1099-K and taxes for resellers & consignment stores

What a 1099-K is — and who actually sends it

A Form 1099-K is an information return that third-party settlement organizations — payment processors and online marketplaces like eBay, Poshmark, Etsy, Mercari, PayPal, Stripe and Square — file with the IRS and send to you. It reports the gross amount of payments those platforms settled to you over the year, broken out by month, with a copy going to the tax authority.

The key word is 'information.' A 1099-K does not calculate what you owe. It simply tells the IRS how much money flowed to you through that processor, so the IRS can match it against what you report. If you sell across several marketplaces and take card payments in person, expect several separate 1099-Ks — and the totals can overlap or double-count if the same sale touched two processors, which is exactly why your own records matter more than any single form.

The reporting threshold keeps changing — verify the current one

This is the part everyone gets tripped up on, so read it carefully. The dollar threshold that triggers a 1099-K has been in flux for years. The long-standing federal rule was $20,000 in gross payments AND more than 200 transactions. There has been a heavily discussed move toward a much lower $600 threshold with no transaction minimum, and the effective date has been delayed and phased more than once through legislative and IRS action.

On top of that, several STATES set their own, lower reporting thresholds — so a seller under the federal number can still receive a 1099-K because of a state rule. Marketplaces issue the form based on whichever threshold applies to you. The practical upshot: do not memorize a single number. Confirm the CURRENT year's threshold with the IRS or your CPA before you file, and — this matters — build your bookkeeping so it does not depend on the threshold at all.

Here is the reassuring part. Whether or not you receive a 1099-K, your legal obligation is the same: report your income and pay tax on your profit. A form arriving (or not arriving) changes nothing about what you owe. So the goal is simply to be ready regardless of the exact number, which is what the rest of this guide is about.

Gross payments are not profit — the #1 misunderstanding

The single most common panic is opening a 1099-K, seeing a big gross number, and assuming you owe tax on all of it. You do not. A 1099-K reports GROSS payments — the full sale amount buyers paid, before anything is subtracted. It includes the cost of the item, marketplace fees, payment-processing fees, shipping you collected, and even sales tax in some cases.

You owe income tax on PROFIT, not gross sales. Profit is what is left after you subtract what the item cost you (your cost basis), the fees the marketplace and processor took, shipping costs, and your other legitimate business expenses. A $40,000 gross number can easily be a few thousand dollars of actual profit once cost of goods and fees come out — but only if you can document those subtractions.

That is the whole game: the 1099-K sets the top line, and your records establish everything you get to subtract from it. Without records, you risk being taxed on gross. With clean records, you are taxed on what you actually made.

Consignor income vs shop income — you are a pass-through

Consignment stores have an extra wrinkle that pure resellers do not. When you sell a consigned item, the full sale amount often settles to YOUR payment processor — so it shows up on YOUR 1099-K — even though a large share of that money belongs to the consignor and gets paid back out to them. If you treat the entire gross as your income, you will massively overstate what you earned.

Your actual income from a consigned sale is your commission — the shop's share of the split — not the whole sale price. The consignor's portion is money that passes through you to them. How that is reported and structured has real tax consequences, so this is a case to confirm with your CPA, but the record-keeping principle is clear: you must be able to separate the shop's share from the consignor's share on every single sale.

This is exactly what per-consignor tracking is for. In ResaleOS, consignor accounts record who owns each item and split every sale into consignor payout and shop income automatically, so at tax time you can show which portion of your gross was really yours.

Cost basis, COGS and deductible fees — why records matter

Everything you subtract from your gross has to be defensible. Cost basis is what you paid for an item — the estate-sale price, the wholesale invoice, the thrift-store receipt. Cost of goods sold (COGS) is the total basis of the items you actually sold during the year. Deductible expenses include marketplace and payment-processing fees, shipping, supplies, mileage, and software.

A reseller who reconstructs cost basis from memory in April is leaving money on the table and inviting trouble. A reseller who logged each item's cost when they bought it, and let their tools capture fees on each sale, simply exports the numbers. That is the difference clean records make — and it compounds every year.

ResaleOS records cost basis per item and captures marketplace and processing fees on each sale, then rolls it into reporting you can hand to an accountant: per-item margin, sell-through, and profit-and-loss / accounting exports. It is the paperwork trail that lets you report profit instead of gross.

Sales tax on consigned items (a quick note)

Sales tax is a separate obligation from income tax, and it is easy to conflate the two. Sales tax is collected from the buyer at checkout and remitted to the state — it is never your income and should never be counted as profit. For consigned goods the store is typically the seller of record and responsible for charging and remitting sales tax on the full retail price, though the rules vary by state.

The practical move is to set your tax rates once so the right amount is collected on every sale, in person and online, and kept separate from your earnings. ResaleOS has a sales-tax setup for exactly this.

Stay ready year-round with clean reporting

Tax readiness is not a March project — it is a byproduct of good bookkeeping done all year. If cost basis is logged when you source, fees are captured when you sell, and consignor splits are recorded automatically, then filing is mostly exporting. If none of that is tracked, filing is archaeology.

The stable takeaways hold no matter what the threshold does this year: a 1099-K reports gross, you are taxed on profit, and profit is gross minus cost of goods, fees and legitimate expenses. Most resellers file on Schedule C as a business and deduct those expenses there. Keep the records that back every subtraction, and the form becomes a formality instead of a fire drill.

ResaleOS keeps that trail without extra work: cost basis and fees per item, consignor vs shop income split automatically, and P&L / accounting exports ready when your CPA asks for them.