Nobody Gets Into Reselling for the Taxes
I get it. You started reselling because you love the hunt — estate sales on Saturday mornings, the thrill of finding a $5 item worth $80. Taxes are the opposite of fun. But after watching a friend get hit with a $4,200 tax bill she wasn't expecting, I decided to figure this out properly. Here's what I've learned, in plain English.
Disclaimer: I'm a reseller, not a CPA. This is based on my experience and research. Tax laws vary by state and change regularly. Talk to a tax professional about your specific situation.
Are You a Business or a Hobby?
The IRS makes this distinction and it matters a lot. If reselling is a hobby, you report income but can't deduct expenses (thanks to the 2018 tax law changes). If it's a business, you can deduct all ordinary and necessary business expenses against your revenue.
The IRS looks at several factors to determine if you're running a business:
- Do you depend on the income?
- Do you put in regular time and effort?
- Have you made a profit in at least 3 of the last 5 years?
- Do you keep business records?
- Do you operate in a businesslike manner?
If you're reading this blog, you're probably past the hobby stage. Treat reselling as a business from day one. Get a separate bank account, keep records, and track everything. Even if you're only making $500 a month, acting like a business protects you and saves you money at tax time.
The 1099-K Situation
This is the one everyone panics about. Here's what's actually happening.
Payment platforms (eBay, Etsy, PayPal, Venmo, etc.) are required to send you a 1099-K form reporting your gross sales. The threshold has been a moving target:
- Before 2022: $20,000 AND 200+ transactions
- The IRS planned to drop it to $600, but kept delaying
- For the 2025 tax year: the threshold is $2,500
- It's expected to drop to $600 eventually
Important: the 1099-K reports gross sales, not profit. If you sold $15,000 worth of items but spent $9,000 buying them, your actual income is $6,000. The IRS knows this. You'll report the $15,000 in gross receipts and then deduct your cost of goods sold and expenses.
The 1099-K is not a tax bill. It's an information form. But if the IRS receives a 1099-K showing you received $15,000 and you don't report it on your tax return, you'll hear from them. So always report it, even if your net profit is small.
Sales Tax: The State-by-State Headache
Sales tax is a state issue, not a federal one. Rules vary wildly. Here's the general framework.
Do You Need to Collect Sales Tax?
If you have "nexus" in a state — meaning a physical presence or significant economic activity there — you generally need to collect sales tax on sales to buyers in that state. For most resellers, you have nexus in the state where you live and operate.
Five states have no sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon. If you live in one of these, lucky you — at least on the collection side.
Marketplace Facilitator Laws
Here's the good news: if you sell on eBay, Etsy, Amazon, Mercari, or Poshmark, the marketplace handles sales tax collection and remittance in most states. These "marketplace facilitator" laws mean the platform collects sales tax from the buyer and sends it to the state. You don't have to do anything for those sales.
But — and this is the important part — if you sell on your own website or storefront, you are responsible for collecting and remitting sales tax. This means you need a sales tax permit in your state (and potentially in states where you have economic nexus from high sales volume).
Getting a Sales Tax Permit
In most states, this is free and takes about 15 minutes online. Search "[your state] sales tax permit application" and you'll find the state's website. You'll get a permit number that you'll use when filing returns — which are typically monthly, quarterly, or annually depending on your sales volume.
I file quarterly in my state. My storefront through APMTSales tracks the sales tax collected, which makes the quarterly filing straightforward — I just pull the numbers and enter them on the state's website.
The Resale Certificate
This is a money-saver many new resellers don't know about. When you buy items specifically for resale, you generally don't have to pay sales tax on that purchase. You give the seller your resale certificate (which you get when you register for your sales tax permit) and they don't charge you tax.
This works at estate sale companies, auction houses, wholesale suppliers, and even thrift stores in some states. I hand my resale certificate to estate sale companies regularly. On a $500 purchase, that saves me $30-45 in sales tax depending on the local rate.
What You Can Deduct
This is where reselling as a business really pays off. You can deduct all ordinary and necessary business expenses. Here's what I deduct:
Cost of Goods Sold (COGS)
This is the big one. Every dollar you spend buying inventory is deductible against your sales revenue. That $5 vase you bought at Goodwill and sold for $45? Your taxable profit is $40 minus other expenses, not $45.
Track every purchase. I use a simple spreadsheet with columns for date, source, description, and cost. For estate sales, I keep the receipt and log items individually when I can, or log the total when I buy a lot.
Shipping Supplies and Postage
Boxes, bubble wrap, tape, packing peanuts, labels, printer ink for labels, and all postage costs. I spent about $2,800 on shipping last year, all deductible.
Platform Fees
Every fee eBay, Etsy, PayPal, or any other platform charges you is deductible. This includes listing fees, final value fees, payment processing fees, promoted listing costs, and subscription fees for any selling tools.
Mileage
Driving to estate sales, thrift stores, auction houses, the post office, and supply stores. The standard mileage rate for 2026 business driving is set by the IRS annually (check the current rate). Track your mileage. I use a free app on my phone that logs trips with GPS.
Last year I drove about 8,400 miles for reselling. At the 2025 rate of $0.70 per mile, that was $5,880 in deductions. That's real money.
Home Office
If you use a dedicated space in your home for reselling — a room for photographing items, a garage for storage, a desk for listing — you can deduct a portion of your home expenses. The simplified method lets you deduct $5 per square foot up to 300 square feet ($1,500 max). The regular method requires calculating the percentage of your home used for business.
Other Common Deductions
- Phone and internet — the business-use percentage
- Software and subscriptions — inventory management tools, photo editing apps, accounting software
- Education — books, courses, or events related to your reselling specialty
- Business insurance — if you carry it
- Storage unit — if you rent one for inventory
- Equipment — camera, lighting setup, scales, label printers
Estimated Quarterly Taxes
If you expect to owe more than $1,000 in taxes for the year, the IRS wants you to pay estimated taxes quarterly. The due dates are:
- April 15 (for January-March income)
- June 15 (for April-May income)
- September 15 (for June-August income)
- January 15 (for September-December income)
If you don't pay quarterly and end up owing a lot at tax time, you'll get hit with an underpayment penalty. It's not huge, but it's annoying and avoidable.
I set aside 25-30% of my net profit each month in a separate savings account earmarked for taxes. Every quarter, I pay estimated taxes from that account. It stings less when you've been setting money aside all along rather than facing a lump sum in April.
Record-Keeping: The System That Actually Works
Elaborate systems fail because you stop using them. Here's my dead-simple approach:
- Separate bank account — all reselling income goes in, all reselling expenses come out. This alone makes tax time 10 times easier.
- One spreadsheet — columns for date, item, source, purchase price, sale price, platform, fees, shipping cost. One row per sale. I update it every Sunday evening for the previous week's sales.
- Receipt folder — a physical folder in my desk for paper receipts (estate sales, thrift stores) and a digital folder for email receipts. I toss everything in throughout the month and organize at month-end.
- Mileage app — logs trips automatically. Takes 5 seconds to categorize each trip.
My inventory tracking through APMTSales handles a lot of the sales-side record-keeping. I can pull reports showing what I sold, when, and for how much. That data feeds directly into my tax spreadsheet.
Total time I spend on bookkeeping: about 30 minutes per week and 2-3 hours at the end of each quarter. It's not fun, but it's manageable.
When to Get Professional Help
I did my own taxes for the first two years of reselling. When my annual revenue crossed $30,000, I hired a CPA. Best $400 I ever spent. She found deductions I was missing (the mileage one was a big one — I hadn't been tracking it), set me up on quarterly payments, and helped me understand my self-employment tax obligations.
If your reselling revenue is under $10,000 a year and your situation is straightforward, tax software like TurboTax or FreeTaxUSA can handle it with Schedule C. Over $10,000, or if you have any complexity (multiple states, employees, entity structure questions), a CPA is worth the cost.
Bottom Line
Taxes are the least exciting part of reselling but ignoring them is expensive. Get a separate bank account, track your purchases and expenses, set aside money for quarterly payments, and take every deduction you're entitled to. The resellers who stay in business long-term are the ones who treat it like a business — and that includes the tax side.