Easysale's Tips

Do I Need to Pay Taxes on My eBay Income?

Many eBay sellers who restrict their sales to that of personal items believe that they don’t have to pay taxes on any of their profits, but sadly, that’s not true. In fact, even many eBay sellers who generate significant revenue from their eBay sales — through dropship services, volume sales, etc. — harbor the mistaken notion that eBay sales are somehow exempt from the long arm of the IRS.

If you’ve ever taken the time to read the fine print of even the 1040 instruction booklet, however, you’ll see that the IRS makes no bones about it: all income — regardless of source, even tips and gambling — is potentially taxable.

Perhaps you’ve been operating under the assumption that your eBay sales activities should be considered as a hobby rather than a business and therefore not subject to income taxes. That may be the case, but the burden of proof lies on you. If you’ve been selling secondhand merchandise that you originally purchased new, you might be able to avoid paying taxes if the selling price is lower than the original purchase price, which is what often happens in garage sales, yard sales and eBay sales. Since you didn’t make any money from the sale, you didn’t have any profits to report as income.

However, if the merchandise has appreciated in value — say, a rare video console from the ’80s — and you sell it for more than you paid for it new, then you’re expected to report the profits as taxable income.

Now, the chances of the IRS flagging you for an audit are fairly slim if all you’ve done is sell a few small, personal items here and there, even if you did make a little money off of them. That’s not to say that it will never happen, however, so it’s best to keep all your original purchase receipts so that there’s no question that you ultimately made little or no profit from their resale.

Of course, if you spend a considerable amount of time on your eBay sales and are dependent or even partially dependent on them for your income, you are required to report your sales on your income taxes and will likely need to file a separate form for them, e.g.,the  Schedule C or the 1040-ES for estimated quarterly tax payments for individuals who regularly make profits on a business. The good news, however, is that if you do have an eBay selling business, you’re eligible to deduct nearly all expenses related to running it, from your postage and packaging costs to the transaction fees you pay to PayPal.

Like everything else tax-related, it’s best to consult a qualified tax professional or accountant regarding any questions about your eBay income. Although tax season is still over a month away,  it’s best to start gathering records now so that you’ll be ready to present documentation to your accountant when it comes time to filing your tax forms. Keep meticulous records of your eBay sales, including receipts from the post office and eBay and from your purchases of items you intend to sell on the auction site. Regardless of how you view your eBay sales, it’s best to be prepared for the possibility that the IRS will step up enforcement of income tax laws on eBay sales in the future.

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Holiday eBay Sales: Start Small, Start Now

Many people wait till Black Friday (i.e., the day after Thanksgiving, now known as the “official” kick-off of the holiday shopping season) to do their gift shopping, while others procrastinate until Christmas Eve. Regardless, however, most are already beginning to think about what they’ll buy, how much they’ll spend, and where. If you’ve been toying with the idea of selling on eBay, now’s the perfect chance to capture their attention and maximize your profits.

If you’re selling on eBay for the first time, however, you’ll need to start small, and you’ll need to start now. People have always been careful with their hard-earned cash, but they’re even more so now that the economy has us a little skittish about spending too much of it. If there’s one thing that defines all successful eBay sellers, it’s the reputation of trust that they’ve built over hundreds, perhaps even thousands of transactions. As an eBay seller newbie, you’ll need to work hard to earn and establish that reputation. It’s not difficult to do and is worth the effort, but keep in mind these tips as you launch your eBay selling business:

• If you want to take advantage of the holiday shopping season, start now. Don’t wait until the day after Thanksgiving, because you’ll need to have a decent feedback rating under your belt before buyers will be willing to trust your listings. Start buying a few things now, be an honest and ethical buyer, and get that feedback rating up.
• Start small. Don’t sell your grandmother’s fine bone china right away. Even with a 100% feedback score, if your rating is based solely on a handful of purchases, buyers still have little evidence of your reputation as a seller, especially of high-end merchandise. Start out selling smaller, lower-priced items such as items of clothing, DVDs, CDs, books, or secondhand software. From there you can move on to higher-priced items and price accordingly.
• Think about opening an eBay store. It costs a little more money, but it can help boost your reputation as a professional eBay seller. It demonstrates to buyers your commitment to your eBay business and allows you to expand your selling opportunities by increasing the number of auction listings you’ll have going on at any given time.
• Slow down, but don’t stop on December 25th. People’s minds turn to returning unwanted items the day after Christmas, but there will also be plenty of folks out there on the hunt for post-holiday bargains. This might be a great time to unload some of your eBay store’s slow-moving items at a discount, such as winter wear and holiday decorations.
• Keep going. Like anything worth having, a solid reputation as an eBay seller takes a long time to build and maintain. Continue to offer buyers quality items and well-designed listings, perhaps offering frequent buyers discounts and other loyalty programs. If your eBay store continues to provide outstanding customer service and excellent merchandise, by the time the next holiday season rolls around, it’ll hopefully become the go-to store for eBay shoppers seeking Christmas bargains.

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The Secrets of eBay “Typo Treasures”

Save up to 70% by searching for mispellings misspellings

The Problem

In a bricks-and-mortar retail store, you browse through the shelves and racks until you find the item you’re looking for.  Let’s say, for example, that you want a Sony PlayStation 3.  You would walk to the video games department of your favorite electronics store, and look around until you found the display of PS3 boxes.  Easy enough.

But eBay is different.  In most cases, browsing through a category for a particular item just isn’t practical, because of the sheer number of listings.  Again using our Playstation example, if you simply browsed eBay’s “Video Games” category, you’d find more than 613,000 items currently listed.

So what buyers do instead is use the Search tool built into eBay to find a more precise and manageable list of items.  Searching eBay for Sony PlayStation 3 system, for instance, yields about 580 listings–and you could get an even narrower list by specifying New, 80GB, etc.

And  there’s the challenge:  when it comes to searching, computers are very literal.  Their software is programmed to look for words in the listing titles that match your search terms exactly.

eBay knows that many buyers misspell keywords when they’re searching for an item, so they’ve added programming to suggest possible correct spellings if you inadvertently commit a typo.  For example, if you accidentally search eBay for palystation (transposing the second and third letters), eBay will helpfully ask, “Did you mean playstation?”

But there is no such help for the hapless seller who misspells, either out of ignorance or carelessness, a key word like the product’s brand name in their title.  eBay does not suggest or display misspellings to a buyer who searches for the correct spelling. Thus, if you list a “Palystation” for sale on eBay, the only buyers who will ever see it are those who explicitly search for that misspelling!

Bad for Sellers…But Great for Buyers

For a seller, this is disastrous.  The magic of an auction–whether live or on eBay–is in having dozens of people bid against each other to drive up the price.  But if only one or two bidders participate, there’s little or no competition, and the item may sell well under market value–possibly even for just the opening bid.  It’s as if the address for the location of a live auction was printed wrong in the newspaper advertisement, and instead of the expected crowd, only a couple of people show up because they found the location purely by accident.

(This is a great reason to use a professional eBay store like Easysale rather than trying to sell it yourself.  It’s one of the many kinds of errors that our listing staff is trained to avoid.)

But for you as a buyer, knowing how to exploit this little quirk can save you a lot of money.  If you intentionally search for those typos and misspellings, you can be one of those few people who find the auction–and with few competitors, you can often pick up a bargain.

How Much Can You Save?

To find out just how much you could possibly save with this strategy, Easysale performed a test.  We used a misspellings search tool–more on that in a moment–to generate many possible misspellings of PlayStation.  These included:

Playstaion

Playatation

Palystation

Playtation

Playstaton

Play Station (space between words)

Playsation

Playstatio

Platstation

Playstaiton

Note that one of these, Play Station, isn’t even a misspelling–there’s just a space between the two words, where there should be none–but that’s enough to fool eBay’s search engine.

We then used Terapeak (a subscription service that we use to do product research for our sellers) to find the average selling price (ASP) over the last 90 days for items matching each search term in the Video Game Systems sub-category.

As a reference point, listings that contained the properly spelled word–PlayStation–had an ASP of $140.  (Because we didn’t specify the system version, this average includes both the PS3 and older, less valuable systems like the PS2.)

What we found astounded even us as experienced eBay sellers:  the average selling prices of items with misspellings in the title were $20 to $100 less than the ASP for listings with the correct spelling.  Here’s a graph of the results; the ASP for correctly spelled listings is on the far left.

Just how much of a bargain is this?  Here are the results again, this time showing the effective percentage “discount” off of the “full price” of the properly spelled listing:

In a nutshell, you could get a 15-71% discount–at least in this example–just by shopping smart and taking advantage of sellers’ mistakes!

7 Tips for Finding Your Own Typo Treasures

1. Use software to find and search all the possible misspellings. Many people routinely search for Typo Treasures, so there are a number of of tools available that will take a correctly spelled word, generate many possible misspellings and search for them on eBay.  To get started, try the Typo Treasures Search page right here on the Easysale website.  Or to find some even more advanced tools, search Google for “eBay misspellings”.
2. Do your research so you don’t overbid.  As with any eBay purchase, be sure to research the ASP for listings with correctly spelled titles first.  Know what the market value of the item is, then set your maximum bid on any Typo Treasures at some percentage of that value.
3. Be patient.  You’re not the only one looking on the hunt for typos.  Stick to your maximum bid, and if you do get outbid by someone else who found the same listing, just go back to your search and try again.
4. Don’t ignore Buy It Nows.  The Typo Treasures strategy works best with auction-format listings, but watch for recently-listed Buy It Now (fixed price) listings with typos, too.  You may get lucky and find one with a below-market price before someone else stumbles on it.
5. Search eBay’s international sites.  Misspellings are more common on these sites due to the sellers’ frequent unfamiliarity with the English language.  But don’t forget to check the international shipping costs to be sure they don’t eat up your savings.
6. Watch for deliberate misspellings.  Unscrupulous sellers will often intentionally misspell a trademarked brand name when they’re selling a counterfeit or replica of that brand.  They do this to avoid detection by the trademark owner.  For example, if you search for Louis Vitton, you’ll find numerous items with titles such as “Louis Vitton Inspired” or “Louis Vitton Style”.  These items are replicas of the authentic Louis Vuitton designer products, not the real thing.  Read the listing carefully and be sure you know what you’re buying.
7. If you find a juicy misspelling, don’t tell the seller! It seems obvious, but well-intentioned people do it.  If the listing can still be revised, and the seller fixes the typo, then your “find” will now be visible again to everyone in mainstream search.

Want to be a Successful eBay Seller? Be an eBay Buyer

You can spend hours of research online and at the bookstore learning the tricks of the trade on how to be a successful eBay seller, but probably the easiest way to find out what will draw a buyer to your eBay store listings is to become a buyer yourself.

If you wanted to open a brick-and-mortar store, one of the things you’ll want to do is check out your competition, right? It’s the same with selling on eBay. By becoming a buyer, you’ll have a close-up look at how successful (and not-so-successful!) eBay sellers run their business.

Some tips on being an eBay buyer:

1. Pick the same category of items in which you’ll be selling. If you’re going to sell antiquarian books, buy something from that category. You don’t have to pick an eBay PowerSeller, but find someone with a fairly high feedback rating (around 96-98%, if not 100%) and a high number of transactions (100+).
2. Study their eBay listings. Analyze how they compose their photographs, how many they upload, how they word their descriptions and titles, and what keywords they use. What kind of shipping do they offer? Do they offer a Buy It Now option? Do they use the reserve option? How long are their auctions? Do they offer or require insurance? What types of payment do they accept?
3. Before you bid, ask a few questions from the buyer. See how quickly they respond (if at all). Do they answer your question(s) to your satisfaction? Do they sound friendly and open to questions, or are their emails brusque and dismissive?
4. After you bid, continue to monitor the listing to see if the seller updates it based on questions they receive.
5. Once you’ve won an auction, see how quickly the eBay seller sends you a notification of your winning bid (if at all). Do they tell you when they’ll ship the item? Do they thank you for your bid? Do they give you a tracking number for your shipment?
6. Once you’ve received the item, examine it closely. How quickly did it arrive? How was it packed? Did it arrive in good condition? Does it match the eBay seller’s description of it in his listing? Did the seller include a thank-you note?

Choose different eBay sellers as you do your research, and soon you’ll have a solid grasp of some of their success secrets. Most of these aren’t that difficult, but you might be surprised at just how lazy and unresponsive many eBay sellers are. Don’t be one of them. Be one of the responsible, friendly, responsive, and professional ones, and soon you too can join the ranks of successful eBay sellers.

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Make Your eBay Store a Family Affair

If you’ve been selling on eBay for a little while, you know how much work goes into the business. That’s what it is, after all — a business — and you deal with many of the issues that all businesses ultimately face, albeit on a smaller scale: purchasing, inventory, pricing, shipping, customer relations, administration. Once you start selling a substantial amount of items and have established an actual eBay store, you might want to think about opening up a human resources department, too. In other words, bring in the kids.

Depending on the volume of eBay sales you have, you may already have actual employees on staff, but if you’re just starting out as an eBay seller or are experiencing moderate growth but don’t yet have the inclination and/or funds to hire someone, start looking at the home first when you need help. Here are some responsibilities you can easily delegate to your children or spouse when it comes to selling on eBay:

Photography: Do you have a budding Ansel Adams in your family? Ask them to take photographs of the items you’ll be listing on eBay. Let them experiment with different angles, backgrounds and lighting. Encourage them to study how successful eBay sellers compose their winning photographs and learn from the pros. Remind them not to use their cell phone cameras when taking photos, regardless of how many megapixels it has!

Shipping & Handling: For many eBay sellers, this is the most tedious part of the job, but even small children can really get into the activity. Who wouldn’t like to play with packing paper and bubble wrap? Have them pack non-fragile items and stick mailing labels on the packages. Don’t allow younger kids to play with plastic bags or tape guns, but otherwise they’ll be happy to hold down the folds of cardboard boxes while you tape them up. Ask your spouse or teenage children to do post office runs for you on their way to or from work and school.

Source inventory: Who loves shopping more than teenagers? They’re also among the most trend-savvy folks out there, so why not promote your beloved mall-haunting offspring to your eBay store’s official Senior Buyers ? Ask them to come with you on yard/estate/garage sale haunts and discount store expeditions. You can learn just what trends are hot now and what will be hot a few months from now, and they can learn how to price inventory accordingly so that the family business makes a profit on eBay.

Inventory consignment: Want to consign your items instead of selling them on eBay yourself? Have your young “shipping staff” or spouse take them to our store in Dallas on Lovers Lane . Or better yet, have them call us at (469) 759-6266. Just like our name promises, the process is fast and easy.

Involving your entire family in the management of your eBay store allows your children to learn valuable lessons about entrepreneurship, responsibility and money management, all while spending lots of fun, quality time together.  As your eBay store grows, you can delegate more advanced responsibilities and might even be able to start paying “salaries and bonuses.” Now there’s an incentive everyone can get behind!

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