The Reseller's Tax Guide: What You Need to Know About Taxes and Deductions
If you have been reselling for a while, you have probably had that sinking feeling around tax season. Maybe you stuffed receipts in a shoebox, ignored the 1099-K from eBay, or just hoped the IRS would not notice your side hustle.
Here is the reality: if you are selling on marketplaces like eBay, StockX, Mercari, Poshmark, or Grailed, you are running a business. And businesses pay taxes. But here is the good news: businesses also get to deduct expenses. And resellers have a lot of deductible expenses that most people never think to claim.
This guide breaks down everything you need to know about reselling taxes, from what you owe to what you can write off, so you keep more of what you earn.
Do You Actually Owe Taxes on Reselling Income?
Short answer: yes. Any profit you make from selling goods is considered taxable income by the IRS. It does not matter if reselling is your full-time gig or a weekend side hustle. If you made money, the government wants its cut.
Starting in recent tax years, platforms are required to send you a 1099-K if you exceed $600 in gross sales. That means the IRS already knows how much you sold. But here is the important distinction: you are taxed on profit, not gross sales.
If you bought a pair of sneakers for $120, paid $15 in shipping supplies, listed them on StockX with a $20 seller fee, and sold them for $200, your taxable profit is only $45, not $200. This is why tracking your costs is absolutely critical.
Many resellers panic when they see a 1099-K showing $30,000 in sales. But after accounting for the cost of goods, fees, shipping, and other expenses, their actual profit might be $8,000. That is a massive difference in what you owe.
The Cost of Goods Sold: Your Biggest Deduction
Your single largest deduction as a reseller is Cost of Goods Sold (COGS). This is simply what you paid for the items you sold during the year.
If you spent $15,000 buying inventory throughout the year and sold it for $35,000, your COGS is $15,000. You are only taxed on the remaining $20,000 minus your other deductions.
Tracking COGS means keeping records of every purchase. Save receipts from thrift stores, retail stores, wholesale suppliers, and online purchases. If you source from garage sales or estate sales where there is no receipt, write down the date, location, what you bought, and what you paid. A simple note in your phone works.
For sneaker resellers buying from drops and retail, your purchase confirmations and order emails serve as your receipts. Screenshot them and save them in a dedicated folder.
Deductible Expenses Most Resellers Miss
Beyond COGS, there is a long list of business expenses you can deduct. These reduce your taxable income dollar for dollar, which means real money back in your pocket.
Shipping supplies: Boxes, poly mailers, tape, bubble wrap, tissue paper, labels, and printer ink. Every trip to the post office supply aisle is a business expense.
Platform and payment processing fees: eBay final value fees, PayPal or payment processing charges, StockX seller fees, Mercari selling fees, and Poshmark commission. These add up fast and are fully deductible.
Shipping costs: If you pay for shipping on any of your sales, that is deductible. This includes postage, shipping labels, and any carrier pickup fees.
Mileage: Driving to source inventory, drop off packages at the post office, or pick up shipping supplies? Track your mileage. The IRS standard mileage rate lets you deduct a set amount per mile driven for business purposes. Use an app like MileIQ or Everlance to track automatically.
Home office: If you have a dedicated space in your home for photographing, storing inventory, or packing shipments, you can deduct a portion of your rent or mortgage, utilities, and internet based on the square footage of that space.
Software and tools: Subscription fees for cross-listing tools, inventory management software, analytics platforms, photo editing apps, and accounting software are all deductible. If you use TracknList to manage your listings across marketplaces, that subscription is a business expense.
Phone and internet: The business-use percentage of your phone bill and internet service is deductible. If you use your phone 50% for reselling (taking photos, responding to buyers, checking prices), you can deduct 50% of the bill.
Education: Courses, books, and resources related to improving your reselling business are deductible. That reselling course you took? Write it off.
How to Track Everything Without Losing Your Mind
The biggest mistake resellers make is not tracking expenses throughout the year and then scrambling to reconstruct everything in April. Here is a simple system that takes five minutes a week:
Use a dedicated business bank account or credit card. This is the single best thing you can do. When all your business transactions go through one account, you have a clean record without having to separate personal and business spending.
Photograph or scan every receipt immediately. Use your phone camera or an app like Dext or QuickBooks to snap a photo of every receipt the moment you get it. Paper receipts fade and get lost. Digital copies last forever.
Track your inventory purchases in a spreadsheet or app. For each item you buy to resell, record the date, source, item description, and cost. When you sell it, record the sale price, platform fees, and shipping cost. This gives you your profit per item and makes calculating COGS easy.
Set aside money for taxes. A good rule of thumb is to set aside 25-30% of your net profit for taxes. Put it in a separate savings account so you are never caught off guard by a tax bill.
Quarterly Estimated Taxes: Do You Need to Pay Them?
If you expect to owe more than $1,000 in taxes for the year, the IRS wants you to pay quarterly estimated taxes instead of one lump sum in April. The deadlines are typically in April, June, September, and January.
Missing quarterly payments can result in penalties and interest, even if you pay everything by the April filing deadline. It is not a huge penalty, but it is easily avoidable.
To calculate your quarterly payment, estimate your annual reselling profit, subtract your deductions, and figure out roughly what you will owe. Divide by four and pay that amount each quarter using IRS Form 1040-ES or through the IRS Direct Pay website.
If your income varies a lot quarter to quarter (which is common in reselling with seasonal fluctuations), you can use the annualized income installment method to adjust your payments. But for most resellers, dividing your estimated annual tax by four works fine.
When to Get Professional Help
If your reselling income is under $20,000 a year and your situation is straightforward, you can probably handle your taxes yourself using software like TurboTax or FreeTaxUSA. Make sure to file a Schedule C (Profit or Loss from Business) with your regular tax return.
But if you are scaling into five or six figures, have complex inventory situations, or are considering forming an LLC or S-Corp for tax advantages, a CPA who understands e-commerce businesses is worth every penny. They will typically save you more in deductions than they charge in fees.
Look for a CPA or tax professional who has experience with e-commerce sellers. They will understand platform fee structures, COGS calculations for resellers, and the specific deductions available to you.
The Bottom Line
Paying taxes on your reselling income is unavoidable. But paying more than you should is entirely avoidable. Track your costs, claim every legitimate deduction, and set aside money throughout the year so tax season is a non-event.
The resellers who treat their business like a business, including the financial side, are the ones who build sustainable income. Five minutes a week of bookkeeping now saves you hours of stress and potentially thousands of dollars later.
Want to keep better track of your reselling business across every marketplace? Try TracknList to manage your cross-platform inventory, track your sales, and understand your real profit margins, all in one place.