Reseller Tax Guide: What You Need to Know About Taxes on Reselling Income

Do You Have to Pay Taxes on Reselling?

Yes. If you resell items for profit, that income is taxable in the United States. It does not matter whether reselling is your full-time job or a weekend side hustle. The IRS considers reselling income as self-employment income, and you are required to report it.

However, there is a common exception: if you sell personal items for less than you originally paid, there is no taxable gain. Selling your old couch at a loss is not income. But buying a couch at a thrift store for $20 and selling it for $200 is absolutely taxable.

The 1099-K Threshold

Online marketplaces are required to issue a 1099-K form to sellers and the IRS. As of the current rules, the reporting threshold is $600 in gross sales through a single platform. This means:

eBay will send you a 1099-K if you received $600+ in payments
Poshmark, Mercari, Depop, and others follow the same rule
The form reports gross sales, not profit — you may owe far less than the reported amount suggests

Even if you do not receive a 1099-K (perhaps you stayed under $600 on each platform), you are still legally required to report the income.

Income Tax on Reselling Profits

Your reselling profit is taxed as self-employment income, which means you pay:

Federal income tax at your marginal rate (10-37% depending on total income)
Self-employment tax of 15.3% (covering Social Security and Medicare)
State income tax (varies by state, some states have none)

The self-employment tax is the one that catches new resellers off guard. On $10,000 of reselling profit, you owe approximately $1,530 in self-employment tax alone, before income tax.

Deductions That Reduce Your Tax Bill

The good news is that business expenses directly reduce your taxable profit. Common reseller deductions include:

Cost of Goods Sold (COGS)

Everything you paid to acquire inventory — thrift store purchases, estate sale buys, wholesale costs, online auction wins. This is usually your largest deduction.

Shipping Costs

Postage, shipping labels, and carrier fees are fully deductible.

Supplies and Packaging

Poly mailers, boxes, tape, bubble wrap, tissue paper, labels, and printer ink.

Platform Fees

eBay commissions, Poshmark’s 20% cut, Etsy listing fees, and any other marketplace charges.

Mileage

Driving to thrift stores, estate sales, the post office, and supply stores is deductible. The 2026 IRS mileage rate is your per-mile deduction. Keep a mileage log with dates, destinations, and miles driven.

Home Office

If you have a dedicated space for photographing, listing, and packing inventory, you can deduct a portion of your rent or mortgage, utilities, and internet. The simplified method allows $5 per square foot, up to 300 square feet ($1,500 max deduction).

Software and Subscriptions

Cross-listing tools, accounting software, eBay Store subscriptions, and other business-related software.

Equipment

Camera, lighting, phone used for listing, shelving, storage bins, and steamer. Items over $2,500 may need to be depreciated rather than deducted in full.

Sales Tax Obligations

Sales tax is separate from income tax. Whether you need to collect and remit sales tax depends on your state and sales volume:

Marketplace facilitator laws: In most states, platforms like eBay, Amazon, and Etsy collect and remit sales tax on your behalf. You do not need to do anything.
Own website sales: If you sell through your own site, you may need to collect sales tax in states where you have nexus (physical presence or economic activity above a threshold).
Resale certificates: If you buy inventory from wholesalers or retailers for resale, a resale certificate exempts you from paying sales tax on those purchases.

Record-Keeping Best Practices

Good records make tax time painless and protect you in an audit:

Save all purchase receipts — Even handwritten notes from garage sales with the date, location, and amount
Track every sale — Platform, date, sale price, fees, and shipping cost
Log mileage weekly — Use an app or spreadsheet; do not try to recreate a year of driving in April
Separate your finances — Open a dedicated bank account for your reselling business
Set aside 25-30% of profits for taxes — Transfer this to a savings account after each payout

Quarterly Estimated Taxes

If you expect to owe more than $1,000 in taxes for the year, the IRS requires you to make quarterly estimated tax payments. Due dates are roughly April 15, June 15, September 15, and January 15. Missing these payments results in penalties and interest.

When to Hire a Professional

Consider working with a tax professional if:

Your reselling income exceeds $10,000/year
You are unsure about deduction eligibility
You sell across multiple states or internationally
You want to form an LLC or S-Corp for tax optimization

A good accountant familiar with e-commerce businesses will typically save you more in deductions than they charge in fees.