If you sell goods through online auction or sales sites (such as TradeMe and eBay), your tax obligations are exactly the same as buying and selling goods in a shop.
Over the last few years, more and more people have been trading over the Internet through online sales and auction sites.
If your online trading activities are more than just a hobby, you may have to pay tax on your sales.
Many people use online sales and auction sites to sell articles that they no longer need.
If the sales are not part of a business activity, there is usually no tax to pay.
However, if you regularly sell online, you may be in business, and you should be declaring your sales for income tax purposes.
If your sales total over $60,000 a year, you must register for GST.
As a general guide, you are regarded as being in business if you acquired goods with the purpose of on-selling, if the activity is to make a profit, or your business involves dealing in these goods.
A key factor that we would consider when deciding whether someone is in business is the frequency or regularity of their trading.
If you are in business, please remember to keep complete and accurate records, including banking information, proof of income and expenses (like invoices and receipts), cash books and wage books. Records must be kept for seven years.
Anyone who is not paying the right amount of tax has an unfair competitive advantage over those who are paying their fair share.
We receive regular data about online trading transactions, and we will take firm action with people who deliberately evade tax.
If you have been trading online for some time and think that you might have tax obligations that you have overlooked, contact us as soon as possible.
If you are still not sure if your online trading activity is a business, see our Online trading tax implications (IR1022) factsheet or contact us to discuss your situation.
Please visit our website for comprehensive information.
If you are in business, you may like to attend one of our free tax seminars or workshops held in various parts of the country. Please visit our website for details (www.ird.govt.nz).
Abdul Rafik is Inland Revenue’s Community Compliance Officer based in Auckland. He will answer your queries, which may be emailed to firstname.lastname@example.org