Legalities

Bottom line is you are a hobbiest if you lose money and a business if you are operating at a profit. Once you hit about $12,000 in sales a year you do attract attention form IRS and your state tax collection agency. At some point Ebay and PayPal will be required to report these sales figures so keep it legal.

Keep records of all sales and purchases to be prepared for any audit by the IRS or your local state tax collection agency.

Hobbiest trying to claim to be a business to get a tax rebate run into serious tax issues so do not try to claim to be a business as a hobbiest with some sales unless you can afford to spend thousands for lawyers or you know the tax laws well enough to self represent.

I have over 50K in sales so far this year and will operate at a loss but next year and beyond there will be no way to show a loss and then I need to figure out Social Security payments on top of the State sales tax and IRS rules.

I use Quicken to track everything now and it is pretty easy to use. I do it only once a month and consolidate all entries, income and expenses into the last day of the month but I do have every receipt or note for cash purchases and sales to spport the records. it takes about 4 hours a month to keep current.