Hi Archie,
Thanks for dragging me into this thread.<g> Life's a "beach" and than you go for a swim!
First of all, any sale whether casual or on a regular basis is subject to tax if the amount received exceeds the basis of that item (cost). In other words if you sell only ONE chip and the price received exceeds what you paid for that chip - You have a realized gain that is subject to tax. Now if you sell this ONE chip at a loss the loss is not deductible (recognized) because it is considered personal and not business.
The IRS has a way of making you a dealer if you sell at a gain and a private collector if you should show a loss.<LOL>
Your point about not being able to compete with those who pay no tax (state or federal) is valid.
As you know, since I have retired and have my own practice I specialize in defending individuals who have become subject to audit - Individuals, Corporations, Partnerships, Estates, etc.. Best, Jim