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Income Taxes and eBay

Anyone who is self-employed has to pay income and self-employment taxes, and eBay sellers are no exception.  No matter how much you make from your eBay business, it is subject to taxes as far as the IRS is concerned.  It is important to understand the types of taxes that eBayers must pay, and how to minimize the amount of taxes you are responsible for.

Income Tax Considerations

If you have sold items at a profit on eBay, you are responsible for paying income tax on the amount of profit you make.  The key here is profit.  If you have sold nothing but items you’ve found around the house and need to get rid of, you have likely sold them at a loss just to get them out of the way.  In that case, you would not have to pay income tax on your eBay earnings.  But if you buy items from suppliers, stores, or even garage sales, and make a profit on them, you will have income tax liability.

One of the tax advantages of running a small business is that you can take advantage of several deductions.  These reduce your taxable income, hence reducing the amount of income tax you owe.  For an eBay business, you might be eligible for some of the following deductions:

* Mileage (for trips to the post office)

* Shipping costs

* Purchase prices of products bought for resale

* A portion of your phone bill

* Home office equipment and expenses

* Computer and software

It is important to talk to your tax advisor about your deductions.  Some may be limited or not qualify due to use for other purposes.  And there may be others that you qualify for as well.

Sales and Use Tax and Payroll Tax

eBay sellers may also be responsible for collecting sales tax from buyers who are in their state.  Buyers from other states are responsible for paying use tax in their own states.  Also, if you purchase items from another state that would be subject to sales tax had you purchased them in your home state, you will be responsible for paying use tax.  You can avoid paying use tax on items you buy to resell by getting a reseller’s license.

If you hire employees to help with your eBay business, you will be responsible for payroll taxes.  And if you set your business up as an S or C corporation, you will have to pay payroll taxes on your own income as well.  If you are a sole proprietor, self-employment tax takes the place of payroll tax.

It pays to be prepared when it comes to taxes.  Knowing what taxes you may be subject to in your eBay business can make things much easier on you when it comes time to file.  If you are unsure, go ahead and talk to your tax advisor before the end of the year.  Doing so may help you avoid unpleasant surprises.

Ten Household Items That Sell Well on eBay

Are you looking for things to sell on eBay?  You may not have to look any further than your own house!  Many sellers have gotten started selling household items that were previously just sitting around taking up space.  And once you’ve sold some of your own items and gotten a feel for what works, you can start hitting garage sales and picking up more items to sell.

There are lots of household items that have great selling potential on eBay.  Here are ten of the best, in no particular order:

1.  Antiques - This is a pretty broad category, but if you are knowledgeable about antiques you can use that to your advantage.  Many types of antique furniture and home dÈcor are in demand.  If you’re not sure about the origins or value of your older items, you can find information online, at the library, or from your local antique dealer.

2.  Collectibles - If you are a collector, you probably have a great deal of knowledge about the things you collect.  You may even have found some of your pieces on eBay.  Collectors are often willing to pay top dollar for items that are missing from their collections, so it is possible to make a great deal of money selling collectibles.

3.  Small Appliances - Do you have a fancy blender that you never use tucked away in your cabinet?  Chances are there’s an eBay buyer out there who would love to have it.  Small appliances that are in good condition are hot sellers.

4.  Books - Book lovers often search eBay for out of print or limited edition books.  You can get more money out of books that are in good condition, but those in fair condition often sell at lower prices.  Consider selling book series together, or offering reduced shipping to customers who buy more than one book to cut shipping costs.

5.  Tools - There are lots of tools that sell well on eBay.  Power tools are quite popular, but there is quite a market for quality hand tools as well.  Specialty tools are also good sellers.

6.  Musical Instruments - If you have any musical instruments or accessories sitting around gathering dust, eBay is a great place to get some cash for them.  Vintage or signed instruments often bring great prices, but any instrument in good condition is worth listing.

7.  Computer Hardware - Printers, scanners, laptops, and PCs that are in good working condition are in demand on eBay.  If you have replaced all or part of your system, you might be able to unload your old hardware by auction.

8.  Sporting Goods - eBay is a great place to get rid of unused sporting goods.  Some popular items in this category include golf clubs, fishing poles and reels, snowboards, and hunting equipment.

9.  Toys - Some toys sell well on eBay.  The best bets are older or rare toys that you can’t find at your local discount store.  Train sets, Star Wars toys, and vintage Barbie dolls are hot sellers.

10.  Kitchen Items - Dishes and pots and pans often bring good prices on eBay.  They may be difficult to pack and ship safely and efficiently, however, so be sure to do a trial run before listing them and charge enough to cover the shipping.

eBay Fees Explained

One of the best things about eBay is the ability to present your offerings to millions of people for relatively small fees.  But in order to maximize your success on eBay, it is important to understand their fees.  Although they are fairly small, they could negate your profits if you don’t take them into consideration when setting your starting bid or reserve price.

Basic Fees

Every item listed on eBay is subject to insertion fees.  The insertion fee is based on the starting or reserve price of the item.  If you are running a multiple item or fixed price auction, the insertion fee is based on the starting or fixed price multiplied by the quantity of items.

Items that sell are subject to final value fees.  These are based on the price the item sells for.  The more the item sells for, the higher the final value fee, but the lower the actual percentage of the final value.

If you wish to set a reserve for your auction, you will have to pay a reserve fee.  This fee varies depending on the reserve amount.  The reserve fee is fully refunded if the item sells.

The Buy It Now feature allows buyers to purchase your item without bidding for it.  Buy It Now can be used in conjunction with a regular auction, or it can be the only way a seller offers an item.  There is a small additional fee to enable the Buy It Now feature.

Picture Hosting Fees

eBay sellers can include one picture with each listing at no additional charge.  There is a fee for each additional picture hosted by eBay.  You can also pay extra to have your pictures supersized.

There are two ways to reduce your fees if you are using multiple pictures.  One way is by purchasing eBay’s picture pack.  It allows the seller to add more pictures and supersize them all for one flat rate.  You could also host your pictures on your own web hosting, or on a free photo hosting site such as Flickr.  The only disadvantage to this option is that you can’t use eBay’s picture show option, which allows buyers to see all available pictures as a slide show at the top of the listing’s page.

Listing Upgrade Fees

There are several ways that a seller can upgrade a listing.  These include gallery pictures, subtitles, bold, highlight, and border.  Gallery pictures are the most common upgrade, as they allow a thumbnail of the product picture to be displayed next to the listing’s title in the search results.  Listing Designer is another useful upgrade, especially if you don’t know how to use HTML to format your listing.

There are also several packages you can purchase to have your items featured on the eBay home page and in search results.  These packages are rather pricey, so they are best used when listing items that will bring a large profit.

Other Fees

Some categories on eBay have fees that are different from those of standard listings.  These include real estate, automobiles, and business and industrial equipment.  No matter what type of item you are listing, it is important to know exactly which fees will be assessed before setting a starting bid or reserve price.

PayPal and Other Payment Options for Your eBay Business

When selling on eBay, it is important to offer buyers a variety of payment options.  If you don’t allow a payment method that they can use easily, they may move on to the next seller.  There are several ways that you can accept payment on eBay.

PayPal

PayPal is the payment option preferred by eBay, because they own it.  But it also offers numerous benefits to buyers.  They can pay with credit or debit cards, as well as their PayPal account balance.  It also allows greater privacy, because they do not have to provide their credit card or bank account number to the seller.  PayPal accounts are free to set up, and buyers do not have to pay fees to use the service.

PayPal has benefits for sellers as well.  For those who do not have a merchant account, it provides a less expensive and less complicated alternative.  There are no setup fees and no monthly fees, and the fees per transaction are similar to those incurred when using a merchant account.  There is also a seller protection policy that offers protection against fraudulent transactions.

Merchant Accounts

Merchant accounts are the means by which most offline businesses accept credit and debit card payments.  You can accept credit card payments through your merchant account for eBay sales if you have one.

If you do not already have one, it is important to note the fees charged before applying for one.  Fees vary by processor, but they usually include a hefty setup fee, monthly fees, and per-transaction fees.  Merchants must fill out applications and submit to credit checks before being approved for a merchant account as well.

Other Payment Options

eBay permits some online payment services other than PayPal for those who prefer them.  These include Moneybookers, Propay, Allpay, and a few others.  The company evaluates all payment services before allowing them.

Sellers can offer buyers the option of paying by check, bank transfer, or money order as well.  These options allow greater flexibility for buyers, but they also carry some risk with them.  The risks include forgery, fraud, and counterfeit instruments.  Therefore, it is important to consider them carefully before offering them.

eBay are not allowed to solicit payment by Western Union, Moneygram, or any other non-bank transfer service, and they can’t ask buyers to send cash by mail.  They are also not allowed to accept payments by having users add funds to their prepaid credit or debit cards, or through any online payment service not specifically approved by eBay.  Violators of the policy may be subject to cancellations of listings, loss of account privileges, or account suspension.

While PayPal is one of the most popular payment methods for eBay sellers, there are other options.  The most important thing is to make it easy and convenient for your buyers to pay you.  Doing so will result in greater buyer confidence, which in turn results in greater willingness to bid on your items.

Five Things to Avoid When Selling on eBay

eBay is a wonderful place where buyers and sellers come together.  But it can be a bit frustrating at times, especially for novice sellers.  Maybe you’re not getting bids on your items, or maybe they’re not bringing the prices that similar items are.

Chances are, if you’re not getting the results that sellers of similar items do, some simple adjustments to your listings could help.  Here are five things to avoid when trying to sell on eBay:

1.  Misspellings - If you misspell the name of your item, those who are searching for it may never find it.  And if someone does happen to find it and bid on it, that person may be the only one who happens upon it.  That means that he will get your item for bottom dollar.

Besides making your listing hard to find through the search function, misspellings just look bad.  Buyers may be hesitant to hand their money over to a seller who can’t be bothered to take the time to proofread her listings.  If spelling is not your strong suit, consider having someone else proofread your listings.  At the very least, copy and paste it into your word processing program and do a spell check.

2.  Not Using Keywords - Buyers search for products in lots of different ways.  So it’s important to use keywords in your title and description as much as possible.  Try to cover as many terms that could be used to search for your product as you can think of.

3.  Bad Photos - When shopping at bricks and mortar stores, customers can see a product up close.  When shopping online, they can’t.  That’s why it is so important to provide good pictures of your auction items.

Photos should not be blurry, and they should show the product in as much detail as necessary.  Multiple photos taken at various angles and showing important labels and accessories will give buyers more information.  It’s also important to make your photos look reasonably professional.  While you don’t have to hire an experienced photographer, it’s a good idea to use a contrasting, solid-colored background and proper lighting.

4.  Reserves - A reserve is the minimum amount you will accept for an item, but it is not shown to buyers.  If someone bids below the reserve price, he is simply told that the reserve has not been met, and he will have to try bidding again.  In most cases, reserves serve only to frustrate buyers.

Many sellers like using reserve prices because they will not be obligated to sell at a lower price, and they don’t have make the starting bid so high that no one is willing to place a bid.  In this case, using a reserve price and disclosing it within your listing may be the best answer.

5.  Incorrect Categorization - Buyers can get more relevant results by searching within the right categories.  And some forgo searching altogether, going directly to the specific category that they think is most appropriate.  That means that placing your item in the right category is very important to your listing’s success.  Searching for items similar to yours and noting the categories they’re in should give you an idea of which ones to use.