Hi Katie,

Setting up a separate bank account to handle the finances of online sales would be a step toward being required to obtain sales tax licenses. The most compelling reason to open a merchant's bank account is to give your enterprise the ability to accept credit card payments. That's one of the reasons PayPal makes me nervous. I don't see anything that could stop the government viewing a seller using this service as being liable for sales taxes on sales within his or her own state.

Another thing that would tend to be viewed as your enterprise being a business rather than your sales falling into the category of being a hobbiest would be all, or a significant part, of your personal income is derived from these types of sales.

One thing the hobbiest can not legally escape is income taxes on sales. If I sell a $1 chip for $400, and if the sale were to catch the eye of the IRS, I better be able to prove I paid more than $1 for the chip originally, otherwise I'd be liable for income taxes on $399.

Doncha just love how easy the government wants to make it for us to earn a few bucks!

Bob