So I want to start selling items on ebay but I know that you have to report your ebay profits when filing yearly taxes if your total ebay profits exceed a certain amount during the year. I just don't know exactly this would work. I read somewhere that for example, if you purchased a hat from a yard sale for $5 and sold it on ebay for $12, that would be $7 profit that you have to report as income. But my question is, if I payed $60 for a video game a few years ago and sold it on ebay for $10, that's technically not any profit I am making, so would I not have to report that $10 in my taxes? Basically what I am asking is, how would the government know how much profit I am actually making if some items sell for more than what I originally paid and some sell for less than I originally paid? Is it basically an honor system? I doubt it because then everyone would just lie to avoid paying income tax. This is why I am so confused on this. Any help on this would be greatly appreciated.