small business has to account for profits on the items that it sells.