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IRS may consider eBay sales taxable income

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Hawking baby and children's clothes - along with some garage sale and thrift store bargains - on eBay helps Sunni Wojnarowsky bring in some extra money so she can afford to stay home with her two young boys. The additional dollars are great, but does she really need to hassle with the paperwork and report her small profit to the Internal Revenue Service? Her question, posed to the online auction site's discussion board for sellers, generated much advice - and more confusion.

In tax law, there is no clear, bright line that separates fun from profit, or a hobby from a business. But IRS instructions make it clear that all income - a category that includes bribes, gambling winnings, kickbacks and money made in illegal activities - can be taxed.

"You can't get an answer from anybody," Wojnarowsky said in an interview from her home in Brunswick, Ohio. "It would be nice to have a straightforward answer of yes, you file taxes, or no, you don't."

More than 135 million people have registered to use the auction site that calls itself "the world's online marketplace." Buyers bought more than $34 billion worth of merchandise there last year.

Some people make money by cleaning out items from their closets; others use the site to run small businesses.

"When you're working on the Internet, it's kind of a gray issue," said Bart Fooden, a certified public accountant in Woodbury, N.Y., who advises small businesses and individuals. "The big issue is whether you're doing it as a business or not."

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