I Sell Things Online - What Do I Need to Do for Taxes?

I Sell Things Online - What Do I Need to Do for Taxes?

Selling things online is easier than ever, whether it’s a side hustle, a small shop, or occasional sales.But once money starts coming in, many people ask:

“What do I actually need to do for taxes?”

The answer depends on what you’re selling, how often, and whether you’re making a profit. Let’s walk through it in simple terms.

🟢 STEP 1: UNDERSTAND WHEN ONLINE SALES MATTER FOR TAXES

Selling online can count as taxable income, even if it doesn’t feel like a business.

This applies if you sell through platforms such as:

🔹 Etsy

🔹 eBay

🔹 Amazon

🔹 Shopify

🔹 Facebook Marketplace

🔹 Instagram or TikTok shops

What matters most is intent and profit, not the platform.

🟢 STEP 2: KNOW THE DIFFERENCE BETWEEN PERSONAL SALES AND PROFIT

🔹 Selling Personal Items

If you’re selling personal items (old clothes, furniture, electronics) for less than you paid, you usually do not owe tax.

However:

🔹 These sales may still be reported to the IRS

🔹 Losses on personal items are not deductible

🔹 Selling for Profit

If you regularly sell items or create products with the goal of making money, the IRS generally views this as taxable income.

This applies even if:

🔹 It’s a side activity

🔹 You only sell part-time

🔹 The profits are small

🟢 STEP 3: EXPECT TAX FORMS FROM ONLINE PLATFORMS

Many online sellers receive Form 1099-K from payment platforms.

A 1099-K reports:

🔹 Total payments processed for you

🔹 Gross sales am

ounts (not profit)

Important:👉 The IRS also receives this form, which means the activity should be addressed on your tax return.

🟢 STEP 4: UNDERSTAND WHAT ACTUALLY GETS TAXED

You are generally taxed on profit, not total sales.

Profit is calculated as:

🔹 Sales

🔹 minus cost of items sold

🔹 minus allowable business expenses

Common deductible expenses include:

🔹 Inventory costs

🔹 Shipping and packaging

🔹 Platform and payment fees

🔹 Supplies and materials

🔹 A portion of internet or workspace costs (in some cases)

Good recordkeeping makes this much easier.

🟢 STEP 5: KNOW WHEN YOU NEED TO FILE A TAX RETURN

You generally need to file if:

🔹 You made a profit from online sales

🔹 You received a 1099-K

🔹 You earned $400 or more in net profit from selling

🔹 You already need to file for other reasons

Even small profits can create a filing requirement.

🟢 STEP 6: WATCH OUT FOR SELF-EMPLOYMENT TAX

Many online sellers are surprised by this.

If your online selling activity is considered a business:

🔹 You may owe self-employment tax

🔹 This covers Social Security and Medicare

🔹 It applies even if no regular income tax is owed

This is why some sellers owe taxes even when profits seem modest.

🟢 COMMON MISTAKES ONLINE SELLERS MAKE

🔹 Ignoring a 1099-K because “that wasn’t my profit”

🔹 Not tracking expenses and inventory

🔹 Mixing personal and business sales

🔹 Assuming small amounts don’t matter

🔹 Waiting for an IRS notice instead of filing properly

Most problems come from confusion, not intent.

🟢 WHEN YOU MAY NOT NEED TO FILE

You may not need to file if:

🔹 You only sold personal items at a loss

🔹 You had no profit from sales

🔹 No tax forms were issued

🔹 You had no other filing requirement

Even then, confirming is better than assuming.

🟢 A SIMPLE CHECKLIST FOR ONLINE SELLERS

🔹 Selling personal items → usually not taxable

🔹 Selling for profit → usually taxable

🔹 Received a 1099-K → should be reviewed

🔹 Net profit of $400+ → filing is required

When in doubt, review before filing (or not filing).

🟢 NEED HELP FIGURING IT OUT?

Online selling can quickly cross from casual to taxable without realizing it.

At Pacific Data, we help online sellers:

🔹 Understand what needs to be reported

🔹 Avoid overpaying or underreporting

🔹 Fix past filing issues if needed

If you sell things online and want clarity, we’re happy to help.