Ebay in Your Free Time: Entrepreneurship or a Personal Hobby?

Many people who sell goods on the online auction platform “eBay” do so under the assumption that they are acting as private individuals. However, from a tax law perspective, this is not always the case. Sales activities on eBay may be subject to sales tax. Here, we explain what you need to keep in mind.

Characteristic of Continuity

To determine whether eBay sales are subject to sales tax, tax authorities examine whether the seller’s activities exhibit the characteristic of regularity. This is considered present when there is a business organization. This includes, for example, purchasing packaging materials, packing the goods, paying for postage, and taking digital photos of the items being sold. In determining whether the seller is an entrepreneur within the meaning of Section 2 of the Value-Added Tax Act, the presence of a sustained nature is sometimes the sole determining factor. If the sales activity is intended to be regular, this may already be the case from the very first sale. If the seller’s sales activity is designed to constitute a business operation of a certain duration, it may become difficult for the seller to avoid paying sales tax. If the seller sells regularly and systematically on the online platform, this constitutes market participation, which entitles the tax office to assess sales tax.

Seller’s Intention Not Decisive for Determining Entrepreneurial Status

It is irrelevant with what intention the eBay sellers in question sell goods, whether they consider themselves non-entrepreneurs, and claim to pursue the sales activity as a “hobby” in their free time. However, as long as the small business threshold is not exceeded, little changes for the respective eBay seller from a tax perspective at first. If the annual sales threshold of 22,000 euros is maintained, the small business regulation can be utilized. Beyond this threshold, eBay sellers must switch to standard taxation. It is advisable for anyone who regularly sells on eBay to inquire thoroughly, as the tax investigation department regularly checks the platform for activities subject to sales tax.