That’s true.
Hmm, that’s a little too vague. Profit or loss is also a factor in a hobby. But, the tax rules differ for a business versus a hobby. If a hobby cannot qualify as a business under the tax law, then a loss is not deductible, but a profit is taxable. So, as far as model railroading is concerned, if you sell an item intended for, or used on, your layout at a profit, that profit is taxed as ordinary income.
Rich
You set up an ebay account as either an individual or a business, so they do have a way of knowing. I think the issue is that the Recovery Act does NOT distinguish between who gets the 1099-k. Payments companys are required to send it to anyone, even individuals. That’s the issue. The Act should say that only businesses that receive $600 or more should get the 1099-k.
But if you sell it for more than you paid…it is still subject to tax. For an individual, this is called a capital gain. Sell a stock for more than you paid several years ago, you owe tax. Sell a brass model train for more than you paid 3 decades ago, you owe tax. Always have, so nothing has changed (except now if you use ebay or Venmo, etc, the IRS knows you sold something. [;)]).
So even if you are an individual and should not get the 1099-K, you still owe tax on the profit/gain (proceeds in excess of cost), so a regular 1099 is probably warranted anyway.
In the end, anything normally sold for more than it costs is subject to tax, whether its profit for a business or a gain for an individual. It always has been subjected to tax. What kind of forms and what kind of tax it is starts to get in the weeds.
IMO, the easiest thing to do is simply raise the threshold from $600 to about $3,000 per year.
FWIW, for 2022 the capital gains tax rate for single filers with a taxable income under $40,400 (or married filing joint under $80,800) is 0%. (Above that it’s 15% up to $400-800K.)