Deductible Expenses for Resellers

Every dollar of legitimate business expense you track is a dollar that does not get taxed as profit. For resellers, who often spend a large share of each sale on fees, shipping, and supplies, careful expense tracking is not bookkeeping busywork; it is the difference between a fair tax bill and an inflated one. The general standard the IRS uses is that a business expense must be ordinary and necessary for your trade, a phrase explained in its small business guide, Publication 334, at IRS.gov. This guide walks the categories a typical reseller can deduct on a Schedule C (Form 1040), and flags the ones with special rules.

Platform and payment fees

The commissions marketplaces take are a deductible cost of doing business. Every final value fee, per-order fee, promoted-listings ad fee, and payment processing charge reduces your taxable profit. Because these come straight out of your payouts, it is easy to forget they are also a deduction, but they add up fast: a seller doing $28,000 in sales can easily pay several thousand dollars in platform fees over a year. Log them from your payout records so the total is ready at tax time. If you advertise through something like eBay Promoted Listings, that ad spend is a deductible marketing cost too, and the eBay Promoted Listings Breakeven tool helps you decide when that spend is worth making in the first place.

Shipping and packaging

Postage you pay, whether or not the buyer covered shipping, is deductible, as are the physical supplies of fulfillment: boxes, poly mailers, tape, bubble wrap, thermal labels, and printer supplies. Many resellers under-deduct here because packaging is bought in dribs and drabs at the hardware store. A running expense log fixes that. Note the interaction with shipping you charge the buyer: money collected for shipping is part of your revenue, and the postage you actually pay is the offsetting expense, so both belong in your records. Our shipping costs and your margin guide digs into how these two figures interact and how to price so shipping does not quietly erase your profit.

Mileage and vehicle costs

If you drive to source inventory, to the post office, or to markets, that business mileage is generally deductible. The IRS lets most small businesses choose between the standard mileage rate, a set number of cents per business mile, and the actual-expense method that tracks a share of gas, maintenance, and depreciation. The standard mileage rate is simpler and is what most resellers use, but the rate changes every year, so do not memorize an old figure; check the current standard mileage rate at IRS.gov and read the travel and transportation rules in Publication 463. Either way, the deduction only holds up if you keep a mileage log with dates, purpose, and miles, so record trips as you take them.

Supplies, tools, and subscriptions

Beyond packaging, the everyday tools of the business are deductible: a postage scale, storage bins, a label printer, photography lighting, and the software or subscriptions you pay for to run listings or bookkeeping. Fees for a business bank account or the business share of a phone or internet plan can qualify too, apportioned to business use. The theme across all of these is documentation: the deduction is only as good as the record that supports it, which is why a steady record system matters as much as knowing the categories.

Startup and one-time costs

Costs you incur getting the business going, before your first sale, are worth knowing about because they are handled a little differently. The IRS treats certain startup costs under their own rules, sometimes allowing part to be deducted in the first year and the rest recovered over time rather than all at once. Larger equipment that lasts more than a year, like a serious label printer or a photography setup, can also fall under depreciation or a special election that lets you expense it up front. The dollar amounts and elections change, so this is a category to raise with a tax professional rather than guess at, but the practical point for records is the same: keep the receipt and note the date, because how a cost is treated can depend on when you paid it.

The home office, handled carefully

Resellers who use part of their home regularly and exclusively for the business may qualify for the home-office deduction, which can cover a share of rent or mortgage interest, utilities, and insurance, or use a simplified square-footage method. The two words that trip people up are "regularly and exclusively": a spare room used only for inventory and packing can qualify, while the kitchen table you also eat dinner at generally does not. This is a legitimate deduction that is also scrutinized, so read the current IRS rules and consider professional advice before claiming it.

What is not deductible

A few things routinely get miscategorized. The cost of the items you sell is not an ordinary expense; it flows through cost of goods sold instead, as explained in our cost basis and COGS guide. Personal purchases are never deductible, and mixing them in is a fast way to undermine your whole return, which is why a separate account helps. And if your selling is a hobby rather than a business, the deduction rules are far more limited, so whether your activity is a business at all is a threshold question. The 1099-K Checker includes a read on the hobby-versus-business question alongside its tax estimate.

This article is general information, not tax advice. Deduction rules, mileage rates, and home-office requirements change and depend on your situation. Confirm the current rules with the IRS at IRS.gov and with a qualified tax professional before you claim anything. Start at the Reseller Math hub for the tools referenced above.