Reseller Taxes 2026: The Complete 1099-K Guide

Last February, a part-time reseller posted in a Facebook group: “I just got a 1099-K for $14,000 from eBay. Does this mean I owe taxes on all of it? I only made like $2,000 profit.”

The panic was real. And unnecessary.

Here’s what actually happened: She bought items for $10,000, sold them for $14,000, and made $2,000 profit after expenses. The 1099-K reports the $14,000 in gross sales—not profit. She only owes taxes on the $2,000 profit, and after deductions (shipping supplies, mileage, platform fees), her taxable income was closer to $1,400.

But because she didn’t track expenses throughout the year, she spent weeks scrambling to recreate records, risking an audit and losing legitimate deductions.

If you’re a reseller in 2026—whether you’re making $500/month or $5,000/month—you need to understand how the 1099-K works, what’s actually taxable, and which deductions can save you hundreds (or thousands) in taxes.

This guide breaks down everything: the 2026 1099-K threshold, taxable vs non-taxable sales, every deduction you’re entitled to, how to keep records that survive an audit, and exactly how to file.

In this guide, you’ll learn:

• What the 2026 1099-K threshold actually means (and who gets one)
• The difference between hobby vs business (it affects your deductions)
• Personal item sales vs inventory sales (one is taxable, one isn’t)
• 15+ tax deductions every reseller should claim
• The exact record-keeping system to use
• How to file (Schedule C walkthrough)
• When to pay quarterly estimated taxes (and how to calculate them)
• Common mistakes that trigger audits

Disclaimer: I’m not a CPA or tax professional. This guide provides general information based on IRS guidelines and common reseller situations. Consult a tax professional for your specific situation.

Table of Contents

• The 2026 1099-K Threshold: What Changed
• Do You Have to Pay Taxes on Reselling?
• Taxable vs Non-Taxable: Personal Items vs Inventory
• Hobby vs Business: Which One Are You?
• 15+ Tax Deductions Every Reseller Should Know
• Record-Keeping That Survives an Audit
• How to File: Schedule C Step-by-Step
• Quarterly Estimated Taxes: When and How Much
• State Sales Tax: Do You Need to Collect It?
• Common Mistakes That Trigger Audits
• Frequently Asked Questions

The 2026 1099-K Threshold: What Changed

What is a 1099-K?

A 1099-K is a tax form that payment processors (PayPal, Venmo, eBay, Poshmark, Mercari, etc.) send to the IRS reporting your gross sales.

Key word: GROSS sales (total money received, not profit).

The Threshold Timeline

Pre-2022:

• Threshold: $20,000 in sales AND 200+ transactions
• Most casual resellers never got a 1099-K

2022-2023 (Proposed):

• Threshold: $600 in sales (massive drop)
• IRS delayed enforcement due to confusion

2024-2025 (Transition):

• Threshold: $5,000 in sales (temporary compromise)
• Many resellers got their first 1099-K

2026 (CURRENT):

• Threshold: $5,000 in gross sales
• This is where we are now

Who Gets a 1099-K in 2026?

You’ll receive a 1099-K if:

• Your gross sales exceed $5,000 in a calendar year
• You used a payment processor (PayPal, Venmo, eBay Managed Payments, etc.)

Example scenarios:

Important: Even if you don’t get a 1099-K, you still owe taxes on taxable profit.

Multiple Platforms = Multiple 1099-Ks

If you sell on eBay, Poshmark, and Mercari:

• eBay sales: $3,000 → No 1099-K
• Poshmark sales: $2,500 → No 1099-K
• Mercari sales: $1,800 → No 1099-K
• Total: $7,300 → You still owe taxes, but no single platform sent a 1099-K

You must self-report all income, regardless of 1099-K.

Do You Have to Pay Taxes on Reselling?

Short answer: It depends.

The IRS Rule

You owe taxes if:

1. You sold items for profit (bought to resell)
2. Your profit exceeded your standard deduction (highly unlikely for casual resellers)

You DON’T owe taxes if:

1. You sold personal items at a loss (cleaning out your closet)
2. Your reselling is a hobby and you have no profit

Key distinction: Intent matters. Buying a couch for your home, then selling it 2 years later? Not taxable. Buying a couch to flip immediately? Taxable.

Real-World Scenarios

Scenario 1: Cleaning Out Your Closet

• You sell 30 items of your personal clothing on Poshmark
• You bought them for $1,200 total over the years
• You sell them for $600 total
• Tax owed: $0 (sold at a loss)

Scenario 2: Part-Time Reseller

• You buy items to resell (thrift stores, garage sales)
• You buy for $5,000, sell for $10,000
• Gross profit: $5,000
• Expenses: $1,200 (shipping, fees, supplies)
• Net profit: $3,800 (this is taxable income)

Scenario 3: Full-Time Reseller

• You buy inventory for $30,000, sell for $65,000
• Gross profit: $35,000
• Expenses: $8,500 (fees, shipping, mileage, home office, etc.)
• Net profit: $26,500 (this is taxable income)

Taxable vs Non-Taxable: Personal Items vs Inventory

This is the most confusing part for new resellers.

Non-Taxable: Personal Items Sold at a Loss

Definition: Items you bought for personal use and are now selling used.

Examples:

• Your old iPhone (bought for $999, selling for $400)
• Clothing from your closet (bought for $50, selling for $15)
• Furniture you used in your home (bought for $800, selling for $200)

Why it’s non-taxable: You’re selling at a loss. No profit = no tax.

Record-keeping: Keep receipts if you have them, but for personal items under $500, the IRS typically won’t question it.

Taxable: Inventory (Items Bought to Resell)

Definition: Items you purchased specifically to sell for profit.

Examples:

• Thrift store finds bought for $5, selling for $40
• Garage sale items bought for $20, selling for $80
• Wholesale items bought for resale

Why it’s taxable: You intended to profit. Profit = taxable income.

Record-keeping: CRITICAL. Track every purchase, every sale, every expense.

The Gray Area: Appreciation

What if you bought a personal item that APPRECIATED in value?

Example: You bought Nike Dunks in 2018 for $100 to wear. Never wore them. Now they’re worth $300.

IRS rule: If you sell personal property for MORE than you paid, you owe capital gains tax on the profit.

Reality: Most resellers don’t track or report this. The IRS focuses on business income, not one-off personal items. But technically, you should report it.

How to Classify Sales

Ask yourself:

1. Did I buy this to resell? → Taxable
2. Did I buy this for personal use and I’m now decluttering? → Likely non-taxable
3. Am I doing this regularly (weekly/monthly)? → Business income (taxable)
4. Is this a one-time garage sale? → Likely non-taxable

Rule of thumb: If you’re reading this guide, you’re probably running a business, and your income is taxable.

Hobby vs Business: Which One Are You?

The IRS classifies reselling as either a hobby or a business. This matters because it affects your deductions.

Business (Schedule C)

You’re a business if:

• You intend to make a profit
• You operate regularly (weekly/monthly sourcing and selling)
• You keep records
• You invest time and effort

Tax implications:

• Report income on Schedule C (Profit or Loss from Business)
• Deduct ALL business expenses (shipping, fees, mileage, home office, etc.)
• Pay self-employment tax (15.3% on net profit)
• Can carry losses forward to offset future profits

Advantages:

• Full deductions lower taxable income significantly
• Can deduct home office, mileage, supplies
• Losses can offset other income (W-2 job)

Example:

• Revenue: $20,000
• COGS (Cost of Goods Sold): $12,000
• Expenses: $3,500
• Net profit: $4,500 (taxable)
• Self-employment tax: ~$636
• Income tax: Depends on tax bracket (10-37%)

Hobby (Other Income)

You’re a hobby if:

• No profit motive (you do it for fun)
• Irregular sales (few times a year)
• Minimal effort/time investment

Tax implications (2026):

• Report income on Form 1040, Line 8 (Other Income)
• NO deductions allowed (since 2018 tax law changes)
• No self-employment tax
• No loss carryforwards

Disadvantages:

• You pay tax on gross sales minus COGS, but can’t deduct expenses
• This almost always results in HIGHER taxes

Example:

• Revenue: $5,000
• COGS: $3,000
• Expenses: $800 (but you can’t deduct them)
• Taxable income: $2,000 (can’t deduct the $800 in expenses)

Which Should You Choose?

Choose “Business” if:

• You want to maximize deductions
• You’re serious about making profit
• You sell regularly

Choose “Hobby” if:

• You truly do it casually for fun (not profit)
• You sell a few times a year
• You don’t want to deal with Schedule C

Reality: 95% of resellers should file as a business. The deductions save far more than the self-employment tax costs.

15+ Tax Deductions Every Reseller Should Know

These deductions reduce your taxable income. Every dollar deducted saves you 25-40¢ in taxes (depending on your tax bracket + self-employment tax).

1. Cost of Goods Sold (COGS)

What it is: The cost you paid for inventory you sold.

Example:

• You bought 100 items for $2,000 total
• You sold 80 items this year
• COGS: $1,600 (80% of what you bought)

Important: Only deduct COGS for items you SOLD, not items still in inventory.

2. Shipping Supplies

What qualifies:

• Boxes, padded envelopes, bubble wrap
• Packing tape, labels, printers
• Thermal printers, label holders

Average deduction: $300-1,200/year for active resellers

3. Postage & Shipping Costs

What qualifies:

• USPS, UPS, FedEx shipping costs
• Shipping labels purchased through platforms

Important: If the buyer paid for shipping, this is already offset (buyer paid $10 shipping, you spent $10 = net zero). Only deduct shipping you paid out of pocket.

4. Platform Fees (eBay, Poshmark, Mercari)

What qualifies:

• eBay final value fees
• Poshmark 20% fees
• Mercari selling fees
• PayPal/payment processing fees

Average deduction: 13-20% of gross sales

Example: $10,000 in sales × 16% average fees = $1,600 deduction

5. Mileage (Standard Mileage Rate)

2026 rate: 67¢ per mile (IRS standard mileage rate)

What qualifies:

• Driving to thrift stores, garage sales, estate sales
• Post office trips
• Picking up inventory (Facebook Marketplace, Craigslist)
• Driving to shipping locations

How to track: Use MileIQ app or manual log (date, start/end locations, miles, purpose)

Example: 3,000 miles/year × $0.67 = $2,010 deduction

Alternative: Actual expenses method (gas, maintenance, depreciation). Most resellers use standard mileage (simpler).

6. Home Office Deduction

What qualifies:

• A dedicated space in your home used EXCLUSIVELY for reselling
• Can be a room, or portion of a room (measure square footage)

How to calculate:

• Simplified method: $5 per square foot (max 300 sq ft = $1,500 max)
• Regular method: (Home office sq ft ÷ Total home sq ft) × Home expenses (mortgage/rent, utilities, insurance, repairs)

Example (Simplified):

• You use a 120 sq ft bedroom as your listing/storage space
• Deduction: 120 × $5 = $600

Example (Regular method):

• Home office: 150 sq ft
• Total home: 1,500 sq ft
• 10% of home used for business
• Rent: $18,000/year → Deduct $1,800
• Utilities: $2,400/year → Deduct $240
• Insurance: $1,200/year → Deduct $120
• Total: $2,160 deduction

Important: Only use if you have dedicated space. A corner of your living room doesn’t count.

7. Office Supplies

What qualifies:

• Computer, laptop, tablet (if used for reselling)
• Printer, ink, paper
• Pens, markers, tape measures
• Shelving, storage bins
• Scissors, box cutters

Average deduction: $200-600/year

8. Internet & Phone

What qualifies:

• Portion of internet bill used for business
• Portion of cell phone bill used for business

How to calculate:

• If 50% business use → Deduct 50% of bills
• If 100% business use (separate phone/internet) → Deduct 100%

Example: $60/month internet × 50% business use × 12 months = $360 deduction

9. Photography Equipment

What qualifies:

• Camera, smartphone (if primary use is listing photos)
• Lighting equipment
• Photography backdrop

Average deduction: $100-500 (one-time or depreciated over years)

10. Storage Unit Rental

What qualifies:

• If you rent storage space for inventory

Deduction: 100% of rental cost

Example: $120/month × 12 = $1,440 deduction

11. Software & Apps

What qualifies:

• Inventory management software (Vendoo, List Perfectly)
• Accounting software (QuickBooks, Wave)
• Research tools (Terapeak, BookScouter)

Average deduction: $100-600/year

12. Education & Training

What qualifies:

• Reselling courses
• Books about reselling, taxes, business
• Conference tickets (reseller meetups)

Average deduction: $50-300/year

13. Listing Services

What qualifies:

• Store subscription fees (eBay Store: $27.95-349.95/month)
• Promoted listings (if you pay for ads)
• Crosslisting tools (Vendoo, List Perfectly)

Average deduction: $300-4,000/year (depending on store level)

14. Banking & Financial Fees

What qualifies:

• Business checking account fees
• Credit card processing fees
• PayPal fees

Average deduction: $50-300/year

15. Professional Services

What qualifies:

• CPA/accountant fees
• Tax preparation fees
• Legal fees (business formation, contracts)

Average deduction: $200-1,500/year

16. Advertising & Marketing

What qualifies:

• Facebook/Instagram ads
• Google Ads
• Flyers, business cards
• Website costs (domain, hosting)

Average deduction: $100-1,000/year

Bonus: Self-Employment Tax Deduction

What it is: You can deduct 50% of your self-employment tax on Form 1040.

Example: Self-employment tax of $2,000 → Deduct $1,000 on your personal return (reduces income tax)

Calculate Your Deductions - Estimate your annual tax deductions

Record-Keeping That Survives an Audit

The IRS can audit you up to 3 years after filing (6 years if they suspect fraud). Your records need to survive that scrutiny.

What to Track

For every purchase (inventory):

• Date
• Item description
• Cost
• Where purchased (receipt or screenshot)

For every sale:

• Date
• Item description
• Sale price
• Platform (eBay, Poshmark, etc.)
• Fees charged

For every expense:

• Date
• Description
• Amount
• Category (shipping supplies, mileage, etc.)
• Receipt or proof

How to Track (4 Options)

Option 1: Spreadsheet (Free)

Create a Google Sheet or Excel file with tabs:

• Inventory: Date Purchased | Item | Cost | Date Sold | Sale Price | Profit
• Expenses: Date | Category | Description | Amount
• Mileage: Date | From | To | Miles | Purpose

Pros: Free, customizable
Cons: Manual entry, time-consuming

Option 2: Accounting Software (Recommended)

• QuickBooks Self-Employed: $15/month, tracks mileage, income, expenses, quarterly tax estimates
• Wave: Free, good for basic tracking
• FreshBooks: $17/month, invoicing + expenses

Pros: Automated, categorizes transactions, generates reports
Cons: Monthly cost

Option 3: Reseller-Specific Apps

• GoDaddy Bookkeeping (formerly Outright): Built for resellers, syncs with eBay/Poshmark/Mercari
• Vendoo: Inventory + crosslisting + basic tracking

Pros: Designed for resellers, platform sync
Cons: Limited tax features

Option 4: Combo Approach (Best)

• Inventory: List Perfectly or Vendoo (tracks what you bought/sold)
• Expenses: QuickBooks or Wave (tracks deductions)
• Mileage: MileIQ app (auto-tracks drives)

Receipt Organization

Physical receipts:

• Take photo immediately (use CamScanner app or phone camera)
• Store in cloud (Google Drive, Dropbox)
• Organize by month/year

Digital receipts:

• Forward emails to dedicated folder
• Download bank/PayPal statements monthly

How long to keep: 7 years (IRS statute of limitations)

Bank Account: Separate or Combined?

Best practice: Separate business checking account

Why:

• Clear separation (makes tracking easier)
• Professional appearance
• Easier to prove business expenses

Minimum: Use one credit card ONLY for business expenses (easier to categorize)

How to File: Schedule C Step-by-Step

If you’re a business (not a hobby), you file Schedule C (Profit or Loss from Business) with your Form 1040.

Schedule C Sections

Part I: Income

• Line 1 (Gross receipts): Total sales ($20,000 from your 1099-Ks + any unreported sales)
• Line 4 (Cost of Goods Sold): Amount you paid for inventory sold (calculated in Part III)
• Line 7 (Gross profit): Line 1 - Line 4

Part II: Expenses

• Line 8 (Advertising): $200
• Line 9 (Car and truck expenses): $2,010 (mileage)
• Line 14 (Depreciation): $0 (or if you bought equipment over $2,500)
• Line 17 (Legal and professional): $300 (CPA fees)
• Line 18 (Office expense): $400 (supplies)
• Line 20b (Office rent): $0 (unless you rent office space separately)
• Line 25 (Utilities): $360 (portion for business)
• Line 27a (Other expenses): Platform fees, shipping supplies, storage, etc.

Part III: Cost of Goods Sold

• Line 35 (Inventory at beginning of year): $0 (first year) or ending inventory from last year
• Line 36 (Purchases): $12,000 (inventory you bought this year)
• Line 41 (Inventory at end of year): $2,000 (items not yet sold)
• Line 42 (COGS): $10,000 (what you subtract from gross sales)

Part IV: Information on Your Vehicle (if claiming mileage)

Part V: Other Expenses (itemize “Other expenses” from Line 27a)

• Platform fees: $3,200
• Shipping supplies: $800
• Storage unit: $1,440

Example Schedule C Calculation

Income:

• Gross sales: $20,000
• COGS: $10,000
• Gross profit: $10,000

Expenses:

• Mileage: $2,010
• Home office: $600
• Internet (50%): $360
• Office supplies: $400
• Platform fees: $3,200
• Shipping supplies: $800
• Storage: $1,440
• CPA: $300
• Total expenses: $9,110

Net Profit (Line 31): $10,000 - $9,110 = $890

Self-employment tax: $890 × 92.35% × 15.3% = ~$126

Income tax: $890 taxed at your marginal rate (10-37% depending on total income)

Filing Software Options

DIY:

• TurboTax Self-Employed: $119 (includes Schedule C support)
• H&R Block Premium: $95
• FreeTaxUSA: $7 (cheapest, full Schedule C)

Hire a Pro:

• CPA: $300-800 for basic Schedule C
• Worth it if you made $10K+ or have complex situation

Quarterly Estimated Taxes: When and How Much

If you expect to owe $1,000+ in taxes, the IRS requires quarterly estimated tax payments.

Payment Deadlines (2026)

• Q1 (Jan-Mar): Due April 15, 2026
• Q2 (Apr-May): Due June 16, 2026
• Q3 (Jun-Aug): Due September 15, 2026
• Q4 (Sep-Dec): Due January 15, 2027

How to Calculate

Method 1: Safe Harbor (Simplest)

Pay 100% of last year’s total tax (110% if high earner).

Example: You owed $4,000 in 2025 → Pay $1,000 per quarter in 2026 (no penalty, even if you owe more in 2026)

Method 2: Estimate This Year’s Tax

1. Estimate net profit for the year
2. Calculate self-employment tax (net profit × 92.35% × 15.3%)
3. Calculate income tax (based on your bracket)
4. Divide by 4 = quarterly payment

Example:

• Estimated net profit: $15,000
• Self-employment tax: $15,000 × 92.35% × 15.3% = $2,120
• Income tax (assume 12% bracket): $15,000 × 12% = $1,800
• Total tax: $3,920
• Quarterly payment: $980

How to Pay

Online (easiest): IRS Direct Pay (irs.gov/payments)

• Free
• Immediate confirmation
• Schedule future payments

Form 1040-ES: Paper voucher (mail with check)

Penalty for not paying: 0.5% per month on underpayment (not huge, but adds up)

State Sales Tax: Do You Need to Collect It?

Short answer: Depends on your state and where you sell.

General Rule

You must collect sales tax if:

1. You have nexus (physical presence) in a state
2. You sell to buyers in that state
3. The platform doesn’t collect it for you

Platform-Collected Sales Tax

eBay, Poshmark, Mercari (2026):

• They collect and remit sales tax in all states that require it
• You don’t need to do anything

Facebook Marketplace:

• No sales tax collection (local sales)
• Technically you should collect/remit, but most don’t (low enforcement)

Your own website:

• You’re responsible for collection/remittance in states with nexus

When to Worry

• If you have your own website/store
• If you sell at flea markets/craft shows (collect in person)

For most resellers: eBay/Poshmark/Mercari handle it. You don’t need to track sales tax.

Common Mistakes That Trigger Audits

1. Not Reporting 1099-K Income

Mistake: The IRS got your 1099-K, but you didn’t report it on your tax return.

Why it’s a problem: Automatic mismatch = audit letter

Fix: Report ALL income, even if you got multiple 1099-Ks from different platforms

2. Deducting 100% of Mixed-Use Expenses

Mistake: Deducting 100% of your phone bill when you use it 30% for business, 70% personal

Why it’s a problem: IRS expects reasonable business-use percentage

Fix: Only deduct the business portion (document your estimate)

3. Home Office for Non-Dedicated Space

Mistake: Claiming home office deduction for your living room couch where you list items

Why it’s a problem: IRS requires EXCLUSIVE use (not shared space)

Fix: Only claim if you have dedicated space (spare bedroom, corner of room with desk/shelving separated)

4. Round Numbers

Mistake: Reporting exactly $5,000 in mileage, exactly $500 in supplies

Why it’s a problem: Looks fabricated (real expenses are $4,837.21, not $5,000)

Fix: Track actual expenses to the cent

5. No Receipts

Mistake: Deducting $3,000 in expenses with no documentation

Why it’s a problem: IRS will disallow deductions in an audit

Fix: Keep receipts/records for 7 years

6. Claiming Losses for Years

Mistake: Showing a loss on Schedule C for 3+ consecutive years

Why it’s a problem: IRS may reclassify as “hobby” (no deductions)

Fix: Show profit at least 3 out of 5 years (or be prepared to prove profit motive)

7. Large Home Office Deduction Relative to Income

Mistake: Making $5,000 profit but claiming $4,000 home office deduction

Why it’s a problem: Disproportionate deduction raises flags

Fix: Keep home office deduction reasonable (typically <20% of net income)

Frequently Asked Questions

Do I owe taxes if I didn’t get a 1099-K?

Yes. You owe taxes on profit regardless of whether you got a 1099-K.

The 1099-K is just a reporting document—it doesn’t determine tax liability. If you made $4,000 in profit (below the $5,000 threshold for 1099-K), you still report it as income.

What if my 1099-K is wrong?

Contact the platform immediately.

If eBay reports $15,000 but you only received $12,000 (maybe they included refunds or shipping reimbursements), request a corrected 1099-K.

If they won’t correct it, file accurately based on YOUR records and attach an explanation to your return.

Can I deduct inventory I haven’t sold yet?

No. You only deduct Cost of Goods Sold (COGS) for items you actually sold.

Unsold inventory is an asset, not an expense. Track it as “Ending Inventory” on Schedule C Part III.

Example:

• You bought $10,000 in inventory
• You sold 70% of it ($7,000 COGS)
• You still have $3,000 unsold (Ending Inventory)
• Only deduct the $7,000 COGS this year

Do I need an LLC or business license?

Not required for taxes.

You can file Schedule C as a sole proprietor (no LLC needed). An LLC provides liability protection but doesn’t change tax treatment.

Business license: Check local regulations. Most cities require a business license if you operate regularly, but enforcement is low for home-based resellers.

What if I sold personal items AND resale inventory?

Separate them in your records.

Personal items sold at a loss: Don’t report (not taxable)
Inventory bought to resell: Report as business income on Schedule C

Gray area: If the IRS questions it, be prepared to show intent (did you buy it to resell, or did you buy it for personal use?).

How do I handle returns and refunds?

Reduce your gross sales by the refund amount.

Example:

• You sold $10,000 in 2026
• You issued $800 in refunds
• Report $9,200 gross sales on Schedule C

Platforms like eBay show “net sales” (gross sales - refunds) in your annual statement. Use that number.

Can I deduct my first shipment of inventory as an expense?

No. Inventory is COGS (Cost of Goods Sold), not an expense.

You deduct it when you sell the items, not when you purchase them.

Example:

• January: You buy $1,000 in inventory (not deductible yet)
• March: You sell $600 of that inventory → Deduct $600 COGS
• December: You still have $400 unsold → Deduct when sold in 2027

What’s the difference between COGS and expenses?

COGS: Cost of inventory you sold
Expenses: Everything else (shipping supplies, fees, mileage, etc.)

Example:

• You bought a pair of shoes for $20 (COGS)
• You paid $5 to ship them (expense: shipping)
• You paid $3 eBay fee (expense: platform fee)

Do I pay self-employment tax if I have a W-2 job?

Yes, on your reselling profit.

Self-employment tax applies to Schedule C net profit, regardless of W-2 income.

Example:

• W-2 job: $50,000 (no self-employment tax on this)
• Reselling: $8,000 net profit → Pay 15.3% self-employment tax (~$1,100)

Your total taxable income is $50,000 + $8,000 = $58,000 (determines income tax bracket).

What happens if I don’t file or underreport?

Penalties:

• Failure to file: 5% of unpaid tax per month (max 25%)
• Failure to pay: 0.5% per month
• Accuracy penalty: 20% if you substantially underreport (>10% or $5,000)

Criminal penalties: Rare for resellers (reserved for massive fraud)

Reality: If you file late or make a mistake, the IRS will send you a letter. You pay the tax + penalty + interest. Most resellers won’t face criminal charges.

When should I hire a CPA?

Hire a CPA if:

• You made $15,000+ net profit (complex enough to benefit from professional help)
• You have multiple income streams (W-2 + reselling + rental property)
• You’re unsure about deductions
• You got an audit notice
• You want to minimize taxes legally

DIY if:

• You made under $10,000 net profit
• Your records are organized
• You’re comfortable with TurboTax/H&R Block

Cost: $300-800 for basic Schedule C preparation

Final Thoughts: Track As You Go

The biggest mistake resellers make isn’t the filing—it’s the lack of tracking throughout the year.

You can’t recreate 12 months of expenses in February. You’ll forget mileage, lose receipts, and miss deductions worth hundreds of dollars.

Your action plan:

1. Choose a tracking method today (spreadsheet, QuickBooks, Wave)
2. Set up a mileage app (MileIQ, free version good enough)
3. Create a cloud folder for receipts (Google Drive, Dropbox)
4. Track every purchase, sale, and expense as it happens (weekly, not yearly)
5. Reconcile monthly (match your records to bank/PayPal statements)
6. File quarterly estimates if you owe $1,000+ (avoid penalties)
7. Hire a CPA if you made $15K+ or feel overwhelmed

Do this, and tax season becomes a 2-hour task instead of a 2-week nightmare.

You legally owe taxes on reselling income. But you also legally deserve every deduction. Track properly, claim everything you’re entitled to, and you’ll keep more of what you earned.

Stop guessing at your deductions. Calculate exactly what you can write off and how much you’ll save in taxes.

Calculate Your Tax Deductions → — Free reseller tax deduction calculator

Related Tools:

• ROI Calculator - Calculate profit after fees and taxes
• Break-Even Calculator - Factor in tax implications
• eBay Fee Calculator - Deductible platform fees

Related Guides:

• Best Things to Flip for Profit in 2026
• Thrift Store Flipping: Complete Guide
• The Complete Guide to eBay Fees