I still remember the first time I received a 1099-K form in the mail. It was 2018, and I had just cleared $22,000 in sales flipping vintage electronics on eBay. I stared at that piece of paper with a mix of pride and sheer panic. Until that moment, the money in my PayPal account felt like "internet money"—fun, separate, and somehow invisible to the government. Holding that form, I realized my hobby was actually a taxable business, and I had zero receipts organized.
I spent the next three weeks digging through shoeboxes of Goodwill receipts and printing out hundreds of pages of shipping labels, swearing I would never be disorganized again.
In 2026, the landscape of reseller taxes is even more confusing. We have bounced between proposed $600 thresholds, delays, and now the new legislation passed in mid-2025. If you are selling online, ignoring the tax man is no longer an option. But the good news is that once you understand the rules, the tax code can actually work in your favor.
Do I Have to Pay Taxes on Reselling Items 2026?
This is the most common question I get. The confusion stems from the difference between "Reporting Thresholds" and "Tax Liability."
The short answer is: Yes. If you are selling items for a profit, that is income. The IRS requires you to report all income, whether it is $50 or $50,000.
However, the mechanism for how the IRS knows about your money has changed. For several years, we were bracing for a rule that would require platforms like eBay, Poshmark, and Mercari to send a 1099-K form to anyone who sold more than $600. That rule was stressful. It meant casual sellers clearing out a closet might get tax forms.
Here is where it gets interesting... In July 2025, the "One Big Beautiful Bill Act" (OBBBA) was signed into law. This legislation explicitly repealed the $600 threshold that had been looming over us. For tax returns filed in 2026 (covering the 2025 tax year), the federal requirement for receiving a Form 1099-K has reverted to the original standard:
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$20,000 in gross sales
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AND 200 separate transactions
If you sell $15,000 across 50 items, you likely will not receive a 1099-K form automatically. But—and this is a massive "but"—that does not mean you are tax-exempt. It just means the platform isn't tattling on you automatically. If you get audited and haven't reported that $15,000, you are in trouble.
Do I Have to Pay Taxes on Reselling Items 2024?
Because tax laws are retroactive and often delayed, people are still asking about previous years like, " do i have to pay taxes on reselling items 2024?"
For the tax year 2024 (which you filed in early 2025), the IRS had a "transition period" threshold of $5,000. If you are looking back at your records and wondering why you didn't get a form last year but might this year (or vice versa), it is because the goalposts have moved three times in three years.
The Golden Rule of Reselling: Stop worrying about the threshold. Treat your business like a business from day one. If you track every sale and every expense, it doesn't matter what form shows up in your mailbox because you already have the data.
The Secret Weapon: Reseller Tax Certificate
If you are buying items to resell them, you should not be paying sales tax on those purchases. Paying sales tax on inventory is "double taxation." You pay tax when you buy it, and your customer pays tax when they buy it from you. To fix this, you need a reseller tax certificate (also called a resale certificate or sales tax permit).
How to Get a Reseller Tax ID Number:
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Register: Go to your state's Department of Revenue website.
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Apply: Look for "Sales and Use Tax Permit" or "Certificate of Authority."
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Receive: You will get a state Tax ID number.
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Issue: You fill out a tax resellers certificate form and give it to the store you are buying from.
My Personal Experience: I source a lot of inventory from a local liquidation warehouse. For years, I paid 7% sales tax on every pallet. That was $35 down the drain for every $500 pallet. Once I got my reseller tax id, I simply showed them the paper. They removed the tax immediately. That single piece of paper saves me about $1,200 a year. That is free money.
Note: Major retailers like Walmart and Target offer "Tax Exempt Programs" where you upload your certificate to their app. Once approved, you scan a barcode at checkout, and the sales tax vanishes.
Tax Exempt Reseller: The Responsibilities
Being a tax exempt reseller is a privilege, not a right. It comes with homework. When you register for a certificate, you are telling the state: "I am not the end consumer. I will collect sales tax from the person I sell this to."
The Catch: If you sell on marketplaces like eBay, Poshmark, or Mercari, they are "Marketplace Facilitators." They collect and remit the sales tax for you automatically. This makes your life easy. However, you still have to file a "Sales Tax Return" with your state, usually quarterly. You just report your sales as "Exempt - Marketplace Sale."
Honest Failure: In 2021, I forgot to file my "Zero Due" sales tax return. I didn't owe any money because eBay collected it all. But because I didn't file the paper saying "I owe zero," the state fined me $50 for a "Failure to File."
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Lesson: Even if you owe nothing, you must file the paperwork.
How to File Taxes as a Reseller
When tax season arrives, you are likely filing as a "Sole Proprietor" (unless you formed an LLC). This means you will use Schedule C attached to your personal Form 1040.
The Formula:
(Gross Sales) - (Cost of Goods Sold) - (Expenses) = Net Profit
You only pay taxes on the Net Profit.
Gross Sales: This is the total amount the buyer paid, including shipping. Do not use the payout amount that hit your bank. Use the gross.
Cost of Goods Sold (COGS): This is exactly what you paid for the item.
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Example: You bought a lamp for $10 and sold it for $100. Your COGS is $10.
Expenses: This is where you win the game. You can deduct almost anything used for the business.
Reseller Tax Deductions: Don't Leave Money on the Table
If you are looking for reseller tax deductions, here is the checklist I use every year. These are valid business expenses that lower your taxable income.
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Shipping Labels: Every dollar you spent on USPS/UPS.
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Platform Fees: The 13% eBay fee, the 20% Poshmark fee, the transaction fees.
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Packaging: Boxes, bubble wrap, tape, poly mailers.
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Mileage: In 2026, the standard mileage rate is roughly 69 cents per mile (check current IRS rate). Every trip to the thrift store, the post office, or the bin store counts.
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Home Office: If you have a dedicated room for inventory, you can deduct a percentage of your rent/mortgage and utilities.
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Software: Your subscription to Vendoo, PhotoRoom, or your accounting software.
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Education: Did you buy a course on "How to Resell"? Deductible.
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Storage Units: If you rent space for inventory.
Opinion: Many new sellers are scared to take the Home Office deduction because they heard it triggers audits. In my opinion, if you are legitimate—if that room is truly 100% used for business—you should take it. It is one of the largest deductions available.
Managing Inventory with Closo 100% Free Crosslister
One of the hardest parts of taxes is knowing your inventory value at the end of the year. The IRS asks: "What is the value of inventory you have sitting in your house right now?" If you are selling on multiple platforms, tracking this is a nightmare. Did that shirt sell on Poshmark or Depop? Is it still in the bin?
I use Closo 100% Free Crosslister to keep my active inventory visible. While Closo is primarily for cross-listing, it serves as a central dashboard. I can see exactly what is active across all platforms. I use Closo to audit my active listings at year-end – saves me about 3 hours weekly of manually checking four different apps to see what is still for sale.
Tax Software Reseller Options
You can't do this with a notepad anymore. You need tax software reseller tools.
1. GoDaddy Bookkeeping (Deceased) This used to be the gold standard, but it shut down years ago. RIP.
2. QuickBooks Self-Employed The industry leader. It connects to your bank and credit cards. It is robust but expensive.
3. Reseller Genie Built specifically for us. It tracks COGS very well.
4. Spreadsheets (The Free Option) If you are just starting, a well-managed Excel sheet is fine. Just make sure you log every receipt immediately.
My Recommendation: Get a separate business bank account. Even if you are a sole proprietor. Run every business expense through that one card. At tax time, you just download the statement. If you mix personal groceries and bubble wrap on the same card, you are entering a world of pain during an audit.
Understanding the "Tax Exempt Reseller Certificate" Nuances
When you hold a tax exempt reseller certificate, you have to use it correctly. You cannot use it to buy things you will use personally.
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Scenario: You are at Walmart. You are buying 10 video games to resell and a gallon of milk for your kids.
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The Rule: You must separate the transactions. Use the certificate for the games. Pay tax on the milk.
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The Risk: Using a tax certificate for personal items is tax fraud. States audit this. If they see you bought a 75-inch TV "for resale" and it never appeared on your eBay store, they will ask questions.
Do I Have to Pay Taxes on Reselling Items if I Lose Money?
This is a common question for people clearing out their closets.
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Scenario: You bought a J.Crew sweater in 2020 for $80. You sell it in 2026 for $20.
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The Math: You have a loss of $60.
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The Law: You do not pay income tax on this sale because there is no profit.
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The Catch: You cannot deduct this loss against your other income. Personal losses are not deductible. But you also don't owe tax on the revenue.
However, if you receive a 1099-K for $25,000 of personal items sold at a loss, the IRS will see $25,000 of income. You still have to file. You just report the COGS as equal to the sale price to zero out the profit.
People always ask me...
What happens if I don't file my reseller taxes?
If the platform sent a 1099-K to the IRS, the IRS computer knows exactly how much you made. If you don't file a return matching that number, you will get an automated letter (CP2000) proposing a tax bill plus penalties and interest. If you didn't get a 1099-K, the risk is lower, but if you are audited, they will look at your bank deposits. It is never worth the risk.
Can I get a reseller tax ID if I don't have an LLC?
Yes, absolutely. You do not need to incorporate to get a sales tax permit. You can apply as a "Sole Proprietor" using your Social Security Number (SSN). The state will issue the license to your name. This allows you to buy tax-free just like a corporation.
Conclusion
Navigating reseller taxes 2026 feels overwhelming, but it is actually a sign of success. It means you are making money. The reversion of the 1099-K threshold to $20,000 gives casual sellers some breathing room, but for serious flippers, the discipline remains the same.
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Track every expense.
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Get your reseller tax certificate to save 7-10% on sourcing.
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Use automation to keep your records clean.
Don't let the fear of the IRS stop you from growing. The tax code is just a set of rules, and once you know them, you can play the game to win.
And speaking of playing to win, keeping your inventory organized is the first step to a stress-free tax season. I rely on Closo to keep my listings synced and my data accessible, so when April 15th rolls around, I'm not scrambling.
Start cross-listing with Closo today—because the only thing better than making money is keeping more of it.
