Selling scrap metal is a popular way to make extra money.

In fact, some people derive their entire income from the sale of scrap metal. However, as with any source of income there are tax considerations to consider. A person who sells scrap metal should understand how to document and report this income for tax purposes.

Income Tax

The Internal Revenue Service (IRS) requires that everyone who has an earned income above a certain amount file an income tax return. The exact amount of income required to file varies depending on a person's specific situation, but people with a self-employed income over £260 must file a return. The IRS considers those selling scrap metal as self-employed. Even if a person does not make £260 from the sale of scrap metal, but files a return due to income from other sources, the person must report the income from the scrap metal sales.


While many scrap metal sellers feel there is little chance of getting caught not reporting income from the sale of scrap metal as scrap metal processors do not report small transactions to the IRS, the processors must keep strict records of purchases in most states.

States require these records as a way of identifying those sellers who may have stolen the scrap metal. However, if the IRS or a state tax agency would audit the scrap processor, the auditor may review these records and find sellers of scrap metal who did not report the income from the sale.


The possible penalties for failing to report all taxable income to the IRS varies.

If the IRS finds that a person failed to report income, the IRS will amend that person's tax return to include the income and will add penalties for failing to report income.

The amount due would also accrue interest from the date the return was due to the time the person pays the taxes. In more serious cases, criminal prosecution may occur which could result in substantial fines and incarceration.

Business Expenses

While a person selling scrap metal does have to report this income to the IRS, most scrap metal sellers will also have many tax deductible expenses which will lower the amount of taxes owed.

For example, a person who collects scrap metal from various sites and delivers the metal to a scrap buyer can deduct mileage expenses which will reduce his taxes. Some other possible deductions might be the purchase of gloves, trash bags, wire strippers or other equipment used to collect and process the scrap metal.