If you sell on multiple resale platforms, your tax situation is more complex than a single-platform seller — and more complicated than a typical freelancer. You have multiple 1099-K forms, platform-specific fee structures, inventory that spans categories and years, and a COGS calculation that most tax software doesn't handle well.
This is the guide for getting it right.
Platform-by-Platform Fee Breakdown
Every platform takes a cut, and every cut is a deductible expense. Knowing the exact fees matters for accurate P&L.
eBay: Final Value Fee of 12.9–15% on most categories (13.25% for most clothing and accessories). This applies to the total order amount including shipping. There's no separate payment processing fee for managed payments — it's included in the Final Value Fee.
Etsy: Three separate fees stack on every transaction:
- Listing fee: $0.20 per item (charged when listed, renewed when it sells and relists)
- Transaction fee: 6.5% of the item price + shipping + gift wrapping
- Payment processing: 3% + $0.25 per transaction
On a $50 Etsy sale, you're paying roughly $3.75 in transaction fees, $0.25 in processing, $1.50 in payment processing, plus the $0.20 listing renewal. Total: ~$5.70, or about 11.4%.
Poshmark: Flat 20% commission on sales over $15. For sales under $15, the fee is a flat $2.95. Poshmark covers shipping labels, so you don't pay separately for outbound shipping.
Mercari: 10% selling fee plus a 2.9% + $0.50 payment processing fee. Mercari has promoted "0% seller fees" in some periods — confirm the current fee structure in your account settings, as it changes.
Depop: 10% commission on the total transaction value (item + shipping).
All of these fees are deductible business expenses. Track them per-platform, either from your annual fee summary or by aggregating monthly statements.
COGS: The Core of Your Tax Math
Cost of Goods Sold is the most important deduction for resellers, and the one most people undertrack.
COGS = what you paid to acquire each item you sold during the year
This is NOT:
- What you spent on inventory total (only sold items count)
- The current value of unsold inventory
- Your total sourcing spend
For each item you sell, you need to know your acquisition cost. That's:
- The purchase price at the thrift store, garage sale, estate sale, or retail
- Any buyer's premium at auction
- Shipping to receive the item (if you paid it)
If you bought 20 items at a garage sale for a flat $80, you allocate the cost across items by category or by estimated value. Document your method and apply it consistently.
Inventory Tracking That Holds Up
The IRS can audit resellers up to 3 years back (6 years if income is substantially understated). That means receipts from 2022 might matter in 2025. Your tracking system needs to survive time.
Minimum viable system:
- Receipt file — photograph every purchase receipt immediately. Cloud storage (Google Photos, iCloud) with automatic backup. Tag with date and sourcing location.
- Inventory log — a spreadsheet or app that links each item to its purchase receipt, purchase date, cost, and eventually sale date and price.
- Platform sale records — download your annual transaction history from each platform by January 31.
The reconciliation: your total COGS should equal the sum of acquisition costs for all items you sold. Your inventory balance (items on hand) should be reconcilable to your total acquisition spend minus your COGS.
If the IRS asks for documentation, you'll need to show: what you paid for a specific sold item, when you acquired it, and the receipt or bank record supporting it.
Quarterly Payments for Resellers
If your reselling business is generating net profit of roughly $5,000+ per year, you're likely required to make quarterly estimated tax payments.
Net profit of $5,000 generates approximately $707 in SE tax and some amount of income tax depending on your bracket. The IRS $1,000 threshold for required quarterly payments is based on total annual tax due — not per quarter.
The safe approach for resellers: set aside 25–30% of net profit (not gross sales) for taxes. In Q4, reconcile against prior-year tax to make sure you're within safe harbor. If your business is growing, lean toward 30%.
Resellers often have lumpy income — big estate sale hauls in spring, slow summer, holiday selling season in fall. Don't base your quarterly payment on one good month. Use the full-year estimate.
What to Do When a Surprise 1099-K Arrives
You get a 1099-K showing $28,000 from eBay. You did not think you were a business. You panicked.
Step 1: Don't assume you owe tax on $28,000. The 1099-K is gross proceeds — what buyers paid you. Your taxable profit is what's left after COGS and expenses.
Step 2: Reconstruct your COGS. Go through your bank records and PayPal history to document what you paid for every item you sold. If you sold 200 items and paid an average of $8 each, your COGS is ~$1,600. If you sold $28,000 gross at an average 3x markup, your COGS is ~$9,333.
Step 3: Add up deductible expenses — platform fees (12-20% of gross), shipping, packaging, mileage to sourcing locations.
Step 4: Report on Schedule C. Gross income = 1099-K amount. COGS and expenses reduce it to net profit. Net profit is subject to SE tax and income tax.
Step 5: For future years, track in real time. Reconstructing a year of sales retroactively is painful. Tracking as you go takes 5 minutes per sourcing trip.
The 1099-K is a reporting document, not a tax bill. Your actual tax depends entirely on your net profit after legitimate costs — and for most resellers who track properly, that's well below what the 1099-K shows.