The $600 1099-K Threshold Is Here

What Changed in 2026

The IRS phased in new reporting requirements over three years. Here is where we are now:

If you receive $600 or more in gross payments through Depop in 2026, the platform must send you (and the IRS) a Form 1099-K. This applies to calendar year totals, not monthly amounts.

What 1099-K Reports

The form shows your gross payment volume - the total amount buyers paid, before Depop's fees, shipping costs, or refunds. This number is almost always higher than what actually hit your bank account.

Example breakdown:

You do not owe taxes on $8,500. You report the full amount and then subtract your costs. More on deductions below.

Getting a 1099-K Does Not Mean You Owe Taxes

This is the most misunderstood part. Receiving a 1099-K simply means the IRS knows you received payments. Whether you owe income tax depends on:

1. Were you selling personal items at a loss? If you sold your old clothes for less than you paid for them, that is not taxable income. Your $200 jacket sold for $45 is a $155 loss, not $45 of income.

2. Were you reselling for profit? Thrifted items, wholesale buys, and flips where you made money are taxable income - but only the profit portion, not the gross sale.

3. What are your deductible expenses? Fees, shipping, packaging, mileage, and inventory costs all reduce your taxable amount.

How Sales Tax Works on Depop

Depop Collects It For You

Depop operates as a marketplace facilitator under state laws passed after the 2018 Wayfair Supreme Court decision. When a US buyer purchases your item:

• Depop calculates the correct sales tax rate based on the buyer's location
• Depop adds tax to the buyer's total at checkout
• Depop collects the tax and remits it to the appropriate state
• You never touch this money

This applies in all states that collect sales tax. You do not need to register for sales tax collection, calculate rates, or file sales tax returns for your Depop sales.

What About Buyers Using Resale Certificates?

If someone buying your item has a resale certificate (because they are purchasing to resell), Depop does not currently offer a tax exemption process for buyers. The buyer pays tax at checkout regardless. This is a platform limitation, not a tax law requirement.

The Hidden Tax Problem: Your Purchases

While Depop handles sales tax on your selling side, nobody handles it on your buying side. When you source inventory, you pay sales tax unless you take action to prevent it.

If you buy a vintage jacket at a thrift store for $25 plus $2 tax, that $2 cuts directly into your profit margin. Multiply this across hundreds of purchases per year and it adds up.

Reporting Your Depop Income on Your Tax Return

Schedule C for Business Sellers

If you are running Depop as a business (buying items to resell, not just clearing your closet), you report income on Schedule C (Profit or Loss From Business). This form calculates your net profit after expenses.

Basic structure:

Schedule 1 for Casual Sellers

If you only sold personal belongings (no intent to profit, just downsizing), you may report any gains on Schedule 1 instead. Most casual sellers actually have losses since they sell used items for less than original purchase price.

Example: You sell 50 items from your own wardrobe for $2,000 total. You originally paid $5,500 for those items years ago. You have a $3,500 loss - not taxable income.

Hobby vs Business: How the IRS Decides

The IRS uses a facts-and-circumstances test. If you are thrifting every weekend looking for items to flip, you are running a business regardless of whether you call it a "side hustle."

Deductions That Lower Your Tax Bill

Cost of Goods Sold (COGS)

Everything you paid for the items you sold is deductible. This includes:

• Purchase price of thrifted items
• Wholesale costs
• Auction/estate sale purchases
• Shipping costs to get inventory to you
• Sales tax paid on inventory (if you do not have a resale certificate)

Keep receipts. If audited, you need to prove what you paid for items.

Platform and Payment Fees

Depop's current fee structure:

Shipping and Packaging

All shipping costs you pay are deductible:

• Depop shipping labels
• USPS, UPS, FedEx postage
• Poly mailers, boxes, tape, tissue paper
• Shipping supplies (scale, label printer, tape gun)
• Branded packaging materials

Home Office Deduction

If you use part of your home exclusively for your Depop business (photographing, storing inventory, packing orders), you may qualify for the home office deduction.

Two methods:

1. Simplified method: $5 per square foot, up to 300 sq ft ($1,500 max)
2. Regular method: Actual expenses proportional to business space percentage

Other Deductible Expenses

Stop Paying Tax on Your Inventory Purchases

How a Resale Certificate Works

A resale certificate lets you buy inventory without paying sales tax at the point of purchase. You are not avoiding tax - you are deferring it to the final consumer (who pays when they buy from you on Depop, collected by the platform).

When you present a resale certificate to a supplier:

1. Supplier does not charge you sales tax
2. You save 5-10% depending on your state's rate
3. Your cost of goods sold decreases
4. Your profit margin increases

Where Depop Sellers Can Use It

The Math on Annual Savings

For full-time Depop sellers, this is often the single biggest tax optimization available.

How to Get Your Resale Certificate

1. Register your business (LLC or sole proprietorship) with your state
2. Apply for a sales tax permit through your state's revenue department
3. Your resale certificate comes with or shortly after your permit
4. Make copies to give to each supplier

Processing time: instant to 4 weeks depending on state.

Apply for Your Resale Certificate

State-Specific Rules for Depop Sellers

States With No Sales Tax

If you live in or source from these states, there is no state sales tax:

• Alaska (no state tax, but some local taxes)
• Delaware
• Montana
• New Hampshire
• Oregon

You still benefit from a resale certificate when sourcing in other states.

States With Clothing Exemptions

Several states do not charge sales tax on most clothing:

If you source clothing in these states, you may not pay tax regardless. But accessories, shoes over certain thresholds, and non-clothing items still need your certificate.

States That Require Local Registration

These states may not accept out-of-state resale certificates. If you source regularly from suppliers here, you may need to register:

• California
• Florida
• Hawaii
• Illinois
• Louisiana
• Washington

Check with each state's requirements before assuming your home state certificate will work.

Costly Mistakes Depop Sellers Make

Mistake 1: Panicking Over the 1099-K Amount

The 1099-K shows gross payments, not taxable income. Do not assume you owe taxes on the full amount. Subtract your cost of goods sold, fees, and expenses first.

Mistake 2: No Records of Purchase Prices

Without receipts showing what you paid for inventory, you cannot prove your cost of goods sold. The IRS may disallow your COGS deduction entirely, meaning you pay tax on gross revenue instead of profit.

Fix: Keep every receipt. Take photos of thrift store tags. Use a spreadsheet or app to log purchases.

Mistake 3: Forgetting About Items That Did Not Sell

Items you bought but did not sell by year-end are still part of your inventory - not a deductible expense yet. You deduct COGS when items sell, not when you buy them.

Mistake 4: Mixing Personal and Business Sales

If you sold personal items and resale inventory through the same Depop account, you need to separate them for tax purposes. Personal items sold at a loss are not taxable. Resale profits are.

Mistake 5: Paying Sales Tax on All Inventory

Every dollar of sales tax you pay on inventory purchases is profit lost. A resale certificate eliminates this for most sourcing channels.

Mistake 6: Ignoring Estimated Taxes

If you expect to owe $1,000 or more in taxes (federal), you should make quarterly estimated tax payments. Missing these results in penalties.

2026 Tax Checklist for Depop Sellers

Before Tax Season

• Obtain your resale certificate if sourcing taxable inventory
• Set up a tracking system for purchases (spreadsheet, app, or notebook)
• Keep all receipts organized by month
• Separate personal closet sales from resale business activity
• Track mileage for sourcing trips

Throughout the Year

• Log every inventory purchase with date, source, and cost
• Record which items sell and for how much
• Save receipts for shipping supplies, packaging, equipment
• Make quarterly estimated tax payments if applicable

At Tax Time

• Wait for your 1099-K from Depop (arrives by January 31)
• Calculate cost of goods sold for items that actually sold
• Total your deductible expenses
• Complete Schedule C if running a business
• File by April 15 or request an extension

Records to Keep

Keep these for at least 3 years (7 years if you want to be safe):

• All 1099-K forms received
• Inventory purchase receipts
• Shipping and supply receipts
• Bank/payment statements
• Mileage logs
• Home office calculations