Q: I'm opening a gift shop and want to be able to accept credit cards. I talked to branch manager at my bank, but he didn't seem to know much about how it all worked. He did say that I would need something called "a merchant account" and something else called "a credit card processor." Beyond that he seemed as clueless as I am. I'm thinking about going to another bank. Can you explain how that all works? -- Mary Ann G.

A: Mary Ann, I'm going to give your banker benefit of doubt and say that a lack of knowledge regarding specifics of credit card processing is not necessarily a reflection of banker's competence. I have found over years that most bankers, no matter how experienced or knowledgeable about banking business they my be, don't really know much about how credit card processing and acceptance really works. That's because task of accepting and verifying credit card purchases is handled by third party service companies who process and deposit (or settle) funds into a bank merchant account.

The decision to accept credit cards is a wise one for any retailer. I agree with financial guru Dave Ramsey's teachings regarding use and abuse of credit cards. Many people dig deep holes with credit cards that are hard to climb out of.

But, from a practical business point of view, any retail business that does not accept credit cards is leaving money on table. Research has shown that accepting credit cards increases revenue and helps with cash flow since you receive money within a couple of days instead of waiting up to a week for a check to clear.

Credit cards don't bounce, as some checks have a tendency to do. Credit card users are also more likely to buy on impulse and spend more when they do. Bad news for them, but good news for you. If you have a social conscience concerning use of consumer credit cards, a retail operation probably isn't business for you.

To accept credit cards at a brick and mortar location you typically need four things. The requirements may vary a little, but following applies in most cases.

You will need: (1) A way to enter customer's credit card information into a verification and processing system. This can be done with a swipe terminal, point of sale system, or by calling credit card in by phone; (2) A credit card gateway company to verify credit card's validity and process payments; (3) A credit card merchant account in which gateway company will deposit payments made to you; and (4) A business bank account into which settled funds will ultimately be deposited for your use.

Here's how process works. (1) You make a sale and customer pays by credit card. (2) Using a card swipe machine or telephone, you contact what is known as a "gateway company" who takes card information you submit and verifies that card is valid and charge can be made against card account. The gateway company returns an approval code for purchase.

With a swipe machine or point of sale terminal verification process happens in a matter of seconds. If you're doing telephone verification it can take a couple of minutes. You call gateway company, give them credit card number and expiration date and they give you an approval code that you write on credit card charge slip. Either way, money is typically deposited in your merchant account within 24 to 48 hours (less fees, of course).

Q: I read your last column about paying income tax on eBay sales if you are doing it as a business, but as someone who only sells on eBay occasionally I'm still confused if IRS rules apply to me. Can you tell me more? -- Norman L.

A: Last week's column on whether you were required to report income earned from eBay sales to IRS sparked a number of additional questions and comments from eBay sellers who were hoping that I could somehow validate that their eBay activities were mere hobbies instead of actual businesses and therefore not susceptible to IRS taxation.

Several folks argued that just because their little eBay hobby generated a little cash, that didn't make it a full blown business. It seems they consider income from their little hobby to be financial manna from Heaven and thereby not taxable by earthly tax collectors. I've always been amused by folks who try to impress me with talk about their "little side business" but when subject turns to taxes they suddenly refer to it as "my little hobby."

All kidding aside, conclusion that I came to after reading each email was always same: while you may think selling on eBay is just a fun pastime and money you're making is not reportable as income, depending on circumstances, IRS would probably disagree with you.

It seems that everyone likes making money, but hates carving off a piece for good old Uncle Sam. Welcome to free enterprise, folks. If you're going to come to dance you have to pay fiddler.

The IRS rules are clear: you must pay taxes on all personal and business income and that includes money you make selling on Ebay.

In its most basic sense, IRS rules can be interpreted to mean that if you buy an old vase at a garage sale for $10 and sell it on eBay (or elsewhere) for $20 you made a $10 profit and therefore must report it as income and pay Uncle Sam his fair share.