Help > Advice for businesses > Tax and GST guide > Business

Are you in the business of selling on Trade Me?

Being in business includes but is not limited to any profession, trade, manufacture or undertaking carried on for profit. The consequence of being in business is that gross income of the business will be taxable; however additional deductions are available to those in business.

In addition to an intention to make profit the other factors in determining whether a taxpayer is in business include:
  • The nature of the activity.
  • The period over which the taxpayer engages in that activity.
  • The scale of operations and the volume of transactions.
  • The commitment of time, money and effort.
  • The pattern of activity.

a) Joshua regularly sells items on Trade Me

Selling items on Trade Me has become a regular source of income for Joshua. On an almost daily basis he is purchasing goods and selling them on Trade Me with the intention of making a profit. He has been doing this for the last 18 months and generally holds inventory costing at least $5,000. Due to the period and pattern of activity, the commitment of time and money Joshua would be deemed to be in business and therefore will be subject to income tax on all profits. Joshua may also have obligations under the Consumer Guarantees Act and/or Fair Trading Act.

b) Anthony and Eric run a business and use Trade Me to sell some inventory

Whenever Eric and Anthony want to clear inventory they sell the goods through Trade Me. As the sale of the inventory is part of their business the profits will be taxable.

Types of business structure

There are a number of structures that can be used to operate a business, these include:

  • Sole Trader - This is a person trading on their own who will assume all of the risks and rewards. The business is controlled, managed and owned by that person.

  • Partnership - A partnership is much the same as a sole trader except that there must be two or more partners, and they jointly assume all the risks and rewards.

  • Company - A company is a separate legal entity registered under the Companies Act.