1099-K Threshold Back to $20,000 in 2026: What Every Reseller Actually Owes
TL;DR: The One Big Beautiful Bill Act (OBBA) reverted the 1099-K reporting threshold to $20,000 and 200 transactions for the 2025 and 2026 tax years. This means eBay, Poshmark, Mercari, and Depop will not send you a 1099-K unless you cross both numbers. But you still owe income tax on every dollar of profit - whether you get the form or not. Here is what you actually owe and how to lower it.
Tax Filing
What Changed With the 1099-K Threshold
The 1099-K reporting threshold has been on a roller coaster since 2021. Here is the full timeline:
| Tax Year | 1099-K Threshold | Status |
|---|---|---|
| 2023 and earlier | $20,000 + 200 transactions | Original rule |
| 2024 | $5,000 (IRS transition year) | Reduced threshold took effect |
| 2025 | Was supposed to drop to $2,500 | OBBA reverted to $20,000 + 200 transactions |
| 2026 | Was supposed to drop to $600 | OBBA reverted to $20,000 + 200 transactions |
| 2027 and beyond | TBD | Congress may revisit |
What the One Big Beautiful Bill Act Did
The OBBA - signed into law in 2025 - killed the phased rollout entirely. The IRS had planned to gradually lower the threshold from $20,000 to $600 over several years. That plan is dead. For 2025 and 2026, the rules are back to the original:
- $20,000 in gross payments, AND
- 200 or more transactions
Both conditions must be met. If you had $25,000 in sales but only 150 transactions, no 1099-K. If you had 300 transactions but only $15,000 in sales, no 1099-K.
What This Means for Resellers
If you sell under the threshold on any given platform, that platform will not send you (or the IRS) a 1099-K. This is a relief for part-time resellers who were dreading paperwork for selling a few hundred dollars of clothes on Poshmark.
But here is the part most people miss: not getting a 1099-K does not mean you do not owe taxes. It just means the IRS does not get an automatic report of your activity. You are still legally required to report all income.
What the 1099-K Actually Reports
This is where the confusion costs people money. A 1099-K reports gross payment volume - the total dollar amount that flowed through the platform to you. It does not report profit. It does not subtract anything.
Gross Sales vs. Profit
| What 1099-K Shows | What It Does NOT Show |
|---|---|
| Total payment amount | Your cost of goods |
| Number of transactions | Platform fees deducted |
| Your name and TIN | Shipping costs you paid |
| Returns and refunds (sometimes) | |
| Whether items were sold at a loss |
Example: You sold a jacket on eBay for $80. You paid $15 for it at a thrift store, $8 in shipping, and eBay took $11 in fees. Your 1099-K reports $80. Your actual profit was $46.
If you do not file a Schedule C showing your expenses, the IRS sees $80 in income with no offsetting deductions. That is how people end up paying taxes on money they never actually made.
Platforms That Issue 1099-K Forms
Every major reselling platform issues 1099-K forms when you cross the threshold:
- eBay - 1099-K via Payouts
- Poshmark - 1099-K for eligible sellers
- Mercari - 1099-K through payment processing
- Depop - 1099-K for US sellers
- Facebook Marketplace - 1099-K for checkout-enabled sales
- Etsy - 1099-K via Etsy Payments
Even if you sell across multiple platforms and stay below the threshold on each one, you are still responsible for reporting the combined income.
Buying inventory to resell? A resale certificate lets you purchase tax-free and keeps more money in your pocket.
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What You Actually Owe: A Walkthrough
Let's break down the real tax math for a reseller doing $40,000 in gross sales on eBay and Poshmark.
Step 1: Start With Gross Sales
| Platform | Gross Sales |
|---|---|
| eBay | $28,000 |
| Poshmark | $12,000 |
| Total | $40,000 |
This is the number that shows up on your 1099-K forms (assuming you cross the threshold on eBay).
Step 2: Subtract Your Deductions
| Deduction | Amount |
|---|---|
| Cost of goods sold (inventory) | ($14,000) |
| Platform fees | ($4,800) |
| Shipping costs | ($3,200) |
| Packaging supplies | ($600) |
| Mileage (sourcing trips) | ($1,400) |
| Home office | ($800) |
| Total deductions | ($24,800) |
Step 3: Calculate Net Profit
$40,000 - $24,800 = $15,200 net profit
This is your taxable self-employment income. Not $40,000 - $15,200.
Step 4: Calculate What You Owe
| Tax Type | Rate | Amount |
|---|---|---|
| Self-employment tax (Social Security + Medicare) | 15.3% | $2,326 |
| Federal income tax (varies by bracket) | ~12% effective | $1,824 |
| State income tax (varies) | ~5% average | $760 |
| Total estimated tax | $4,910 |
Without deductions, you would owe taxes on the full $40,000. That could mean $10,000+ in taxes instead of $4,910. Tracking your expenses is not optional - it is the difference between a manageable tax bill and a devastating one.
Self-Employment Tax: The 15.3% Nobody Warns You About
When you work a regular job, your employer pays half of Social Security and Medicare taxes. When you are self-employed, you pay both halves. That is 15.3% on your net profit - 12.4% for Social Security and 2.9% for Medicare.
This hits on top of your income tax. A reseller netting $30,000 owes roughly $4,590 in self-employment tax alone, before a single dollar of income tax.
You can deduct half of your self-employment tax on your 1040, which helps. But the upfront hit is real.
Deductions Every Reseller Should Claim
These are the legitimate business expenses that reduce your taxable income. Every dollar in deductions saves you roughly 30 cents in taxes (income tax + self-employment tax combined).
Cost of Goods Sold (COGS)
This is your biggest deduction. It includes everything you paid to acquire the items you sold:
- Purchase price of inventory (thrift stores, liquidation lots, wholesale)
- Sales tax paid on inventory (if you do not have a resale certificate)
- Restoration costs (cleaning, repairs, alterations)
Keep every receipt. If you source from thrift stores that do not give itemized receipts, photograph your haul with the receipt that same day.
Platform Fees
| Platform | Typical Fee Structure |
|---|---|
| eBay | 13.25% final value fee (varies by category) |
| Poshmark | 20% commission (orders over $15) |
| Mercari | 10% selling fee + payment processing |
| Depop | Payment processing fees |
| Etsy | 6.5% transaction fee + listing fees |
These are fully deductible. Each platform provides an annual summary - download it before tax time.
Shipping Costs
Everything you spend on shipping:
- Postage and carrier fees
- Shipping supplies (boxes, mailers, tape, tissue paper)
- Shipping scale
- Printer ink for labels
Mileage
Every trip to source inventory, drop off packages, or buy supplies is deductible. The 2026 IRS standard mileage rate applies per business mile driven.
- Track every trip with a mileage app or log
- Sourcing trips to thrift stores, estate sales, retail stores
- Post office runs to ship orders
- Supply runs for packaging materials
Home Office
If you use a dedicated space in your home for your reselling business - photographing items, storing inventory, packing orders - you can deduct a portion of your housing costs.
Two methods:
| Method | How It Works |
|---|---|
| Simplified | $5 per square foot, up to 300 sq ft ($1,500 max) |
| Actual expense | Percentage of rent/mortgage, utilities, insurance based on square footage |
Other Deductible Expenses
- Phone and internet (business-use percentage)
- Photography equipment (camera, lighting, backdrop)
- Software subscriptions (inventory management, accounting)
- Education (reselling courses, books, conventions)
- Business insurance (if applicable)
- Packaging supplies (poly mailers, boxes, tissue, stickers, thank-you cards)
How Resale Certificates Reduce Your Tax Burden
Here is where most resellers leave money on the table. A resale certificate lets you buy inventory without paying sales tax at the point of purchase. This is not a loophole - it is how the tax system is designed to work. Items bought for resale are not supposed to be taxed until the final consumer buys them.
The Direct Savings
If you spend $14,000 per year on inventory and your average state sales tax rate is 7%, you are paying roughly $980 in unnecessary sales tax without a resale certificate. With one, that $980 stays in your pocket.
The Deduction Connection
Without a resale certificate, the sales tax you pay on inventory becomes part of your cost of goods sold. That means your COGS is $14,980 instead of $14,000. You still deduct it - but you had to spend the money first.
With a resale certificate:
| Scenario | Inventory Cost | Sales Tax Paid | Total COGS | Cash Kept |
|---|---|---|---|---|
| Without certificate | $14,000 | $980 | $14,980 | $0 saved |
| With certificate | $14,000 | $0 | $14,000 | $980 saved |
That $980 is real cash flow you keep in your business. Over five years of reselling, that is nearly $5,000.
Audit Protection
A resale certificate also serves as documentation that your purchases were legitimate business inventory - not personal shopping. If the IRS questions why you are deducting $14,000 in COGS, a resale certificate and matching sales records prove those were inventory purchases for your business.
Stop paying sales tax on inventory. A resale certificate saves the average reseller $800-$2,500 per year.
Apply for Your Resale Certificate -->
Questions? Contact us for guidance.
7 Common Mistakes That Trigger Audits
These are the patterns that draw IRS attention to reseller tax returns. Avoid all of them.
1. Not Filing Schedule C at All
You received a 1099-K showing $25,000 in gross payments but filed no Schedule C. The IRS matching system flags this automatically. They will assume the entire $25,000 is profit and send you a bill - plus penalties and interest.
2. Reporting Gross Sales With No Expenses
Filing a Schedule C that shows $40,000 in revenue and zero deductions looks suspicious. No legitimate reselling business operates at 100% profit margin. The IRS knows this.
3. Claiming Deductions Without Receipts
You claimed $12,000 in COGS but have no receipts to back it up. In an audit, unsubstantiated deductions get denied. Keep digital copies of every purchase receipt, organized by month.
4. Mixing Personal and Business Purchases
Using the same credit card for personal shopping and inventory purchases makes it nearly impossible to prove which purchases were for business. Open a separate business bank account and card. Use them exclusively for reselling expenses.
5. Ignoring Quarterly Estimated Tax Payments
If you owe more than $1,000 in taxes for the year, the IRS expects you to pay quarterly estimated taxes. Missing these payments triggers underpayment penalties. Due dates are:
| Quarter | Period Covered | Due Date |
|---|---|---|
| Q1 | January - March | April 15 |
| Q2 | April - May | June 15 |
| Q3 | June - August | September 15 |
| Q4 | September - December | January 15 (next year) |
Use Form 1040-ES to calculate and submit quarterly payments.
6. Deducting Personal Items as Business Expenses
That new phone you bought for $1,200 - if you use it 50% for business and 50% personally, you can only deduct $600. Claiming the full amount when you clearly use it for personal calls and social media is a red flag.
7. Not Reporting Income From Platforms Without 1099-K
You sold $8,000 on Mercari and $6,000 on Depop. Neither sent a 1099-K because you were below the threshold on each. You do not report it. The IRS may not catch this immediately - but if they do, the penalties for unreported income are steep. Report all income regardless of whether you received a tax form.
Frequently Asked Questions
Do I owe taxes if I sell less than $20,000?
Yes. The $20,000 threshold only determines whether the platform sends a 1099-K to the IRS. It does not determine whether you owe taxes. All net income from reselling is taxable regardless of the amount. The only exception is selling personal items at a loss - if you sell your old jacket for less than you paid, that is not taxable income.
What if I sell on multiple platforms and stay under $20,000 on each?
You still owe taxes on the combined income. The 1099-K threshold applies per platform, but your tax obligation is based on your total income from all sources. Report everything on one Schedule C.
Do I need to collect sales tax from buyers?
In most cases, no. Platforms like eBay, Poshmark, Mercari, and Depop act as marketplace facilitators and collect sales tax from buyers on your behalf. They calculate the tax, collect it at checkout, and remit it to the appropriate state. You do not need to do anything for that part.
However, if you sell through your own website or at in-person events, you may need to collect and remit sales tax yourself.
What is the difference between sales tax and income tax for resellers?
Sales tax is collected from the buyer at the point of sale. Marketplace platforms handle this for you. Income tax is what you owe on your profit from reselling. Nobody handles this for you - it is entirely your responsibility to calculate, report, and pay.
| Tax Type | Who Pays | Who Collects | Your Responsibility |
|---|---|---|---|
| Sales tax | Buyer | Platform (usually) | None (for marketplace sales) |
| Income tax | You | Nobody - you pay directly | File Schedule C, pay quarterly |
| Self-employment tax | You | Nobody - you pay directly | Included in quarterly payments |
Can I deduct inventory I bought but have not sold yet?
Technically, unsold inventory is an asset, not an expense. The proper method is to track your beginning and ending inventory and deduct only the cost of goods actually sold during the year. In practice, many small resellers use the cash method and deduct inventory when purchased. Consult a tax professional about which method works best for your situation.
What records should I keep and for how long?
Keep all business records for at least three years from the date you file your return. If you underreport income by more than 25%, the IRS has six years to audit you. The safest approach is to keep everything for seven years.
Essential records include:
- Purchase receipts for all inventory
- Platform payout statements and 1099-K forms
- Mileage logs
- Home office measurements and housing costs
- Bank and credit card statements for business accounts
- Resale certificate copies provided to suppliers
Will the $600 threshold come back in 2027?
Nobody knows for certain. The OBBA locked in the $20,000/200 transaction threshold for 2025 and 2026 tax years. What happens after that depends on future legislation. Some lawmakers want to bring the threshold back down. Others want to keep it at $20,000 permanently. Plan your record-keeping as if the $600 threshold could return - that way you are prepared regardless.
Take Control of Your Reseller Taxes
The 1099-K threshold change gives resellers breathing room on paperwork, but it does not change what you owe. Track your income, claim every legitimate deduction, and pay quarterly if you owe more than $1,000.
And if you are buying inventory to resell without a resale certificate, you are paying sales tax you do not need to pay. Fix that today.
Get Your Resale Certificate -->
Questions about reseller taxes or resale certificates? Contact us for guidance.