Most resellers overpay their taxes every year — not because they earned too much, but because they don’t know which tax write-offs for resellers are actually available to them.
If you’re selling on eBay, Poshmark, Mercari, or any other platform, you’re running a business. And businesses get to write off their expenses. But without a clear list of what qualifies, most resellers leave hundreds — sometimes thousands — of dollars on the table at tax time.
According to the Omnisend Side Hustle Report 2025, nearly half (48.2%) of all side hustlers sell products online, making reselling one of the most common forms of self-employment in the US. That’s a huge population of sellers navigating tax season with little guidance.
In this guide, you’ll get every tax write-off for resellers available in 2026, a plain-English breakdown of the 1099-K rule change, and a simple system for tracking expenses so you’re ready when tax season hits.
The quick answer: Resellers can deduct cost of goods sold (COGS), platform fees, shipping and packaging, mileage for sourcing trips, home office expenses, business software, and marketing costs. These deductions reduce your net profit — the amount you actually owe self-employment and income tax on.
Do Resellers Have to Pay Taxes?
Yes — and there’s no gray area here.
If you sell with the intent to make a profit, the IRS classifies you as self-employed. It doesn’t matter whether you’re flipping thrift store finds on the side or running a full-time reselling operation. You owe taxes on your net profit.
The good news: you report your income and expenses on Schedule C (Profit or Loss from Business), which attaches to your Form 1040. Net profit = revenue minus all deductible expenses. The lower your net profit, the lower your tax bill — which is exactly why understanding your deductions matters so much.
You must report all net profit to the IRS regardless of whether you receive a 1099-K form. Even if a platform doesn’t send you a form, the income obligation still exists.
What Is a 1099-K and What Do You Do With It? (Your Reseller 1099-K Guide)
A 1099-K is an informational form that payment processors and marketplace platforms send when your sales exceed a certain threshold.
For the 2025 tax year (filed in 2026), the reporting threshold is $20,000 in gross payments AND more than 200 transactions — reinstated by the One Big Beautiful Bill signed into law on July 4, 2025, which repealed the controversial $600 ARPA threshold. (Source: IRS Form 1099-K FAQs / CPA Practice Advisor / RSM US)
Critical point: receiving a 1099-K doesn’t mean you owe taxes on the full amount shown. The form reports gross sales — not profit. You still deduct COGS and all other expenses to arrive at your actual taxable income.
When you receive a 1099-K from eBay, Poshmark, or Mercari, match it against your own records to confirm the gross sales figures, then subtract every deduction you’re entitled to.
What If You Don’t Receive a 1099-K?
You’re still legally required to report all income to the IRS — even if no form arrives.
The 1099-K threshold is about platform reporting obligations, not about whether your income is taxable. Keep your own records regardless of what any platform does or doesn’t send you.
The #1 Tax Write-Off for Resellers: Cost of Goods Sold (COGS)
For most resellers, COGS is the single largest tax deduction — and it’s often the most misunderstood.
COGS is the amount you paid to acquire the items you actually sold during the tax year. That includes purchases from thrift stores, garage sales, estate sales, liquidation pallets, and wholesale suppliers. The key word is sold — inventory still sitting in storage at year-end doesn’t count yet.
The COGS formula is straightforward:
Beginning Inventory + Purchases During the Year − Ending Inventory = COGS
If you bought $15,000 worth of inventory this year and still have $4,000 sitting unsold, your COGS is $11,000. That $11,000 comes straight off your revenue before any other deductions are applied.
How to Track COGS as a Reseller
This is where most resellers fall apart — and where they leave the most money on the table.
The only way to calculate COGS accurately is to log the purchase price of each item at the moment you acquire it. Trying to reconstruct what you paid for something six months later (especially at thrift store prices) is nearly impossible.
Your options for tracking COGS:
- Manual spreadsheet: Free, works fine at low volume. Create one row per item with purchase price, item description, date acquired, and sale price. It gets unwieldy at higher volume.
- Accounting software (QuickBooks, Wave): Better for overall bookkeeping, but not purpose-built for per-item reseller inventory management.
- Dedicated reseller inventory tools (Vendoo, List Perfectly, My Reseller Genie): These link each item’s purchase cost to its listing and sale, so COGS calculates automatically without any year-end scrambling.
If you want your COGS and expense records to be audit-ready without maintaining a complex spreadsheet, a purpose-built reseller management tool automatically tracks what you paid for each item, your platform fees, and your profit per sale — so your deductions are built in, not built retroactively.
The earlier in the year you set up this system, the easier your tax prep becomes.
Platform Fees Are Among the Best Tax Write-Offs for Resellers
Every fee a marketplace charges you to sell is a deductible business expense. That includes:
- eBay: Final value fees (~13% of the total sale amount including shipping)
- Poshmark: Flat 20% commission on sales over $15; $2.95 flat fee on sales under $15
- Mercari: Listing fees, selling fees, and payment processing fees
- Etsy: $0.20 listing fees, 6.5% transaction fee, payment processing fees
- Amazon: Referral fees, FBA fees, monthly Professional seller subscription
Platform fees are one of the reseller tax deductions 2026 filers most commonly miss because they’re already deducted from your payout — so they never “feel” like a separate expense.
This is a crucial record-keeping point: Most platforms show you the net payout (after fees). For tax purposes, you need the gross sale price as your revenue, then deduct the fees separately. Download your transaction statements from each platform monthly to capture both figures accurately.
Shipping and Packaging Deductions
Every dollar you spend getting packages to buyers is deductible. That covers:
- Postage (USPS, UPS, FedEx, DHL)
- Poly mailers and padded envelopes
- Cardboard boxes of all sizes
- Bubble wrap, packing peanuts, foam inserts
- Tissue paper and presentation packaging
- Tape, labels, and a label printer if used exclusively for business
If you buy shipping supplies in bulk, keep the receipt — the full purchase counts as a business expense in the year you buy it.
Keeping your shipping costs low is smart business strategy, but even when you can’t avoid them, every dollar you spend is a dollar off your taxable profit.
Mileage and Vehicle Expenses
Every mile you drive for business purposes is deductible. For resellers, that covers a lot of ground:
- Sourcing trips to thrift stores, estate sales, garage sales, and liquidation warehouses
- Runs to the post office or UPS/FedEx drop-off
- Trips to your storage unit
- Travel to purchase inventory from individual sellers (Facebook Marketplace pickups, etc.)
The 2026 IRS standard mileage rate is approximately 69 cents per mile for business use. (Source: IRS Rev. Proc. / TaxSlayer / QuickBooks) That means a reseller who drives 5,000 miles sourcing inventory can deduct roughly $3,450 from their taxable income — just from mileage.
To claim mileage legally, you must log:
- Date of each trip
- Destination (e.g., “Goodwill, Springfield location”)
- Miles driven (odometer start and end, or total)
- Business purpose (e.g., “sourcing inventory for resale”)
Mileage tracking apps like MileIQ or Everlance run in the background on your phone and log trips automatically. You just swipe to classify each trip as business or personal. The annual cost of the app is itself deductible as a business software expense.
Home Office Deduction
If you use a dedicated space in your home exclusively and regularly for your reselling business, you can deduct a portion of your housing costs.
Qualifying spaces for resellers often include:
- A dedicated photography area for listing photos
- A packing and shipping station
- An inventory storage room or organized staging area
- A home office used for managing listings, pricing, and administration
Two calculation methods are available:
| Method | How It Works | Best For |
|---|---|---|
| Simplified | $5 per square foot, up to 300 sq ft (max $1,500) | Small dedicated spaces |
| Regular | Percentage of home used for business × actual home expenses | Larger spaces or high rent/mortgage |
The requirement for exclusive use is strict. A corner of your living room where you also watch TV doesn’t qualify. A spare bedroom that functions as your reselling workspace and nothing else? That qualifies.
Business Software and Tools
Any software you pay for in the operation of your reselling business is fully deductible. Common online seller tax deductions in this category include:
- Cross-listing and listing tools (Vendoo, List Perfectly, Crosslist)
- Inventory management software
- Price research tools (Terapeak, PriceCharting, Keepa for Amazon)
- Accounting and bookkeeping software (QuickBooks, Wave, FreshBooks)
- Photo editing apps used for product photography
- Mileage tracking apps (MileIQ, Everlance)
If the software is used exclusively for your business, 100% of the cost is deductible. If it’s mixed-use (like your phone’s photo editing app), only the business-use percentage applies.
AI Tools That Can Help Resellers at Tax Time
AI-powered tools have become genuinely useful for resellers managing their finances. A few worth knowing:
- Keeper Tax uses machine learning to scan your bank and card transactions, automatically identify business expenses, and categorize deductions — it’s purpose-built for self-employed workers and gig sellers.
- Dext (formerly Receipt Bank) uses AI to scan and extract data from receipts the moment you photograph them, eliminating manual data entry entirely.
- ChatGPT and Claude can help you build a custom expense tracking spreadsheet, draft a mileage log template, or explain how to categorize an unusual purchase — useful for setting up your system at the start of the year.
- Wave’s AI-powered categorization automatically classifies transactions in your accounting feed, reducing time spent on manual bookkeeping.
These tools don’t replace a CPA for complex situations, but they dramatically reduce the friction of staying organized throughout the year.
Marketing, Advertising, and Other Deductions
A few more online seller tax deductions that resellers frequently overlook:
Advertising costs:
- Promoted listings on eBay
- Etsy Ads spend
- Social media advertising (Instagram, Facebook, TikTok Shop)
- Business cards and printed promotional materials
Professional services:
- Fees paid to an accountant or tax preparer are fully deductible — including what you pay someone to help you file Schedule C.
Phone and internet:
- The business-use percentage of your monthly phone and internet bills is deductible. If you use your phone 50% for business, 50% of the bill is deductible. Keep records to support your estimate.
Self-employment tax deduction: Self-employment tax is 15.3% of your net earnings — a significant cost of running your own business. (Source: IRS / TurboTax / KeeperTax) The IRS lets you deduct half of your SE tax directly from your gross income as an above-the-line deduction, which reduces your adjusted gross income even if you take the standard deduction. Most resellers miss this one entirely.
How to Track Expenses as a Reseller for Taxes (And Stay Deduction-Ready All Year)
The best deduction is one you can actually prove. Documentation is everything.
The #1 mistake resellers make: trying to reconstruct a year’s worth of expenses in March. By then, receipts are gone, mileage logs don’t exist, and COGS is a guess. The IRS requires records that substantiate every deduction — and “I think I spent about $X” doesn’t cut it.
Three steps that make year-round tracking manageable:
- Open a dedicated business bank account or credit card. Run all reselling purchases and income through it. At tax time, your statement is your record.
- Log expenses at the time they happen. Photograph a receipt before leaving a thrift store. Log a sourcing trip before you get home.
- Reconcile monthly, not annually. Spend 20 minutes at the end of each month reviewing transactions. Catching miscategorizations in real time is far easier than auditing 12 months in April.
Once you have a system for tracking what can resellers write off on taxes, the annual tax prep process shrinks from a stressful weekend to a straightforward review.
The Reseller Expense Tracking Checklist
Run through this list each month to stay ahead:
- Save all sourcing receipts (photograph immediately, store in a folder or app)
- Log mileage for every business trip at the time of the drive
- Export or screenshot platform fee statements from eBay, Poshmark, Mercari, etc.
- Record each item’s purchase price at acquisition — not when it sells
- Review and categorize all business account transactions
- Reconcile ending inventory so your COGS calculation stays accurate
Building this rhythm is how pricing your items profitably and filing taxes accurately become part of the same organized operation — not two separate headaches.
Frequently Asked Questions
Do I have to pay taxes on items I resell on eBay or Poshmark?
Yes. If you sell with profit intent, the IRS considers you self-employed. You report net profit (gross sales minus all deductible expenses) on Schedule C. The 1099-K threshold ($20,000 / 200 transactions) determines whether a platform sends you a form — but it doesn’t determine whether taxes are owed. All net profit is taxable, regardless of whether a form arrives.
What tax form do resellers use to file?
Schedule C (Profit or Loss from Business), attached to your Form 1040. This is where you list gross income and every deductible expense. Your net profit then flows to Schedule SE, which calculates your self-employment tax.
Can I deduct shipping, packaging, and platform fees as a reseller?
Yes — all three are ordinary and necessary business expenses and are fully deductible. Platform fees (eBay, Poshmark, Mercari, Etsy), postage, and all packaging materials (boxes, mailers, tape, bubble wrap, tissue paper) qualify.
How do I track cost of goods sold (COGS) as a reseller?
Log the purchase price of each item at the time you acquire it. At year-end, sum the purchase prices of items you actually sold (not unsold inventory). You can do this manually with a spreadsheet, or use a dedicated reseller app that tracks COGS per listing automatically.
What happens if I receive a 1099-K from eBay, Poshmark, or Mercari?
The 1099-K shows your gross sales — not profit. Report the gross figure as income on your return, then deduct COGS and all other expenses to arrive at your actual taxable income. The form is not a tax bill — it’s a reporting document. Don’t panic.
Do I need a reseller’s license or sales tax permit to sell online?
It depends on your state. Most major platforms now collect and remit sales tax on your behalf under marketplace facilitator laws. However, you may still need a seller’s permit in your home state. This is a separate question from income tax deductions — check your state’s rules or consult a CPA for state-specific guidance.
Conclusion
Resellers have access to a genuinely powerful set of tax write-offs for resellers — COGS, platform fees, shipping, mileage, home office, software, and more. Used correctly, these write-offs can dramatically reduce the taxes you owe on your reselling income.
The strategy is straightforward: document everything, track expenses as they happen, and understand what qualifies so you’re never guessing at tax time. Understanding the 1099-K threshold and how Schedule C works puts you in control of your tax situation instead of being caught off guard by a bill you didn’t see coming.
Tax season doesn’t have to be stressful. Start tracking your expenses and COGS today — every dollar you document is a dollar you won’t owe in taxes.
For a broader look at building a more profitable, better-organized reselling operation, explore the complete reselling business guide — covering everything from sourcing strategy to scaling your sales across multiple platforms.
