Reseller Taxes in 2026: What eBay, Poshmark, Mercari and Amazon FBA Sellers Actually Owe
Reselling is the one gig where the number on your 1099-K almost never resembles what you made. The form reports gross payments — before platform fees, before shipping labels, and before the money you spent buying the item in the first place. Sellers who treat that number as income panic; sellers who ignore it get a notice. This guide walks through what a reseller actually owes in 2026, how cost of goods sold works when your inventory came from a thrift store with no receipt, and the write-offs that quietly do most of the work.
Hobby or business? The question that decides everything
If you sell with the intent to make a profit — sourcing regularly, tracking numbers, reinvesting — you're a business, you file Schedule C, you deduct expenses, and you owe 15.3% self-employment tax on profit. If you're clearing out a closet, you're not. Selling personal items for less than you paid produces no taxable income at all, though the 1099-K still arrives and still has to be addressed on the return. The IRS weighs how businesslike you are, whether you depend on the income, and whether you've turned a profit in some years — no single factor decides it.
The 2026 1099-K threshold is $2,500
For tax year 2026 the federal reporting threshold for third-party settlement organizations is $2,500 in gross payments, with no transaction-count minimum. eBay, Poshmark, Mercari, Etsy, Whatnot, Depop, PayPal and Venmo business profiles all report against it. Several states set lower thresholds — Maryland, Massachusetts, Vermont, Virginia and New Jersey among them — so a form can show up well below the federal line. And the threshold never changed your obligation: profit is taxable from the first dollar whether a form exists or not.
Why the 1099-K number is always too big
The gross figure includes buyer-paid shipping, sales tax the platform collected and remitted, platform fees deducted before payout, and refunds issued later. Report the gross the platform reported, then deduct fees, shipping, refunds and cost of goods on Schedule C so profit lands where it belongs. Filing only your net deposit creates a mismatch with a form the IRS already has, which is the single most common reason resellers get an automated letter.
Cost of goods sold — the biggest deduction you have
COGS is what you paid for the inventory you sold this year, and it comes off before anything else. Purchase price, sales tax paid at the register, buyer's premiums at auction, freight-in on wholesale pallets, and the cost of prepping an item — cleaning, repairs, replacement parts — all belong in COGS. Inventory you bought but haven't sold yet is not deductible this year; it sits as inventory until it moves. That timing rule is what makes a reseller's cash flow and taxable profit look so different in a growth year.
Sourcing with no receipt: how to substantiate thrift and estate buys
Cash at a garage sale, a $40 bag of clothes from Goodwill, an estate lot with one handwritten total — none of it produces the tidy paperwork the IRS prefers, but the deduction is still real. Build a contemporaneous sourcing log: date, location, total spent, item count, and how you allocated cost across the lot. Photograph the receipt if there is one, and photograph the haul if there isn't. Pay from a dedicated business debit card or a cash envelope whose withdrawals show on a business bank statement. A consistent, dated log written the same day beats a reconstruction made in April.
Allocating cost across a bulk lot
Buy a $200 pallet and sell 60 items from it and you need a per-item cost. Two defensible methods: split evenly across the unit count, or allocate in proportion to expected sale price so the $90 jacket carries more cost than the $6 mug. Pick one, apply it consistently, and note the method in your records. Switching methods item by item to chase a result is what makes an audit unpleasant.
Shipping, supplies and packaging
Postage and labels, poly mailers, boxes, bubble wrap, tape, thermal printer and its labels, a shipping scale, dunnage, and the tissue and thank-you cards that make a Poshmark parcel look like a boutique — all fully deductible. Buyer-paid shipping is income when it hits your gross and an expense when you buy the label, so it nets out; just be sure both sides appear rather than neither.
Platform fees, ads and payment processing
Final value fees, insertion fees, Poshmark's flat commission, Mercari and Depop fees, promoted-listing spend, Amazon referral and FBA fulfillment fees, monthly storage and long-term storage fees, removal orders, PayPal and Stripe processing, and currency conversion on international sales. These are pure deductions and they add up faster than most sellers estimate — for many resellers the fee line alone exceeds every other expense but COGS.
Mileage: sourcing runs, post office trips and storage
Driving to thrift stores, estate sales, auctions, wholesale pickups, the post office, UPS drop-offs, storage units and the bank is business mileage at $0.70 per mile in 2026. Sourcing is mileage-heavy work and it is routinely left on the table. A reseller doing three sourcing runs a week plus daily drop-offs easily logs 6,000 miles — $4,200 of deduction. Log date, destination, purpose and miles as you go; a mileage app that runs in the background costs less than the deduction it captures in a single week.
Home office, storage space and the inventory exception
A room used regularly and exclusively for listing, photographing and packing qualifies for the home office deduction — $5 per square foot up to 300 sq ft under the simplified method, or that share of rent, utilities and insurance under the actual method. Resellers get a bonus most businesses don't: space used regularly to store inventory qualifies even when it isn't used exclusively for business, so a dedicated closet or basement shelving counts. Off-site storage unit rent is a straightforward business expense.
Worked example — a $58,000 gross year on eBay and Poshmark
A full-time reseller in Ohio shows $58,000 gross on her combined 1099-Ks in 2026. Buyer-paid shipping included in that gross: $6,900. Deductions: COGS $14,200, shipping labels and supplies $8,100, platform and processing fees $9,300, promoted listings $1,400, mileage 6,400 at $0.70 ($4,480), home office 180 sq ft simplified ($900), phone 60% of $1,200 ($720), storage unit ($1,560), software and subscriptions ($480). Total expenses: $41,140. Net profit: $16,860. SE tax: $16,860 × 0.9235 × 15.3% = $2,382, half of which ($1,191) deducts against income tax. Ohio state tax applies to the income side. Run your own numbers through the [self-employed tax estimator](https://gigmytax.com/calculators/self-employed-tax-estimator).
Quarterly payments and how much to set aside per sale
Expect to owe $1,000 or more and the IRS wants estimated payments on April 15, June 15, September 15 and January 15. For resellers the practical set-aside is 20–30% of profit, not of gross — a rule based on gross will massively over-reserve in a low-margin month and leave you short in a high-margin one. Move the percentage into a separate account every time you reconcile the week's sales, and use the [quarterly tax calculator](https://gigmytax.com/calculators/quarterly-tax) to size each payment.
Sales tax is a separate problem from income tax
Marketplace facilitator laws mean eBay, Etsy, Poshmark, Mercari and Amazon collect and remit sales tax for you on marketplace orders in nearly every state — you generally don't file for those. Sell off-platform through your own site, at a flea market, or direct via Instagram and the obligation is yours once you cross a state's economic nexus threshold. Keep the two systems mentally separate: sales tax is money you hold for a state, income tax is money you owe on profit.
Records that survive scrutiny
Export every platform's annual sales report and every 1099-K. Keep the sourcing log, purchase receipts, an inventory count at year-end (you need beginning and ending inventory for the COGS calculation), mileage records, and fee statements. A dedicated bank account and card for the business removes 90% of the reconstruction work. Hold everything for three years after filing.
Run your numbers
Stack your write-offs in the [tax deduction calculator](https://gigmytax.com/calculators/tax-deduction), size the mileage piece in the [mileage deduction calculator](https://gigmytax.com/calculators/mileage-deduction), and get a full-year picture with the [side hustle tax calculator](https://gigmytax.com/calculators/side-hustle-tax) if reselling sits on top of a W-2.
Frequently asked questions
+Do I owe taxes on eBay sales under $2,500?
Yes, if you sold at a profit. The $2,500 figure is only the 2026 threshold for eBay to issue a 1099-K. Profit is taxable from the first dollar. Selling personal items for less than you paid produces no taxable profit, but you should still be able to show that on request.
+Can I deduct inventory I bought but haven't sold?
No. Inventory is deducted through cost of goods sold in the year the item sells, not the year you buy it. Unsold stock sits as inventory at year-end, which is why a growth year can show strong profit on paper while your cash is tied up in bins.
+How do I prove cost of goods for thrift store finds with no receipt?
Keep a contemporaneous sourcing log with date, location, total spent, item count and your allocation method, and pay from a business account so withdrawals corroborate it. Photos of hauls and any partial receipts strengthen it. Written the same day, a consistent log is acceptable substantiation.
+Is reselling a hobby or a business?
It's a business if you operate with a genuine profit motive — regular sourcing, records, reinvestment, and an effort to make money. Businesses file Schedule C, deduct expenses and pay SE tax. Hobby sellers report income but cannot deduct expenses against it.
+Do I need to collect sales tax as a reseller?
On marketplace orders through eBay, Poshmark, Mercari, Etsy or Amazon, the platform collects and remits it under marketplace facilitator laws. You take on the obligation yourself for off-platform sales once you exceed a state's nexus threshold.
+Can I deduct mileage to thrift stores and the post office?
Yes. Sourcing trips, post office and carrier drop-offs, storage unit visits and bank runs are all business miles, deductible at $0.70 per mile in 2026 with a log showing date, destination, purpose and distance.
About the author
Javed Niamat · Founder & Editor, GigTax
Javed Niamat founded GigTax to make self-employment tax math understandable for rideshare drivers, delivery couriers, creators and freelancers. He builds and maintains every calculator on this site and writes the guides that explain the numbers behind them.
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