Do You Owe Taxes on the Stuff You Sell Online?

The Question Almost Every Online Seller Asks

Sooner or later everyone who sells online wonders whether the money counts as income. The short answer is that it depends on whether you sold something for more than it cost you, and whether selling is something you do occasionally or as a business.

This guide explains that distinction in plain language so you know what to track and what to ask a professional. It is general information for sellers in the United States, not tax advice, and the rules change from year to year, so check current guidance at irs.gov or talk to a tax preparer.

Personal Items Sold at a Loss Versus Items Sold at a Gain

The first line to draw is between your own used belongings and things you acquired to sell.

Selling personal items for less than you paid. This is what most people are doing when they clear out a garage. A couch bought new and sold years later for a fraction of the price was sold at a loss, and a loss on personal property is generally not deductible and does not create taxable income. Casual decluttering rarely changes anyone's return.

Selling personal items for more than you paid. This happens more often than people expect with collectibles, vintage furniture, and trading cards. A gain on the sale of personal property is generally taxable, and what matters is the difference between the sale price and what the item originally cost you.

Buying inventory to resell. The moment you buy things intending to resell them, you are in different territory. Profit from resale is business income whether you sell one item a month or fifty. Our guide to the best items to flip for profit covers sourcing, but the tax side starts the day you buy your first item.

Hobby or Business, and Why the Answer Matters

If you sell regularly, the next question is whether the activity counts as a business or a hobby. It matters because business activity lets you subtract expenses from revenue and be taxed on the profit, while hobby income is treated less favorably.

The distinction is not about how much you earn. It rests on facts like whether you run the activity in a businesslike way, whether you keep books and records, how much time and effort you put in, whether you depend on the income, and whether you intend to make a profit. Somebody who sources inventory weekly is doing something different from somebody who occasionally sells a bike. Bring this question to a tax preparer once selling becomes routine.

Form 1099-K and What It Actually Means

If you accept card payments through an online marketplace or payment app, you may receive a Form 1099-K, an information return reporting the gross amount of payments processed for you during the year. A copy goes to the IRS.

Two things about it confuse people constantly. First, the reporting threshold has been changed and delayed repeatedly in recent years, so the only reliable source for the current number is irs.gov. Second, and more important, the figure on a 1099-K is gross payment volume, not profit. It has not subtracted what you paid for the items, shipping labels, marketplace fees, or refunds you issued.

That gap is why records matter. Receiving a 1099-K does not by itself mean you owe tax on the full amount, but it does mean the IRS has a number, and you want to be able to explain the difference between it and your actual profit.

The Records to Keep From Day One

Good records turn tax season into an afternoon, and one spreadsheet with a row per item covers almost everything.

What you paid and when. Track the purchase price of anything you buy to resell, plus the date and the source. For personal items you might later sell at a gain, hold onto the original receipt.

What you sold it for and when. Record the sale price, the date, and the platform. Most marketplaces let you export completed sales, which makes reconciling at year end straightforward.

What it cost you to sell. Marketplace fees, payment processing, shipping labels, packing materials, mileage, and storage all belong here. On Kash Marketplace the sale fee depends on your plan: 5 percent plus 30 cents on the free Starter plan, 4 percent plus 30 cents on Growth at 29 dollars per month, and 3.5 percent plus 30 cents on Pro at 79 dollars per month, with the full breakdown on the pricing page.

Refunds and returns. A refunded sale is not revenue, and looking only at gross payments will overstate your income.

Expenses Sellers Commonly Overlook

When selling is a business, ordinary and necessary expenses reduce the profit you are taxed on, and sellers routinely forget the small ones. Commonly missed items include shipping supplies such as boxes, tape, and labels, the cost of a shipping scale or label printer, subscription fees for a seller plan, mileage driven to pick up inventory or drop off packages, and payment processing fees. If you use part of your home exclusively and regularly for the business, there are rules for that too, and they are strict enough to ask about rather than guess.

A Simple Routine That Keeps You Ready

Set up one spreadsheet and one folder for receipts, and once a month add the sales you completed and the costs you paid. A separate bank account or card used only for buying and selling makes year end reconciliation much easier.

None of this needs to slow you down when you are starting out. List an item, keep the receipt, note what you paid and what it sold for, and you are already ahead of most casual sellers. If you are ready to start, create a free account, or browse current listings to see what similar items sell for.

Do you have to pay taxes on things you sell online?

It depends on whether you made a gain. Selling your own used belongings for less than you originally paid generally does not create taxable income, which covers most people clearing out a closet. Selling an item for more than it cost you generally does create a taxable gain, and profit from items bought specifically to resell is business income. Confirm current guidance at irs.gov or with a tax preparer.

What is a 1099-K and what should you do if you get one?

A Form 1099-K is an information return from a payment processor or marketplace reporting the gross amount of card and app payments processed for you during the year, with a copy sent to the IRS. It reports gross payments, not profit, so it does not subtract what you paid for the items, shipping, fees, or refunds. Match it against your own records so you can explain the difference.

What records should an online seller keep?

Keep the purchase price and date for anything you bought to resell, the sale price and date for everything you sold, and every cost of selling, including marketplace fees, payment processing, shipping labels, packing supplies, and mileage. Also track refunds, since a refunded sale is not revenue. A spreadsheet with one row per item plus a folder of receipt photos is enough for most sellers.

Is selling online a hobby or a business for tax purposes?

The answer turns on how you operate rather than how much you earn. Factors include whether you keep books and records, run the activity in a businesslike way, put in significant time and effort, depend on the income, and intend to make a profit. It matters because business activity lets you subtract expenses and be taxed on profit, while hobby income is treated less favorably.