I think it goes off profit. I'm not on benefits as such, but I am planning on declaring to tax credits once I make an overall profit- my rough way of working this out is my "bought" and "sold" totals on ebay. I buy some things in RL, but some of the stuff I buy on ebay is eg clothes for the DCs so I think it evens out. Once my "sold" is more than my "bought" I will declare it to TC, before then I am keeping careful records. I hope this is right.
They can be really petty - my DP won £1,000 on a tv gameshow when on JSA and just lost the same amount in benefits so didn't actually end up with any extra money at all. I suppose you can see why they do it, but he was annoyed!