Online shopping is quickly becoming the preferred method of gift buying at Christmas and nearly any other time of year. Americans love the convenience and competitive prices, and they can often find things online that are not sold in stores.
This includes homemade crafts, furniture and other items sold directly by the individuals who made them. Sites like Etsy have really spurred demand for handcrafted items sold person to person. If you are among the many Americans who sell things online, you may be wondering if your sales need to be reported to the IRS. That’s what we’ll discuss in today’s post.
As a rule of thumb, online sales you make can be broken down into “business” sales (which would need to be reported), and “hobby” or online “garage sales” (which generally do not need to be reported).
Let’s begin by discussing the latter. Things that you would sell at a garage sale (used clothing, sporting goods and other personal-use items) can typically be sold online without having to report sales to the IRS. Many items you’d advertise on sites like craigslist would fall into this category.
The one exception to “garage sale” items is the sale of antiques and rare collectibles that can be sold for a significant profit. To be safe, you may want to consider reporting these sales to the IRS.
If you sell new and homemade items online but do so on a small scale and without intending to make a profit, you generally do not need to report sales to the IRS. These are considered “hobby sales.”
At a certain threshold, however, hobby sales can become a business. If you frequently sell craft items online with the intent of making a profit, this would generally be considered a small business by the IRS. As such, you would probably be required to report income from online sales and to pay taxes.
As a disclaimer, we can only speak in general terms and cannot comment on individual cases. You should consult a tax law attorney with questions about your specific online sales and any reporting requirements they may entail.
