As an online reseller on platforms like Poshmark, Mercari, and eBay, understanding how to handle taxes is a crucial part of running a successful business. But if you're anything like me when I was a new reseller, taxes felt SO confusing, overwhelming, and even scary!
The good thing is I'm here to hopefully calm some of those nerves and give actionable steps, outlining how I handle my reseller taxes. With that, it's super important for me to disclose this guide is not legal or tax advice, and you should contact a professional if you need help with your online selling taxes.
In this post, we'll walk you through the ins and outs of filing taxes as a reseller, discussing tax thresholds, deductions, what to track, and where to find the tax info you need on different online marketplaces.
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Understand Your Reseller Tax Obligations
You'll need to report to the IRS if you earn income through reselling. In some cases, platforms like Poshmark, Mercari, and eBay are required to send you a Form 1099-K.
This form is sent both to the online seller and the IRS directly from the online marketplace. This form is only sent in some cases because the IRS at the federal level sets thresholds for it to be sent.
For example, the threshold in 2024 was $5,000. Therefore, if you sold $5,000 worth of items on Poshmark, you would have received a 1099K. If you sold $4,999 on Poshmark in 2024, you would not receive a 1099-K.
Here's another example: in 2024 you sold $3,000 on Poshmark and $2,000 on eBay. In this case, you will not receive a 1099K either. That’s because each individual marketplace sends out the 1099K.
One exception to this is that different states may have other reporting thresholds. Although you may not make enough for the federal threshold, be sure to check with your specific state.
Regardless of it being reported on a 1099K, even if I’m under the threshold and don’t receive one, I personally file and claim that income on my taxes.
Next, we’ll go over what you need to get together whether you receive a 1099K or not.
Tips For Tracking Your Income and Expenses
Keeping accurate records is truly the foundation of smooth tax filing. Here’s what you should track:
Income:
- Sales revenue from each platform
- Refunds and returns
Expenses:
- Cost of goods sold (COGS): What you paid for inventory
- Platform fees: Marketplace fees taken out of each sale
- Shipping costs: What you paid for shipping or any shipping discounts
- Office supplies: Packaging materials, tape, labels, etc
- Technology: A portion of your phone, computer, or internet expenses if used for business
- Software and subscriptions: Like Vendoo or PosherVA
- Professional services: Bookkeeping, tax prep
- Home office: If applicable, calculate the percentage of your home dedicated to business
Whether you use QuickBooks, Wave, or spreadsheets, be sure to track all of these expenses throughout the year.
Receipts
When you are tracking your expenses, make sure to keep the receipts! Either keep them tucked away in a safe place or scan in the paper copy to have access to them digitally.
Mileage
If you thrift in person, at thrift stores, garage sales, or buy-sell-trade stores, be sure to track your mileage to and from these places. Mileage is yet another business expense that can help you save come tax time.
Tax Forms
When tax season rolls around, there's (at least) one form you may need. It’s called a schedule C.
This is where you report the income and expenses that we talked about above. If you have questions about which category to put the different expenses, be sure to ask a tax professional.
How to Find Tax Forms on Poshmark
Well before you hit the sales threshold, Poshmark will ask for your information for tax purposes. This is what helps them generate a 1099K if need be.
To update your information or find these forms, follow the steps below:
- Open the Poshmark app
- Tap on your username with the person symbol in the bottom right corner
- Scroll to “My Seller Tools” and tap there
- Scroll to “Tax Documents”
If you’ve opted in to receive an electronic 1099-K, it will be located here. Alternatively, it will be sent to your primary address on file.
How to Find Tax Forms on eBay
To find your tax forms on eBay, you’ll need to use a web browser:
- Navigate to ebay.com
- In the top right corner, click “My eBay.” This takes you to the eBay Seller Hub
- Under Seller Hub, you will see a menu of items going across the screen. Click or hover over “Payments.”
- Lastly, click “Taxes”
How to Find Tax Forms on Mercari
- Open the Mercari app
- In the bottom right, tap “Profile” underneath the person icon
- Scroll to “Tax Center.” Here, you can see your W-9 information and any other pertinent tax info.
Should I Set Aside Money for Taxes?
As a reseller, like any business owner, taxes aren’t automatically withheld from your earnings. To avoid a surprise bill, you may want to set aside a portion of your income for taxes throughout the year.
A good rule of thumb is to save 25-30% of your profits to cover federal income tax, self-employment tax, and any state taxes. Also, talk to your tax professional to see if you need to pay estimated taxes throughout the year to avoid penalties.
Tips for Staying Organized Year-Round
It's never too late to get things organized, so here are some steps to get started.
Opening A Business Bank Account
The first action that helped me prepare for taxes was setting up a separate business bank account and credit card. This avoids mixing business and personal expenses, avoiding headaches when it comes to tracking income and expenses.
Keeping Up With Bookkeeping
I also use accounting software/ apps to automate recordkeeping. I personally use Wave, but I know QuickBooks is another popular option. Alternatively, you may want to use a reselling-specific tracking spreadsheet and manually track income and expenses.
I typically sit down monthly to reconcile my books, match transactions, and make sure I have all receipts so I don’t have a year's worth of finances to handle all at once before tax season!
Opening A LLC
Lastly, I created my own LLC. This solidified the separation between myself and my business, which added a layer of protection to my personal finances.
Setting up an LLC is usually pretty straightforward, but check with your state for the specific process.
Final Thoughts
Doing taxes as an online reseller doesn’t have to be intimidating. By staying organized, understanding the requirements, and utilizing deductions, you can minimize your tax liability and keep your business running smoothly.
Remember, taxes are unfortunately a part of the reselling journey, and taking small steps to keep up with it can make all the difference!
Karyn Hughes
Thanks for this! Question, when doing taxes, do you report each store (ebay, mercari etc) separately or do you combine and report it all together?
Amanda Manera
Hi Karyn!
I personally combine the sales from all marketplaces and report together under my LLC, but be sure to consult with a tax professional for what will be best for your situation!
- Amanda 🙂