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.

First, general rule: your vehicle is deductible to extent you use it for business.

So, if you drive your car 100% for business, all car- related expenses are deductible.

But if you use it less than 100% for business, do not despair. Less-than-100% use is very typical among small business owners and self-employed -- you'll still come out way ahead by keeping good vehicle expense records.

For example, if you drive your car 75% for business, then you get to deduct 75% of your vehicle expenses.

Now to fun part.

There are two methods for reporting your car expenses: 1. Actual Expense Method 2. Mileage Method

With Actual Expense Method, you have to keep track of all your vehicle related expenses, such as: -- gasoline -- oil -- maintenance & repairs -- insurance -- license & registration -- wash & wax -- supplies & equipment -- depreciation expense (including Section 179 deduction) -- lease payments -- loan interest -- state and local taxes

So you add up all those deductions and multiply total by your business use percentage, which is determined by dividing business miles by total miles driven.

The Mileage Method works like this: instead of tracking all actual expenses listed above, you only need number of business miles driven, which is multiplied by standard mileage rate published each year by IRS.

For 2003 mileage rate is 36 cents per mile. For 2004 mileage rate is 37.5 cents per mile.

If you drove your car 10,000 miles in 2003, your deduction is $3,600 -- regardless of what your actual expenses might have been.