Do I Need to Report Online Marketplace Sales on My Taxes?

Tax Rules for Online Marketplace Sales

Your rules for reporting online sales will vary depending on how regularly you sell and whether you intend to make a profit. There are four typical types of online sales:

One-Off Sales

You bought a $500 blender. You used your $500 blender. You got tired of smoothies and sold your $500 blender on Facebook Marketplace for $50. In this modern-day version of a garage sale, your online sales generally aren't taxable. One-off sales where you sell an item for less than what you paid are considered nondeductible losses by the IRS. You can't deduct the loss, but you won't have to pay taxes on it either.

Hobby Sales

A hobby is something you do for fun and not primarily for profit, even if you make occasional sales. For example, you might sell a painting every few years for a few hundred or a few thousand dollars. Income you make from a hobby is subject to income tax but not self-employment tax. However, through 2025, you can't deduct hobby-related expenses to offset your income.

Collectibles and Investments

An investor buys and sells items for profit, but doesn't run a full-fledged business. Say, for example, you sometimes buy sneakers to sell in the resale market or collectible autographs you hope will appreciate in value. You should report any capital gains you make on Schedule D of your tax return. If you owned the item for less than a year, you'll pay regular income tax on the gain. If you owned it for more than a year, you'll pay capital gains taxes, which are typically lower than your personal tax rate. You can use capital losses, if any, to offset your gains when you sell an investment for less than you paid.

Online Business

If you sell items regularly online, either as a standalone business or as part of a larger operation like a retail shop, your online sales must be reported as sales on your business tax return or on Schedule C of your personal tax return. You'll pay regular income taxes on your profits, but you can deduct your business expenses and can deduct business losses if you don't turn a profit. In addition to income taxes, you must pay self-employment taxes on your business income.

What Is a 1099-K?

Payment service entities (PSEs)—including online marketplaces like Etsy, Facebook Marketplace and StubHub—report online transactions to the IRS using Form 1099-K. A 1099-K form shows the total dollar amount of your online transactions for the year. Through 2022, PSEs were only required to issue 1099-Ks when total transaction volume reached $20,000 or 200 transactions. Starting in 2023, the threshold changes to $600, meaning many more online sellers will receive 1099-K forms going forward.

You should report your taxable online sales to the IRS, regardless of whether a 1099-K is issued. However, when the IRS receives a 1099-K, they can see how much you transacted. This gives you an added inducement to report your sales accurately.

What's not on a 1099-K: Form 1099-K is intended to track business transactions. If you use apps like Venmo and Cashapp to send and receive money between friends and family, those transactions are personal and aren't included as business transactions unless you use a designated business account to make them.

How to Report Online Marketplace Sales on Your Taxes

How you report online sales on your taxes will depend on the type and amount of sales, and the nature of your business.

• Business owners should include 1099-K sales in their revenue calculations. If you have an existing business, you may already be including these sales in your regular accounting.
• Hobby sellers should report their sales on Schedule 1, Form 1040, line 21 of your personal income tax return. For more information on taxable sales from a hobby, see IRS tips for hobbyists.
• Occasional sellers, including investors, report their sales using Schedule D and Form 8949 on their personal tax return. Use these forms to report your income and show a profit or loss.

The Bottom Line

Although the rules surrounding 1099-Ks are not changing in time for the 2022 tax year, the $600 reporting threshold that begins in 2023 could have many taxpayers wondering what their tax obligation is at tax time. If in doubt (in any year), you may want to consult a tax professional. They can help you decide how to report your information about your online marketplace sales correctly and avoid additional scrutiny from the IRS.