What is the meaning of badges of trade?

Badges of trade refer to a set of criteria used to determine whether a specific activity constitutes a trading operation for tax purposes. These criteria include the frequency of transactions, the nature of the goods, the intention to make a profit, and the organization of the activity. Essentially, they help distinguish between casual hobbyists and those engaged in business, influencing how income is taxed. Understanding these badges is crucial for individuals or entities involved in buying and selling goods or services.