# When Does A Home Business Reach a Taxable Point?



## happychick (Sep 20, 2010)

My at home business on eBay has dramatically grown since I started it last year. I heard today Amazon is getting fined for not charging sales tax. When do my home businesses reach a taxable point? Right now I am not charging sales tax nor paying taxes on the amount I earn...Please help me understand this!

Thanks


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## Darren (May 10, 2002)

I'm not advocating not paying your taxes. Does Illinois tax out of state internet sales? I believe the IRS wants you to file a return (quarterly?) if you have $400 of self-employed income.

To charge sales tax you need to register with the state and start doing the paper work. We've never got a sales tax exemption because the farm doesn't make a profit. We pay sales tax on everything we buy. There's nothing at the state level to get them interested in us. We don't file anything dealing with the farm with the IRS. The very few things we sell don't meet the IRS $400 requirement.


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## Belfrybat (Feb 21, 2003)

If you have over $400.00 in income in a year then you have to file with the IRS and pay income tax on it.

Depending on your state, you may have to collect sales tax on out of state sales. In Texas, I don't have to collect sales tax for out of state sales YET, but I must on all in-state sales unless the person/ organization provides me with an exemption certificate. So, check with your State comptrollers office for information. Most are on the internet including the forms you download.

OK -- I just checked and you do not have to collect sales tax from out of state sales. Here are the regs:
http://tax.illinois.gov/Businesses/TaxInformation/Sales/rot.htm


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## Lazy J (Jan 2, 2008)

happychick said:


> My at home business on eBay has dramatically grown since I started it last year. I heard today Amazon is getting fined for not charging sales tax. When do my home businesses reach a taxable point? Right now I am not charging sales tax nor paying taxes on the amount I earn...Please help me understand this!
> 
> Thanks


You are asking two questions.

First, at which point must you collect SALES taxes on items you sell. In my state that occurs to moment you sell a retail item.

The second question is when must I claim income from my business on my annual taxes. The answer to that is more nebulous. Technically all income must be claimed, by claiming the income you also have the ability to claim your expenses which reduces your tax liability.

If your income has risne dramatically due to this business I suggest you talk with your accountant about what you should do.

In our family we collect sales tax on retail sales of feed, we also file a Schedule F and a Schedule C for our Farm and Retail business as ammendments to our Form 1040 every year.

Jim


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## happychick (Sep 20, 2010)

Thanks for your thoughtful replies everyone - I really appreciate it. 

Though _I_ consider my selling on eBay to be a business, I'm not technically _registered_ as one. Which was why I didn't know if I had to do any paperwork over it. I believe anyone can sell on eBay out of their home without having to do any tax paperwork...?

I was just starting to wonder in the back of my mind if I peaked a certain number (you guys say $400 :shocked, that I should file it. 


> If you have over $400.00 in income in a year then you have to file with the IRS and pay income tax on it


 I passed that number a long time ago...


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## clovis (May 13, 2002)

Just food for thought:

If you have income/profits of over $400, you are supposed to pay taxes on it.

It really doesn't matter if you are registered as a business or not. If your neighbor calls and asks you to mow their lawn, or feed their cattle, and you earn more than $400 (earned all at once or over a calender year), you are supposed to report it as income.

I know that most people don't file on side income, but if you read the tax forms, _technically_ you are required to report it.


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## happychick (Sep 20, 2010)

Ok, thanks for explaining that...That's why I asked the question here, didn't know what the 'cut off' was, since it sounds like it is only $400, I guess I have some paper work to do in the future. 

Thanks again everyone!


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## equinecpa (Mar 21, 2011)

There isn't a threshold of $400. If you are a business and have net earnings (net income less all expenses) of over $400 you have to pay self-employment taxes on that income -that's where that figure comes from.

If you're buying stuff at yard sales and selling it on ebay, you are obviously trying to make money and are in this for a profit. If you're in it for profit, you're in business. On the other hand if you're just cleaning house selling personal items you are not in business.

As far as sales tax, each state is different. Here is a link the Illinois Guide

Some states have a small seller exemption with a threshold and others don't, I don't see such an exemption for Illinois.


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## happychick (Sep 20, 2010)

Thanks equinecpa.


equinecpa said:


> If you're buying stuff at yard sales and selling it on ebay, you are obviously trying to make money and are in this for a profit. If you're in it for profit, you're in business. On the other hand if you're just cleaning house selling personal items you are not in business.


I started by clearing out the house, but for the past year have been buying and re-selling, now also sell for friends and family...So I think it's counting as a real business now! (which was why I thought I better ask the question...)


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## Jeffery (Oct 25, 2011)

Here is some tax information from the Paypal web site:

Starting in 2011, all US payment providers including PayPal will be required by the Internal Revenue Service (IRS) to report sales information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal. We want to help you understand these changes.

Applies to sellers receiving over $20,000 in gross payment volume AND over 200 payments per calandar year 

For more information, please visit the following web site:
https://cms.paypal.com/us/cgi-bin/marketingweb?cmd=_render-content&content_ID=marketing_us/IRS6050W

.


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## happychick (Sep 20, 2010)

Thanks Jeffery! :thumb: As that would apply to me, I will read through it right now...


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## Ken Scharabok (May 11, 2002)

Yes, I have to collect 9.75% state sales taxes on any sale delivered within the State of TN. Have to send it into state once a quarter. Not a complicated form.

Now I have a TN sales tax exemption on anything I buy for resale or use into an eventual end item. Thus, I strongly suspect I save more on state sales taxes than I have to pay back to them.

As someone above noted, sales taxes on out-of-state sales - no yet but it is likely coming.


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## idigbeets (Sep 3, 2011)

It doesn't matter if you are a registered business or not. You're asking about paying taxes on income, anything over $300/400 (I forget but it doesnt matter as you're way over) requires you to report that income on your personal income tax statement.

If you want to report as a business, then you have to set up a sole prop or other business structure and work it as a business keeping it all separate from your personal income.

Regarding sales tax, you got a few posts w/ links already on this.


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## Ken Scharabok (May 11, 2002)

On having to charge state sales tax be sure to know if they are just on final sale price or that price plus shipping.

My tracking method is fairly easy. As I see a sale come in from TN I write TN in red ink at the top of the eBay sales notice. These go on the bottom of the stack. Then at the end of the month I can calculate all but TN, TN, then total.

I do not charge state sales taxes on everything I sell. Just items bought for resale or end items. If I'm selling personal property, then I don't charge them.


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