Reseller Tax Guide 2026: What You Owe and How to Track It

February 16, 2026 · 20 min read

Tax season hits different when you're a reseller. Between multiple platforms, thousands of transactions, and constantly changing 1099-K rules, it's easy to feel overwhelmed. But here's the truth: taxes for resellers aren't complicated — they're just tedious. This guide breaks down exactly what you owe, what you can deduct, and how to track everything so you don't overpay or get audited.

Disclaimer: This is educational content, not tax advice. Consult a tax professional for your specific situation.

Do You Need to Pay Taxes on Reselling?

Yes. If you're selling items for profit — even as a side hustle — the IRS considers you self-employed. This is true whether or not you receive a 1099-K form. The tax obligation exists based on your income, not based on whether a platform reports it.

The key distinction:

If you're regularly sourcing and selling items to make money, you're running a business. Period. The IRS doesn't care if it's your "side hustle" or you don't have an LLC. Profit = taxable income.

The 1099-K in 2026: What Changed

The big change everyone's talking about: Starting in tax year 2025 (filed in 2026), the 1099-K reporting threshold dropped to $2,500 and 1 transaction. For 2026 (filed in 2027), it drops further to $600. Here's what this means:

Which platforms send 1099-Ks: eBay, Poshmark, Mercari, Whatnot, StockX, GOAT, Depop, Facebook Marketplace (with checkout), PayPal, Venmo, and essentially any platform processing payments.

Read our detailed breakdown: 1099-K Changes for Resellers 2026

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How Resellers File Taxes: Schedule C

As a self-employed reseller, you file Schedule C (Profit or Loss from Business) with your personal 1040 tax return. Here's the basic structure:

Gross Revenue

This is the total amount you received from all platforms. If you got 1099-Ks, add them up. If you had sales that weren't reported (cash sales, platforms under the threshold), you still need to include them.

Important: Your 1099-K shows GROSS revenue — that includes shipping fees buyers paid, sales tax collected, and refunds. You'll need to adjust for these.

Cost of Goods Sold (COGS)

This is what you paid for the items you sold. COGS is your single biggest deduction and the one that saves resellers the most money. Track every purchase:

Example: You sold $50,000 on eBay and Whatnot. Your COGS was $25,000. Your taxable gross profit is $25,000 — not $50,000. COGS literally cuts your tax bill in half or more.

Business Expenses (Deductions)

Beyond COGS, you can deduct all ordinary and necessary business expenses. Here's what resellers commonly deduct:

Shipping & Supplies

Platform & Software Fees

Vehicle / Mileage

Home Office

If you use a dedicated space in your home exclusively for your reselling business (listing, photography, storage, shipping), you can deduct it:

Other Common Deductions

Self-Employment Tax: The Extra 15.3%

Here's the part that surprises new resellers: on top of regular income tax, you owe self-employment tax of 15.3% on your net profit. This covers Social Security (12.4%) and Medicare (2.9%).

Example breakdown:

Good news: you can deduct half of your self-employment tax from your adjusted gross income, which slightly reduces your income tax.

Quarterly Estimated Taxes

If you expect to owe $1,000+ in taxes for the year, the IRS wants you to pay quarterly. Missing quarterly payments = penalties and interest.

Due Dates for 2026

How to Calculate Quarterly Payments

  1. Estimate your total annual net profit
  2. Calculate self-employment tax (15.3% × 92.35% of net profit)
  3. Estimate income tax based on your tax bracket
  4. Divide total by 4
  5. Pay via IRS Direct Pay (irs.gov/payments) or EFTPS

Safe harbor rule: If you pay at least 100% of last year's total tax liability (110% if AGI > $150K), you won't owe penalties — even if you underpay for the current year.

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Record Keeping: The System That Saves You

The IRS can audit you for up to 3 years (6 years if they suspect significant underreporting). Keep records for at least 3 years, ideally 7. Here's what to save:

Essential Records

Best Tracking Software for Resellers

Common Tax Mistakes Resellers Make

  1. Not tracking COGS: If you can't prove what you paid for items, you can't deduct it. This alone can double your tax bill.
  2. Reporting 1099-K as pure income: The 1099-K is gross revenue, not profit. You MUST deduct COGS and expenses.
  3. Ignoring cash/local sales: Cash sales from Facebook Marketplace meetups, garage sale profits — these are still taxable income.
  4. Not separating personal from business: Get a separate bank account and credit card for your reselling business. Mixing personal and business finances is an audit red flag.
  5. Forgetting self-employment tax: Many new resellers only plan for income tax and get hit with the extra 15.3%.
  6. Not making quarterly payments: Penalties add up fast. Set aside 25–30% of each sale for taxes.
  7. Over-deducting: Don't claim your entire phone bill as a business expense if you also use it personally. Be honest and reasonable.
  8. Not keeping receipts from garage sales/thrift stores: Create a purchase log if no receipt is available. Date, items, amount paid.

Should You Form an LLC?

A common question. The short answer: an LLC doesn't change your taxes (by default, a single-member LLC is taxed identically to a sole proprietor). Benefits:

When it makes sense: If you're doing $25K+/year in revenue, an LLC is worth the small cost for liability protection alone.

S-Corp election: Once you're profiting $40K+/year, talk to a CPA about electing S-Corp taxation. This can save significant self-employment tax by splitting income between salary and distributions.

Tax Preparation Options

Bottom Line

Reseller taxes come down to three things: track everything, deduct everything legitimate, and pay quarterly. The biggest mistake is not tracking COGS — it literally doubles your tax bill. The second biggest is panicking when you get a 1099-K for $30,000 and thinking you owe taxes on all of it (you don't — you owe on profit only).

Set up a system now: separate bank account, receipt tracking app, mileage tracker, and a spreadsheet or QuickBooks. Spend 15 minutes after each sourcing trip logging purchases. This small habit saves you thousands at tax time and hours of stress.

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