It's January. A form shows up from a marketplace saying you received $9,600 last year. You remember buying a lot of inventory, paying for labels and driving to estate sales every weekend, but you can't prove any of it. If you report the $9,600 as if it were all profit, you'll pay tax on money you already spent.
So, do you have to pay taxes on reselling items? If you run a business buying things to resell at a profit, that profit is generally taxable income. The real question is how much profit, and the answer depends on records you either kept during the year or didn't. This guide explains what counts, what the forms show and what to track.
This is general education about US federal taxes, especially for sole proprietors, not tax advice. Your actual tax depends on your circumstances, deductions and business structure. State rules vary. Check your plan with a qualified tax professional. The IRS guidance linked below was checked October 22, 2026; use the rules and forms for the year you are filing.
Do you have to pay taxes on reselling items?
The IRS treats two kinds of selling very differently.
First, selling your own used stuff. If you sell a couch you bought for $900 for $300, you lost money. A loss on personal items isn't taxable and isn't deductible. If you sell a personal item at a gain, that gain is taxable. Keep the purchase cost and selling records for each item: personal losses don't offset gains on other personal items. The IRS explains how to handle personal sales reported on Form 1099-K.
Second, buying to resell as a business. If you regularly buy inventory with a profit motive and operate a trade or business, your profit is generally taxable, and allowable business costs reduce that profit.
Many people reading this blog fall into the second group, even if reselling is a side hustle. Do not assume calling it a hobby makes the income tax-free. Hobby income is still taxable, but its expense treatment differs from a business. You don't choose the classification just by naming it: the IRS considers all the facts and circumstances, including your profit motive and records.
What Form 1099-K shows, and what it doesn't
Marketplaces and payment platforms send Form 1099-K to report payments they processed for you. Under the current federal rules for third-party payment networks, reporting is generally required when payments for goods or services total more than $20,000 AND more than 200 transactions on that platform during the calendar year. Both conditions must be met. Some states set lower thresholds, and platforms may issue forms below the federal threshold anyway.
Direct payment-card processing is different: there is no federal minimum dollar amount or transaction count for those Form 1099-K reports.
These thresholds concern payment reporting, not whether income is taxable. Business profit below $20,000 is still reportable, even if you don't receive a form.
The bigger problem is what the number means. Form 1099-K Box 1a reports gross payments, not profit or your bank deposits. It isn't adjusted for platform fees, credits, refunds or shipping. It also doesn't subtract what you paid for inventory or other business costs. Reconcile the form with your sales, refund, fee and payout records, including any sales-tax amounts or personal transactions that need separate treatment. If the form is wrong, request a corrected form from the issuer and ask your preparer how to report it correctly.
You know your records are too thin when the only number you can produce for last year is the one on the form.
Expense categories resellers should track
Documented, ordinary and necessary business costs can reduce taxable business profit, subject to the applicable deduction, timing and recordkeeping rules. A receipt alone doesn't make a personal purchase deductible. These are the cost types most resellers deal with:
| Expense type | What to record |
|---|---|
| Cost of goods sold | Acquisition and other allocable inventory costs under your tax accounting method |
| Platform fees | Actual commissions, processing fees and promoted listing fees |
| Shipping | Labels you paid for, plus postage for returns |
| Supplies | Business mailers, boxes, tape, labels and printer ink |
| Vehicle use | Eligible business trips, with mileage and business purpose documented |
| Software and subscriptions | The business portion of listing tools, inventory apps and other services |
For fees, use the actual platform statements rather than multiplying every sale by one assumed rate. Our eBay vs Poshmark fees comparison explains why those line items differ.
Two notes on this list. First, a mileage log needs dates, destinations, business purpose and miles. Personal driving and ordinary commuting aren't business mileage. The IRS sets a standard mileage rate each year; check its business-use-of-a-car guidance and the rate for that tax year instead of reusing last year's. Don't also deduct fuel for the same miles when using the standard mileage method.
Second, inventory costs have their own timing rules. Under the inventory/COGS method used below, you recover the costs of items sold, not every purchase made during the year. Don't deduct the same acquisition, preparation or supply cost twice in different categories.
Gross sales vs reportable profit: a worked example
Under a conventional inventory/COGS method, unsold purchases generally remain in ending inventory rather than becoming an immediate deduction. This matters most in your first year, when you're buying more than you sell.
There are exceptions: qualifying small businesses may use permitted alternative inventory accounting methods. IRS Publication 334 explains the small-business inventory exception. Ask your preparer which method applies and use it consistently; don't switch methods just to deduct a pile of unsold stock.
You have $9,600 of gross business receipts: $8,700 for items plus $900 of shipping that buyers paid. Assume the form reconciles to those receipts, with no refunds, sales-tax differences or personal sales to adjust.
You start with no inventory and buy $4,000 of inventory during the year. At year end, $900 of it, valued at acquisition cost, remains on your shelves. Using the inventory/COGS method with no other inventory adjustments, cost of goods sold is $0 + $4,000 − $900 = $3,100.
Assume the expenses below are documented, allowable business deductions for this example and aren't already included in inventory costs. The mileage line is an assumed deduction, not a calculation using a stated number of miles or a current mileage rate. Parentheses indicate costs subtracted from receipts.
| Line | Amount |
|---|---|
| Gross business receipts | $9,600 |
| Cost of goods sold | ($3,100) |
| Platform fees | ($1,250) |
| Shipping labels | ($880) |
| Supplies | ($210) |
| Mileage | ($340) |
| Net profit (before tax) | $3,820 |
The form said $9,600. This example's business profit is $3,820, before income and self-employment taxes. That gap is the value of your records.
Under this example's method, deducting all $4,000 of purchases would understate profit by $900 and risk deducting those costs again when the remaining items sell. With none of the allowable costs recorded, treating all receipts as profit would overstate it by $5,780.
Self-employment tax and sales tax
For sole proprietors and other covered self-employed sellers, self-employment tax generally applies once net earnings from self-employment reach $400 for the year. That threshold is not gross sales or the 1099-K reporting threshold. Income-tax reporting can still be required below it.
The general self-employment tax rate is 15.3%: 12.4% Social Security plus 2.9% Medicare. Generally, 92.35% of net business profit enters that calculation, not 100% of receipts. The Social Security portion has an annual earnings limit, other wages can affect it, and Additional Medicare Tax can apply at higher incomes. See IRS Topic 554, rather than applying 15.3% to every payout.
Our guide on how much resellers make explains why business profit isn't all available to spend. Ask your tax professional whether you need estimated tax payments or increased withholding during the year instead of waiting until tax season.
Sales tax is separate from income and self-employment taxes. A marketplace may collect and remit sales tax under state marketplace-facilitator rules, but don't assume that satisfies every permit, registration or filing obligation. Direct sales, including a booth, local sales or your own website, may create additional obligations. Check your state's revenue department rules and your circumstances with a tax professional.
Your year-end checklist for resellers
Do these before January, while the receipts are still easy to find.
- Count your unsold inventory. Record acquisition costs, quantities and stock still on hand. Under the method in this example, beginning inventory, purchases and ending inventory determine COGS; reconcile returns and other adjustments too.
- Download marketplace reports. Pull annual sales, refund, fee and payout reports from every platform. Reconcile them to your forms and bank records instead of treating a bank deposit as gross sales.
- Match receipts to purchases. Keep receipts and supporting payment records. Photos of handwritten receipts can help, but don't guarantee an expense is substantiated or deductible.
- Finish your mileage log. Check it against your calendar and receipts promptly. Note business purpose and exclude personal trips; don't invent miles to fill gaps.
- Separate personal sales. Keep each personal item's original cost and selling records apart from business inventory, and separate personal gains from nondeductible personal losses.
A reseller inventory spreadsheet can keep manually entered purchases and sales together. It doesn't replace mileage logs, receipts or tax preparation, and it doesn't sync with Upcyclist. Our reseller inventory tracking guide shows what to record per item.
Reseller taxes FAQ
Do I have to pay taxes on reselling items if I don't get a 1099-K?
Business profit is generally taxable income whether or not you receive a form. The form is a reporting rule for payment processors, not a tax-free allowance. Your actual tax depends on your circumstances.
Is money from selling my own used clothes taxable?
Usually not when you sell them for less than their original cost: that personal loss isn't deductible either. Gains on personal items are taxable. Keep personal transactions separate from business inventory and reconcile any that appear on a 1099-K.
What if I lost receipts for inventory?
Rebuild what you can from bank statements, card records and marketplace data. Those records may need other evidence of what you bought and why it was a business purchase. A tax professional can tell you what's acceptable for your situation. Then start recording costs when you buy, not at year end.
Do marketplace fees count as expenses?
Ordinary and necessary business commissions, processing fees and paid promotions are generally deductible. Form 1099-K gross payments aren't adjusted for those fees. Reconcile actual fee statements and deduct each fee once; don't start from an already fee-reduced bank payout and subtract it again.
Upcyclist keeps the item costs, quantities and sales you enter, helping you reconstruct purchase costs and identify unsold stock. Reconcile those records with a physical count and your supporting documents. App profit figures and inventory records aren't a determination of taxable income or allowable deductions; your tax accounting method and adjustments still need review with your preparer.
Shipping costs are one of the biggest lines on that expense table, and also one of the easiest places to lose money without noticing. Our guide to free, flat and calculated shipping compares what each approach does to your profit before tax.
