eBay Sales Can Be Taxable

IRS employee Andrea Orellana failed to report income from sales on eBay from 200-2005.  During those six years Orellana participated in over 7,000 transactions.  From those transactions Orellana had unreported income of over $36,000.  In 2005 alone she had unreported income of $21,062.  Orellana used many different user IDs during the years. 

Orellana’s defense was the transactions were like “online garage sales”, but the US Tax Court ruled that the sales from the designer clothing were taxable. 

Source: www.accountingtoday.com

There are a few items I find significantly important in this court case. 

First of all this woman was involved in over 7,000 transactions during a 6 year period.  That averages out to 3.2 transactions per day, every day, for 6 years.  Immediately my reaction is if you are that involved in eBay transactions it is not a general “online garage sale” and not a hobby. 

Second, when I see that she used multiple user IDs that makes me believe she may have been trying to avoid being noticed in the system. 

Online commerce is challenging when trying to decipher the difference between some “spring cleaning” and money making venture.  Starting for 2011 tax returns, taxpayers who sell more than $20,000 of merchandise or participate in more than 200 electronic transactions annually could receive a 1099.