Taxes are the least fun part of reselling, but ignoring them can lead to serious problems. With the updated 1099-K reporting thresholds, more resellers than ever are receiving tax forms from eBay, Poshmark, Mercari, and other platforms. Here's what you need to know to stay compliant without overpaying.
Disclaimer
This guide is for informational purposes only and is not tax advice. Every situation is different. Consult a qualified tax professional for advice specific to your situation.
The 1099-K: What Changed
The Old Rule (Pre-2024)
Payment processors (like eBay/PayPal) only sent a 1099-K if you had:
- More than $20,000 in gross payments AND
- More than 200 transactions in a year
The Current Rule (2025-2026)
The threshold has been lowered significantly:
- $2,500 in gross payments (2025)
- $600 planned for future implementation
- No transaction count requirement
This means if you sell more than about $2,500 on eBay in a year, you'll receive a 1099-K.
What the 1099-K Reports
Your 1099-K shows your gross payment amount — that's the total amount buyers paid, including:
- Item sale price
- Shipping charges paid by buyers
- Sales tax collected
It does NOT deduct:
- eBay fees
- Shipping costs you paid
- Cost of goods sold
- Returns/refunds
This is important: Your 1099-K will show a much higher number than your actual profit.
What's Taxable?
You only owe taxes on your profit, not your gross sales. Profit = Sales - Expenses.
You DO owe taxes on:
- Profit from items you bought specifically to resell
- Profit from items you made/crafted and sold
You may NOT owe taxes on:
- Items you sold at a loss (personal items sold for less than you originally paid)
- Garage sale items sold below original purchase price
Deductible Expenses for Resellers
Track every expense — these reduce your taxable income:
Cost of Goods Sold (COGS)
- What you paid for inventory (thrift store receipts, pallet costs, etc.)
- This is usually your largest deduction
Shipping Costs
- Postage and labels
- Packaging materials (boxes, tape, bubble wrap, mailers)
- Shipping insurance
Platform Fees
- eBay final value fees
- PayPal/payment processing fees
- Store subscription fees
- Promoted listing costs
Business Expenses
- Mileage to source inventory (thrift stores, garage sales, post office)
- Phone/internet (percentage used for business)
- Home office deduction (if applicable)
- Listing tools and software subscriptions (like Flip Press)
- Scale, printer, labels
- Storage costs/shelving
Record Keeping
Good records are your best friend at tax time:
What to Track
- Every item purchased (date, location, cost)
- Every item sold (date, platform, sale price, fees)
- Shipping costs per item
- Mileage log (date, destination, miles)
- Receipts for all business expenses
Tools
- Spreadsheet (Google Sheets is free and works great)
- Accounting software (QuickBooks Self-Employed, Wave)
- Mileage tracking app (Stride, MileIQ)
- Keep photos of receipts (thrift stores don't always give detailed receipts)
How to File
Casual Resellers
If reselling is a side hustle (not your primary income):
- Report on Schedule C (Profit or Loss from Business) if you're running it like a business
- Report on Schedule 1 if selling personal items occasionally
- Deduct your expenses against your revenue
Business Resellers
If reselling is your primary business:
- File Schedule C with your personal return (sole proprietorship)
- Consider forming an LLC for liability protection (doesn't change how you're taxed as a single-member LLC)
- Pay quarterly estimated taxes if you expect to owe more than $1,000
Common Tax Mistakes
- Not tracking COGS — Without receipts, you can't deduct what you paid for inventory
- Panicking over the 1099-K gross amount — Remember, you're only taxed on profit
- Forgetting mileage — At $0.67/mile (2026), this adds up fast
- Not separating business and personal finances — Get a separate bank account
- Waiting until April — Track as you go; don't try to reconstruct a year of records in April
Quarterly Estimated Taxes
If you expect to owe $1,000+ in taxes for the year, the IRS expects you to pay quarterly:
- Q1: Due April 15
- Q2: Due June 15
- Q3: Due September 15
- Q4: Due January 15 (of the following year)
Use Form 1040-ES to calculate and pay. Underpaying can result in penalties.
The Bottom Line
Getting a 1099-K doesn't mean you owe taxes on the full amount. It just means the IRS knows about your sales. Keep good records, track your expenses, and you'll likely owe much less than you think. And when in doubt, spend the $100-200 to have a tax professional review your return — it's a deductible business expense.