Taxable income from selling on Ebay
Summary: The discussion focuses on clarifying the correct reporting of income for tax purposes from eBay sales. 19lesney47 questions if the 'net' income is reportable to the IRS. Multiple participants clarify that it is the gross income that is reportable, with deductions made for expenses to determine net taxable income. Several contributors emphasize the importance of accurate record-keeping and advise using a CPA, especially for the first year, to avoid complications with the IRS. Others suggest using software or services like TurboTax or H&R Block, while reminding sellers to comply with both federal and state reporting requirements.
Correct me if I am wrong but is the "net" income (the amount paid out to the seller) the reportable income for IRS purposes?
luckythewinner
·Sep 7, 2026 at 9:11 PM · EditedThe net is what generally ends up being taxable, but you do not just report the net. And it depends upon whether it is a business activity, or a capital gain.
If it was a business activity, you do not just report the net. You report the gross, and you report your expenses, and the tax form calculates what is taxable.
If it was a capital gain, I believe you report the sale amount and your basis in the asset, and the tax form calculates what is taxable.
mam98031
·Sep 7, 2026 at 8:52 PMNO @19lesney47 it is NOT. First your income doesn't come FROM Ebay, I mean literally it does, but the money is actually from your buyers.
You report TOTAL income LESS expenses. Those numbers have to be represented on your tax returns. You NET [total sales less total costs] sales is what you are taxed on. For most small sellers and casual it doesn't increase your taxes by much. But we are still legally responsible to report ALL income to the IRS. There is NO minimum threshold.
caldreamer
·Sep 7, 2026 at 5:44 PMIRS always requires that you report all "gross income" (even if you don't receive 1099) and then deduct your expenses. By the time you deduct your business expenses (EBAY fees, cost of goods, returned merchandise, packing materials, shipping income, mileage, etc) you will very little "net taxable income" left. EBAY includes "returned merchandise and shipping income in your "gross sales" (this is why you must show as an expense).
If you have a dedicated space in home office that is used only for your business, you can also deduct percentage of your (rent + utilities). You must file taxes a "business" if you want to deduct business expenses.
EBAY has "easy to read" 1-page report that shows (sales, refunds, EBAY fees, shipping expense). Go to PAYMENTS, REPORTS (click on LAST YEAR) or you can manually enter the time period.
GROSS SALES (shown on 1099 or EBAY report)
- EBAY fees
- Returned merchandise
- Shipping expense
- Cost of goods sold
-Misc. expense (mileage, office supplies, boxes)
NET TAXABLE INCOME
You also need to report your "gross income" to your state every year. You need to show "Total USA sales (gross EBAY income) and sales made inside your state". Then you claim deductions for "shipping income and returned merchandise". EBAY includes "returned merchandise and shipping income in your "gross sales" (this is why you must deduct those expenses). You are not liable to pay any state "sales tax" because you must show EBAY as FACILITATOR who collects "sales tax on your behalf".
TOTAL USA Sales
- Outside YOUR STATE
SALES INSIDE YOUR STATE
I made a spreadsheet to record sales made inside "my state" as this will let me know sales $$$ made OUTSIDE MY STATE which form requires you to provide when filling about state tax report.
19lesney47
OPSep 7, 2026 at 5:19 PMI appreciate everyone's help with my question. Very helpful, thank you
monroe67
·Sep 7, 2026 at 4:41 PMUnless you have a highly complicated financial situation --
like millions of dollars in investments, multiple rental properties, etc.,
I don't think it is necessary to hire a CPA to prepare your income tax returns.
I have gotten excellent service and advice from H&R Block. The representative who has helped me for a few years is NOT a CPA but is fully qualified.
In addition, AARP may offer free income tax preparation services in your area. The volunteer AARP tax preparers are often retired CPAs or perhaps attorneys. Originally, this service was intended for retired people, but I have seen university students and young professionals in the waiting areas, along with my aged mother and me.
christworks
·1 month ago · Edited@19lesney47 Absolutely NOT.
Income is any amount of money (gross receipts, revenue) that comes into your business from any source. All income is reportable to the IRS. Among other things, it includes the cost of the item, any seperate shipping charge to the buyer, any credits, and carrier insurance collected by you for lost or damaged packages.
The good news is you get to expense/deduct many things as well. For example, the actual cost of the postage labels (which may or may not match what you charged the buyer), any supplies (e.g. boxes, tape, labels) , any equipment (e.g. thermal printer, computer), business miles, and more.
In many cases what eBay has on your W2 will be what you report. However, that isn't always the case. You can have business revenue from other platforms, or what is considered "other income." For example, a buyer paid you $100 including shipping for a widget. The post office lost that widget and you had to refund the buyer $100. You file a claim with USPS and they cut you a check for $100. That $100 will go under "other income." The cost of goods for your widget is still deductible, but you pay tax on the amount of the insurance check that is leftover after that deduction. This is, of course, assuming you don't have enough expenses from other things to wipe it all or most of it out.
In the above case, eBay won't have any ided that USPS reinbursed you, so it won't be recorded on your 1099. To be complient with tax law you must still report it. This is why it is vital to keep up with your records throughout the year. I try to ensure I record things immediately. If I cannot, I jot down a quick note or perhaps print out whatever it is that needs to be reported. I write the date on it and it goes into a basket on my desk. At the end of the month (or at the end of the quarter if we are in Q4), I input that stuff into my official records. This way at tax time I have all my data in front of me. I pay estimated quarterly taxes, so ideally when I file I don't owe nor I don't get a refund.
I have done my taxes for years, but I learned from a CPA. Ideally, you can find a CPA who is familiar with reselling and the ins and outs of that, especially if your record keeping is poor. If the CPA doesn't have a clue about reselling, they may not know everything they need to ask you for.
I strongly advise you to check out Not Your Dad's CPA on YouTube. Mark is a CPA and reseller. He is very good at explaining tax law to resellers. Keep in mind advice in older videos may not be applicable today, but he often makes a new video on a subject if something major has changed.
Be cautious with all the advice you will get from people here, including myself. At the end of the day you and only you will answer to Uncle Sam.
Side note to everybody else: Quarterly taxes are due September 15 for those of you who pay them.
ryry-jj
·Sep 7, 2026 at 5:18 PM · EditedIn California, your quarterly prepayment #2 is due Sept. 24
chapeau-noir
·1 month agoUse Turbo-Tax Home and Business, and read this: https://turbotax.intuit.com/tax-tips/self-employment-taxes/a-tax-filing-factsheet-for-ebay-sellers/L7h6uJr0i (of course the hyperlink on this board doesn't work).
shire123
·Sep 7, 2026 at 4:53 PMI use that software and it is extremely helpful.
duffy4444
·Sep 7, 2026 at 5:47 PM · EditedMy wife and I have used that software the last 5 years, and it's cut our preparation time by about 75%. We both have online sales - me on eBay and both of us on Etsy. I also use Seller Ledger automatic accounting software, which was made specifically for us online sellers. Filing our Schedule Cs is now a lot easier than by hand.
Cheers, Duffy
shire123
·1 month ago · EditedI like to believe I am knowledgeable enough to be able to handle the taxes owed on ebay sales. Ebay has some excellent help pages as does the IRS. Plus there are lots of other sellers here with excellent advice.
But in a nutshell at the end of the year you will get a 1099 form from ebay that shows a number (assuming you hit the reportable threshold). From that number you deduct your cost of goods sold (COGS), ebay fees, shipping costs, cost of supplies, and any other expenses related to your ebay selling.
That will leave you with a net income that is reported to the IRS. Note it is NOT the amount paid out to the seller. And for just about everyone that net amount is a lot less than what was paid out.
While a CPA can be helpful for some if you are fairly diligent you can navigate the topic without one. There are also some tax software programs that are very helpful in reporting/filing your taxes.
r_lresale
·1 month agoWhat @theteamsetguy said. After a year or so I learned what all deductions the CPA would need and I put it on a spreadsheet and she just plugs the numbers in. She usually gives me a discount on the fee because I make her job easier lol but the fee is worth it because if something goes wonky, she is on the hook for it rather than me if I mixed something up.
theteamsetguy
·1 month agoYou will get a 1099 for the gross amount collected by Ebay. You will be able to deduct your expenses and pay taxes on the net profits.
If you don't know what you are doing. I would hire a good CPA for the first year at least. Screwing up your taxes and dealing with the IRS is no joke. If you hire a good CPA their fees are worth their weight in gold. Don't be penny wise and pound foolish by trying to do it yourself if you don't know what you are doing. Other's on here will tell you a CPA is not necessary but I don't agree with that advice.
kensgiftshop
·1 month agoThe reportable income is the gross, not the net.