- Money from selling online is taxable income whether or not you get a form. The IRS says you must report it even without a Form 1099-K; only personal items sold at a loss are not taxable.
- For 2025 and 2026, marketplaces and payment apps must send a Form 1099-K only when your payments exceed $20,000 and 200 transactions. Card processors report every amount, and platforms may send one below the threshold.
- If selling is a business, you owe self-employment tax of 15.3% once net earnings reach $400, on top of income tax.
- Sales tax is separate. Economic nexus thresholds in the ten biggest states run from $100,000 (Florida, Pennsylvania, Illinois, Ohio, Georgia, North Carolina, Michigan) to $500,000 (California, Texas, New York). Illinois dropped its 200-transaction test on January 1, 2026.
- Amazon, Etsy and eBay collect sales tax for you on marketplace sales in states with marketplace facilitator laws, but not on your own website’s sales, and some states still want you registered.
This page is for people in the US who sell physical goods online: on Amazon, Etsy, eBay, through your own store or a mix. It covers federal income tax on what you earn for the 2026 tax year (returns filed in 2027), the 2026 rules for Form 1099-K, and state sales tax, with thresholds checked on each state’s own revenue website.
By the end you will know whether your selling counts as a hobby or a business, what the 1099-K does and does not mean, when you have to collect sales tax yourself, and what records and payments keep you out of trouble.
State income tax, selling services or digital products, sellers based outside the US, VAT and customs, and inventory accounting in detail. It explains how the rules work; it does not tell you what to put on your return. For that, ask a CPA, an enrolled agent or a tax attorney.
Do you have to pay tax on money you make selling online?
Usually yes, but it depends on what you sold. The IRS separates three situations, and each is taxed differently.
| What you sold | Taxed? | Where it goes |
|---|---|---|
| Personal items for less than you paid (old clothes, furniture) | No | A loss is not deductible, but you can zero out any amount reported on a 1099-K |
| Personal items for more than you paid | Yes, the gain | Form 8949 and Schedule D |
| Items as a hobby, not to make a profit | Yes, the income | Schedule 1 (Form 1040), line 8j |
| Items as a business, to make a profit | Yes, the profit | Schedule C, plus self-employment tax on Schedule SE |
The IRS reminder is blunt: “Whether or not you receive a Form 1099-K, you must still report any income on your tax return.” That includes personal items “sold at a gain”. Money from friends and family as a gift or to repay a personal expense is not taxable and should not be reported on a 1099-K at all.
Is your selling a hobby or a business?
The IRS says a hobby is something done for enjoyment “with no intention of making a profit”, and a business is run to make one. No single factor decides it. The IRS asks you to weigh all of these:
- whether you run it in a businesslike way, with complete and accurate books and records
- the time and effort you put in, and whether you depend on the income
- whether losses are normal for a start-up or beyond your control
- whether you change methods to improve profitability, and whether you have the know-how to succeed
- whether you made a profit in similar activities before, and whether the activity makes a profit in some years
- whether personal motives such as enjoyment or relaxation play a part
The label matters because of expenses. A business deducts its costs (what you paid for the goods, platform fees, shipping, packaging) on Schedule C, and a loss can offset other income. Hobby income goes on Schedule 1, line 8j, and IRS Publication 334 says you “generally can’t use a loss from the activity to offset other income”. The IRS has said since 2019 that hobby expenses are miscellaneous itemized deductions that “can no longer be deducted”, and the 2025 Publication 525 still lists such deductions as unavailable. So a hobby seller is taxed on gross income, while a business seller is taxed on profit but pays self-employment tax on it.
- You buy stock to resell, or make items in volume
- You track sales, costs and fees in a spreadsheet or bookkeeping app
- You spend regular hours on listings, sourcing and shipping
- You change prices, products or channels to earn more
- You sell the odd item you made for fun
- You don’t track costs and would carry on even at a loss
- Sales are occasional and small
- Your living comes from a job or other income
How much tax do online sellers pay on profit?
A business seller pays two federal taxes on profit: income tax at your bracket, and self-employment tax for Social Security and Medicare. Self-employment tax is 15.3% (12.4% Social Security plus 2.9% Medicare) on 92.35% of net profit, once net earnings from self-employment reach $400. For 2026, the Social Security part stops at the $184,500 wage base.
Here is the self-employment tax part for a seller with $30,000 of sales in 2026. The cost and fee figures are an illustration, not averages.
- Gross sales received (all platforms)
- $30,000
- Less cost of the goods sold
- −$9,000
- Less platform and payment fees
- −$3,000
- Less shipping and packaging you paid
- −$2,500
- Net profit on Schedule C
- $15,500
- Net earnings from self-employment: $15,500 × 92.35%
- $14,314
- Self-employment tax: $14,314 × 15.3%
- $2,190
SE tax, before any income tax$2,190
Half of the self-employment tax is deductible when working out income tax, and the qualified business income deduction may apply too. Income tax depends on your whole return, so we have not estimated it here. The point of the example: tax is worked out on profit, so a 1099-K showing $30,000 does not mean you owe tax on $30,000.
When will you get a Form 1099-K from Amazon, Etsy, eBay or PayPal?
The One Big Beautiful Bill retroactively restored the pre-2021 rule. The IRS says third party settlement organizations, meaning payment apps and online marketplaces, are not required to file a Form 1099-K “unless the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200.” Both tests must be met. This applies to 2025 and 2026 payments; the earlier plan to drop the threshold to $600 no longer applies.
Three details catch people out. First, if customers pay you directly by credit, debit or gift card through a card processor, you get a 1099-K “no matter how many payments you got or how much they were for.” Second, the IRS says platforms may send a 1099-K below the $20,000 and 200 threshold. Third, Box 1a shows the gross amount: the IRS says it is not adjusted for fees, credits, refunds, shipping, cash equivalents or discounts. You deduct those yourself, from your own records.
Forms for 2026 must reach you by February 1, 2027. For the full breakdown, including what to do if the form is wrong, see our Form 1099-K guide.
When do you have to collect sales tax as an online seller?
Sales tax is a state tax, collected from your customer and paid to the state. Until 2018, a state could make a seller collect it only if the seller had a physical presence there. The Supreme Court’s 2018 decision in South Dakota v. Wayfair removed that limit on June 21, 2018, as New York’s tax department explains. States now use “economic nexus”: once your sales into a state pass its threshold, you must register and collect, even with no office or stock there.
Physical presence still counts on its own. California lists “maintaining inventory” in the state as a physical presence, and Illinois says a retailer that fulfills orders from inventory in Illinois is not a remote retailer. If a fulfillment service stores your stock in a state, check that state’s rules whatever your sales.
Economic nexus thresholds in the ten biggest states
| State | Sales threshold | Transaction count | Period measured |
|---|---|---|---|
| California | over $500,000 | none | Preceding or current calendar year |
| Texas | $500,000 | none | Preceding 12 calendar months; counts all Texas revenue, including nontaxable and resale sales |
| Florida | over $100,000 | none | Previous calendar year; taxable remote sales only |
| New York | over $500,000 | and more than 100 sales | Preceding four sales tax quarters |
| Pennsylvania | over $100,000 | none | Previous 12 months |
| Illinois | $100,000 | none since January 1, 2026 (was 200) | Preceding 12 months, tested each quarter |
| Ohio | over $100,000 | or 200 or more sales | Current or previous calendar year |
| Georgia | over $100,000 | or 200 or more retail sales | Previous or current calendar year |
| North Carolina | over $100,000 | none since July 1, 2024 (was 200) | Previous or current calendar year |
| Michigan | over $100,000 | or 200 or more transactions | Previous calendar year |
Where a transaction count still applies, a small seller can cross it long before the dollar amount: 200 orders at $25 each is only $5,000 of sales into Ohio, Georgia or Michigan. That is why Illinois’s change in 2026 and North Carolina’s in 2024 matter to low-priced sellers.
Do your marketplace sales count toward the threshold?
It depends on the state, and the difference is real:
- California: a remote marketplace seller must include sales made through a marketplace facilitator when testing the $500,000 threshold.
- North Carolina: the $100,000 includes “sales as a marketplace seller and marketplace-facilitated sales.”
- Florida: only sales made outside the marketplace count for a marketplace seller.
- Pennsylvania: the Department of Revenue says a marketplace seller counts its direct sales plus sales through a facilitator that does not collect for it.
Marketplace facilitator laws cover sales made through the marketplace. Sales from your own online store, a social media shop that is not a marketplace facilitator, or a craft fair are your responsibility. If they, alone or together with marketplace sales where the state counts them, take you over a threshold, you register and collect on those sales yourself.
Do Amazon, Etsy and eBay collect sales tax for you?
On marketplace sales, in most cases, yes. Marketplace facilitator laws shift the duty to collect and pay sales tax from the seller to the platform. But “most” is not “all”, so here is what each platform says.
- Amazon says that as a marketplace facilitator it “calculates, collects, remits, and refunds sales tax” on third-party sellers’ orders going to states with these laws. Its list covers every state with a statewide sales tax, plus the District of Columbia, Puerto Rico and Alaska local jurisdictions that joined the Alaska Remote Seller Sales Tax Commission. Amazon flags exceptions: New York’s law covers only tangible goods, not taxable services; Colorado home-rule city taxes are not covered where the city has not adopted a facilitator ordinance; and Alabama rentals and leases may fall outside it.
- eBay says it “calculates, collects, and remits sales tax on behalf of sellers” for items shipped to the states and territories it lists, at no charge, and sellers cannot opt out. It also collects certain state fees, such as recycling and retail delivery fees, in some places.
- Etsy says it collects and remits sales tax on orders to states with marketplace facilitator laws, and that your shop’s own sales tax settings apply only where Etsy does not collect. Check the current state list in your Shop Manager.
Do you still need to register if the marketplace collects?
Sometimes. State rules differ for sellers based in the state:
- New York: a seller based in the state who sells only through a marketplace “still need[s] to apply for a Certificate of Authority” and file periodic returns, reporting the facilitated sales as nontaxable.
- Texas: a Texas seller is “still responsible for having a Texas tax permit and filing” returns, even if all sales are through a marketplace. A remote seller selling only through a marketplace that collects does not need a Texas permit but must keep records for four years.
- California: sellers whose sales go exclusively through a marketplace facilitator “are not required to register.”
- Ohio: a seller using only a marketplace that collects and pays the tax does not need a license.
New business account offers, fee changes and deadlines, in one short email.
Do you need a seller’s permit or a resale certificate?
A seller’s permit (each state names it differently: sales tax permit, vendor’s license, certificate of authority) is the registration that lets you collect sales tax. In California, you need one if you are “engaged in business” in the state and sell goods that would normally be taxed at retail. Registration online is free, though the state may ask for a security deposit. Texas asks you to apply if you are engaged in business in Texas and sell taxable goods or services there, and says to allow two to three weeks for the permit.
A resale certificate is the other side. It lets you buy stock you will resell without paying sales tax to your supplier, because the tax is collected when you sell to the final customer. Rules are state by state:
- California: buyers can issue form CDTFA-230 for goods they will resell in the regular course of business. It must not be used for items you will use yourself, use in the business before selling, or hold as an investment.
- Illinois: a purchase for resale is tax-free only if the buyer has an active registration or resale number from the Department and certifies the purchase is for resale; form CRT-61 can document it.
Packaging tape, a label printer or a laptop is used in your business, not resold. California’s guidance says not to use a resale certificate for items you will use rather than sell, and the same principle applies in other states; tax is due on those purchases.
What records should an online seller keep, and for how long?
The IRS lists the supporting documents a business should keep: sales slips, invoices, receipts, deposit slips and canceled checks, plus records showing the amounts and sources of gross receipts and proof of payment for purchases. For an online seller that means:
- Platform reports Download the yearly sales, fee and refund reports from each marketplace and payment app. They are what you reconcile a 1099-K against.
- Purchase records Supplier invoices and proof of payment for every item you resell or the materials you make it from.
- Expense receipts Shipping labels, packaging, subscriptions, advertising and equipment.
- A separate account Running sales and costs through one business checking account makes all of the above far easier to prove.
- Sales tax records If you are registered anywhere, keep each state’s returns and the marketplace’s reports of tax it collected for you.
How long: the IRS says generally 3 years from filing, 6 years if you leave out income that is more than 25% of the gross income shown on your return, 7 years for a bad debt deduction, and indefinitely if you do not file. Employment tax records are kept for at least 4 years.
Do online sellers need to pay estimated taxes?
If you expect to owe $1,000 or more when you file, generally yes. Nobody withholds tax from marketplace payouts, so you pay during the year with Form 1040-ES. You will usually avoid an underpayment penalty if you pay at least 90% of this year’s tax or 100% of last year’s, whichever is smaller; the 100% becomes 110% if your adjusted gross income for the prior year was over $150,000.
| Payment | Due date |
|---|---|
| 4th payment for 2026 | January 15, 2027 |
| 1st payment for 2027 | April 15, 2027 |
| 2nd payment for 2027 | June 15, 2027 |
| 3rd payment for 2027 | September 15, 2027 |
| 4th payment for 2027 | January 18, 2028 (expected, after weekend and holiday shifts) |
Our guide to quarterly estimated taxes shows how to work out each payment, and every date is on the deadlines page. If you pay through IRS Direct Pay or EFTPS and the site will not load, check whether the IRS is down. Thinking about forming an LLC for your shop? Read LLC vs sole proprietorship first: by default it does not change your federal tax.
FAQ
Do I have to pay taxes if I don’t get a 1099-K?
Yes. The IRS says you must report income from selling goods or services whether or not you receive a Form 1099-K. The form is only an information report; the income is taxable either way, and personal items sold at a gain count too.
What is the 1099-K threshold for 2026?
Payment apps and online marketplaces must file one when your payments exceed $20,000 and the number of transactions exceeds 200. Card processors report all card payments regardless of amount. Platforms may still send a form below the threshold.
Is selling my old stuff on eBay taxable?
Not if you sell personal items for less than you paid. The IRS says you cannot deduct the loss, but you can zero out any amount reported on a 1099-K. If you sell a personal item for more than you paid, the gain is taxable.
Do I need to collect sales tax if I only sell on Etsy or Amazon?
Usually not on those marketplace sales, because the platform collects and remits in states with marketplace facilitator laws. But states such as New York and Texas still require sellers based there to register and file returns, and your own website’s sales are not covered.
Which states dropped the 200-transaction test?
Of the ten biggest states, Illinois removed it on January 1, 2026 and North Carolina on July 1, 2024, so both now use $100,000 of sales only. California, Texas, Florida and Pennsylvania use a dollar test only. New York requires both more than $500,000 and more than 100 sales.
Is a hobby seller better off than a business seller?
Not necessarily. Hobby income avoids self-employment tax, but you are taxed on the gross amount because hobby expenses cannot be deducted. A business pays self-employment tax but only on profit after costs. Which applies depends on the IRS factors, not on what you prefer.
Sources
- IRS: FAQs on the Form 1099-K threshold under the One Big Beautiful Bill (IR-2025-107)
- IRS: Understanding your Form 1099-K
- IRS: What to do with Form 1099-K (gross amount, personal items)
- IRS Tax Tip 2022-57: Hobby or business
- Taxpayer Advocate Service: Hobby vs. business income (March 2026) (Schedule 1, line 8j)
- IRS Tax Tip 2019-85: Hobby expenses (archived)
- IRS Publication 525 (2025) and Publication 334 (2025)
- IRS: Self-employment tax and Topic 751 (2026 wage base)
- IRS: Estimated taxes and Form 1040-ES (2026)
- IRS: What kind of records should I keep and How long should I keep records
- CDTFA: Use tax collection after Wayfair, Marketplace Facilitator Act, seller’s permit FAQ and Publication 103
- Texas Comptroller: Remote sellers, marketplace sellers and permit application
- Florida Department of Revenue: Registration and remote sales
- New York Tax Department: No physical presence and marketplace providers
- Pennsylvania Department of Revenue: Online retailers
- Illinois Department of Revenue: Bulletin FY 2026-12 and Sales and use taxes (resale)
- Ohio Department of Taxation: Out-of-state sellers
- Georgia Department of Revenue: Policy Bulletin SUT-2019-02
- North Carolina Department of Revenue: Remote sales and Directive SD-24-1
- Michigan Treasury: Remote seller FAQ
- Amazon: Marketplace Tax Collection
- eBay: Taxes and import charges
- Etsy: How US state sales tax and fees apply to Etsy orders
Checked on October 25, 2026 against irs.gov, the ten states’ revenue departments and the platforms’ own help pages. Tax rules and thresholds change; the IRS, the states and the platforms’ own documents always prevail.