Taxes on Reselling (eBay, Depop, StubHub): Hobby or Business

Do I have to pay taxes on items I resell on eBay, Depop or StubHub?

A sale for more than you paid is taxable, and a loss on something you used yourself is not deductible. How it is reported depends on why you held the item: for your own use, for fun, or to resell at a profit (IRS: What to do with Form 1099-K; Publication 17). Income is reportable whether or not a platform sends a tax form.

Schedule C reports a sole proprietor's business profit. Form 8949 and Schedule D report sales of property. Cost of goods sold is what you paid for the items you sold. A 1099-K is the form a payment app or marketplace sends, showing the gross payments it handled.

A case is not simple when you buy items to resell, sell on several platforms, got a 1099-K far above your profit, left earlier years' sales off a return, or received an IRS notice about missing income. Each needs a decision on hobby or business and purchase records to back it. Missed years and notices are worth a preparer's review before you file or reply.

Gather before you start: what you paid for each item, what each one sold for and where, fees, shipping and refunds, and any 1099-K. This page covers federal income tax; your state may tax the same income under its own rules.

I sold my own stuff for less than I paid: is that taxable?

A personal item sold at a loss is not taxable income, and the loss cannot be deducted. A personal item is something you owned for personal use, such as a car, furniture, a stereo, jewelry or clothing (IRS: What to do with Form 1099-K; IRS: Understanding your Form 1099-K).

A gain on a personal item is taxable as a capital gain: the price you received, less selling costs such as platform fees (Instructions for Form 8949), minus what you paid, reported on Form 8949 and Schedule D (Publication 17). Held more than one year, it is a long-term gain with its own tax rates; held a year or less, it is short-term (26 USC 1222; Publication 550).

If a 1099-K reports the sale price of an item sold at a loss, the form's total is not what gets taxed. Personal items sold at a loss covers how to report it and prove what you paid. The rule changes when you bought the item to resell, not to use.

Is buying things to flip them a business, and what does the IRS look at?

A trade or business is generally an activity carried on to make a profit, and the facts and circumstances decide. A part-time activity can qualify, and a year with a loss does not rule it out if you have a profit motive (Publication 334). The Schedule C instructions ask for a primary purpose of income or profit and continuity and regularity; a sporadic activity does not qualify (Instructions for Schedule C). Regularly buying goods to resell points toward a business. No single factor decides, and the sources used here give no sales volume or dollar amount that turns a hobby into a business.

The regulations weigh these facts (26 CFR 1.183-2):

Use the table as a guide, not a score: the regulation says the number of factors on each side does not decide the question, and the IRS asks similar questions.

Profit in 3 of 5 consecutive years (gross income above deductions) makes the activity presumed to be for profit unless the IRS shows otherwise (26 USC 183(d)). Missing the presumption does not make it a hobby. Form 5213 can postpone that test until the close of the fourth tax year after the activity began: file it within three years after the due date of the return for the first year (or within 60 days after an IRS notice proposing to disallow deductions), with the spouse also signing a joint return. It extends the time the IRS has to assess tax on the activity (Form 5213 instructions). Loss limits and the election are in business losses.

What changes if the IRS treats my reselling as a hobby?

Hobby income is taxable, most hobby expenses cannot be deducted, a hobby loss cannot offset other income, and self-employment tax does not apply.

• Income: enter it on Schedule 1 (Form 1040), line 8j (Publication 17).
• Cost of goods sold: a hobby seller may figure income by subtracting cost of goods sold from gross receipts, if done consistently under generally accepted accounting methods (26 CFR 1.183-1).
• Other expenses: hobby expenses are miscellaneous itemized deductions, and 26 USC 67(h) allows none. Publication 17 says in one place that they can be deducted on Schedule A and in another that they can no longer be deducted; the statute controls.
• Losses: a hobby loss is not deductible from other income (Publication 17).
• Self-employment tax: it is figured on income from a trade or business (26 USC 1402(a)), which a hobby is not.

The Schedule C instructions say a hobby does not qualify as a business and send income from a nonbusiness activity to Schedule 1, line 8j (Instructions for Schedule C). The IRS 1099-K page lists hobby sellers with sole proprietors on Schedule C; that general page conflicts with the form instructions. A gain from selling items out of a hobby collection is a capital gain (Publication 17). Schedule C income carries self-employment tax and line 8j income does not.

A 1099-K does not decide which applies; whether the activity is engaged in for profit does. If that is unclear, or earlier years went on a different schedule, review it with a preparer before filing: see individual tax help.

What changes if my reselling is a business?

A business reports on Schedule C: sales, less returns, cost of goods sold and expenses, leave a net profit taxed with income tax and self-employment tax (Publication 334).

• Sales: start from the 1099-K gross amount and add sales it did not report. The form is not reduced for fees, credits, refunds, shipping or discounts (Instructions for Form 1099-K); the IRS says those are not taxable income and can be deducted from the gross amount (IRS: What to do with Form 1099-K). Count each once: refunds reduce sales, platform fees and the postage you pay are expenses, and shipping you charge the buyer stays in sales. The form may also include sales tax collected from buyers and paid over to the state, which is not income (Publication 334).
• Cost of goods sold: what you paid for the goods you sold. A seller who buys merchandise generally keeps inventory, and small businesses have a choice on method, so how unsold stock is treated depends on the method used (Publication 334). See inventory or supplies for small sellers and gross sales and cost of goods sold.
• Expenses: costs of running the business, such as packaging, listing fees and postage, when they are ordinary and necessary (Publication 334).
• Self-employment tax: 15.3% applied to 92.35% of net profit. The Social Security part stops once wages and net earnings together pass $184,500, and the Medicare part has no cap. Schedule SE is required once net earnings from self-employment reach $400 (Publication 334).
• During the year: a profitable business may owe estimated tax; see quarterly estimated tax payments.
• Sales tax: this is a separate state question; see when you must collect sales tax.

I sell from my own collection and also buy more to resell: which is which?

Each item is taxed by why you held it, so one selling account can hold personal, investment and resale items.

• Collection items kept for fun: a gain is taxable as a capital gain, and a loss is not deductible (Publication 17). A coin, stamp, work of art, antique, metal or gem held more than one year is a collectible, taxed at up to 28% (Publication 550).
• Items held as an investment: a gain is taxable as a capital gain and a loss is deductible as a capital loss; Publication 17 gives gold or silver bullion, coins and gems as examples (Publication 17). Whether an item is an investment or a personal keepsake depends on why you held it.
• Items bought to resell: goods held primarily for sale to customers in the ordinary course of a trade or business, and other inventory, are not capital assets (26 USC 1221(a)(1)). When the activity is a business, the profit is business income.

Mark each item "keep", "invest" or "resell" on the day you buy it. Frequent buying and selling can weigh toward a business under the factors above, but that is a question of facts, not a fixed line.

How do I report ticket sales on a resale site without a 1099?

Report ticket resale income the same way whether or not the site sends a 1099-K. Ticket exchange and resale sites are among the platforms that send Form 1099-K, and the income is reportable with or without one (IRS: Understanding your Form 1099-K).

• Tickets you bought to attend and could not use: these are likely treated like other personal items you bought to use (Publication 17): a gain is taxable and a loss is not deductible. The IRS pages cited here do not address tickets by name.
• Tickets you bought to resell: if the reselling is a business, report it on Schedule C. Sales go in gross receipts, what the tickets cost goes in cost of goods sold, and the site's fees are expenses.

With no form, build the total from the site's sales history and your bank deposits. No tax form for platform income shows how.

I got a 1099-K, or I did not: what must I report?

Report all your resale income whether or not you received a 1099-K, and treat the form as a starting point, not your taxable amount.

A payment app or online marketplace must send Form 1099-K when payments for goods or services total over $20,000 in more than 200 transactions, and may send one for less. A payment card processor reports any amount, and each platform can send its own form (IRS: Understanding your Form 1099-K). The current threshold and what changed are in the 1099-K reporting threshold.

• Backup withholding: if you gave the platform no taxpayer ID, or a wrong one, it may withhold backup tax, shown in box 4; that is tax you have already paid, claimed on your return (Instructions for Form 1099-K; Instructions for Form 1040).
• No form arrived: report the same way as with a form, and build the total from the sales history and deposits. See no tax form for platform income.
• The form is wrong or is not yours: ask the issuer for a corrected form, keep the correspondence and file without waiting. See a wrong or corrected platform tax form.

One form can cover personal items and resale stock together, so your own sale records have to split it. The step from the form's total to profit is in gross sales and cost of goods sold; reconciling sales and payouts covers fees, refunds and sales tax in your books.

What records do I need for purchases, sales, fees and shipping?

Keep proof of what you paid for each item and what each sale brought in. The IRS accepts any recordkeeping system that clearly shows income and expenses (IRS: Recordkeeping), and supporting documents include sales slips, invoices, receipts and account statements (Publication 583).

• Purchases: a receipt, order email or listing, plus the card or bank statement. A statement can prove payment, but it does not by itself show what you bought. For a cash purchase, a dated note of seller, item and price.
• Sales: each platform's sales history and annual report, and every 1099-K.
• Fees, shipping labels, postage and refunds: these tie the platform's payout to the gross amount.
• Stock on hand: a list of what you bought and have not sold.
• Purpose: whether each item was to keep, to hold as an investment or to resell.

Keep an item's purchase record until the period of limitations ends for the year you sold it (IRS: How long should I keep records?). How long to keep business records has the periods.

Example

These examples are illustrative and use US dollars.

Buying sneakers to flip

A seller buys $3,000 of sneakers and sells them for $4,500 across two apps, listing every week. Regular buying to resell points to a business, with $1,500 of gross profit before fees and shipping. If fees and postage were $600, the Schedule C profit would be $900. If the reselling is a business, self-employment tax applies once net earnings reach $400, which $900 of profit does. A 1099-K may or may not arrive, because platforms and card processors can send one for amounts below the reporting threshold; the income is reported either way. Without a record of what each pair cost, the $3,000 is hard to prove.

Selling a childhood card set

A collector kept a childhood card set for fun and sells it once. It cost $500. Sold for $300, the $200 loss is not deductible. Sold for $800, the $300 gain is taxable and goes on Form 8949 and Schedule D. If a platform reports the $800 on a 1099-K, the form's total is not the gain: the gain is the sale price less selling costs, minus what was paid.

Reselling tickets

A reseller sells tickets for $25,000 on a resale site in more than 200 sales, and the site sends a 1099-K for $25,000. All the tickets sold in the year. They cost $19,000, and the site's fees were $3,000. If the reselling is a business, Schedule C shows gross receipts of $25,000, cost of goods sold of $19,000 and fees of $3,000, leaving $3,000 of profit before other expenses. That profit is then subject to income tax and self-employment tax. Without a record of what each ticket cost, the $19,000 is hard to prove.

Different for you?

• You buy stock to resell every month or sell on several platforms: payouts, fees and stock on hand have to reconcile across platforms, and inventory and cost of goods sold decide your profit. See reconciling sales and payouts, and get bookkeeping help to keep one set of records and individual tax help to work through hobby or business for each activity.
• A 1099-K arrived and shows far more than you earned: the form's total is gross sales, not profit. See gross sales and cost of goods sold and get bookkeeping help to reconcile it with your records.
• You have no purchase records: see inventory and cost of goods without records or get bookkeeping help to rebuild them.
• Earlier years' sales were left off a return: see income left off past returns and catching up on unfiled returns, and get individual tax help.
• The IRS sent a notice about a 1099-K or missing income: the underreporter notice guide explains it, and individual tax help is worth having before you reply.
• You have losses, or you are a hobby seller with a 1099-K: a business loss may be deductible and a hobby loss is not, and where the 1099-K goes depends on which you are. See business losses and get individual tax help to work through hobby or business.
• You are in the US on a visa or have lived here only a few years: whether you are a resident or nonresident for tax changes the return you file and whether self-employment tax applies (Publication 519). See a nonresident return for business income and get individual tax help.
• You sell on one platform and want the general rules: see income tax for online sellers.
• You live in Canada: see selling online from Canada.