Taxes and Resellers: A Guide to 1099s

Reselling 101

By RC Staff

28 April 2023

Recent legislation has shifted the landscape for side hustlers and resellers, with sales over $600 now needing to be reported. While taxes may not be the most thrilling aspect of the business, staying on top of them is essential to keep the tax man satisfied. We’ve put a short guide together to help you get a better grasp on how taxes affect you as a reseller, but remember, your first step should be to get in touch with a qualified accountant. Self-employment also means a higher degree of responsibility for your taxes compared to a W2, so plan accordingly.

That said, let’s tighten our laces and get into the world of taxes as a reseller.

Saving money for taxes as a reseller

Saving enough money for taxes throughout the year is extremely important, as nobody wants a colossal tax bill from Uncle Sam come April. As a reseller, self-employed status means self-employment tax is due, in addition to income tax. Here are some ways to stay prepared:

• Estimate your taxes – A good rule of thumb is setting aside 25-30% of what you make to go towards self-employment and income tax. That’s a safe estimate, you might owe more or less depending on your income and deductions.
• Set aside your tax money (literally) – Either open a second bank account or take it out in cash and stow it away. You don’t want to find out what happens when you spend the money that is supposed to go to the government.
• Pay quarterly – If you pay 4 times a year it keeps that money from piling up and tempting you. It also keeps the IRS happy. You can use Form 1040-ES to calculate your estimated tax payments.

Get familiar with the 1099-K

Understanding the 1099-K form is crucial when you’re dealing with platforms like StockX, PayPal, eBay, Venmo, or Ticketmaster. When your sales surpass $600 on any of these platforms, you can expect a Form 1099-K in the mail – an official tax document outlining those sweet, sweet transactions.

How to deal with the 1099-K form:

• Track those sales – Your 1099-K form records revenue from each platform, so be sure to report the correct amount on your taxes.
• Report, report, report – Make sure to  include that 1099-K income on Schedule C (Form 1040) when tax time rolls around. That’s where you’ll document your income and expenses.
• Add it up – Selling on multiple platforms? You’ll get a 1099-K from each one (as long as you’ve sold over $600 on each), so make sure to report your combined income on your tax return.
• Stay in the loop with state requirements – Different states have different rules when it comes to the 1099-K form. Make sure you’re up to date with your state’s regulations.
• Receipts are your new best friend – Keep receipts of your sales, fees, and expenses throughout the year. If you don’t want to hold on to a wad of papers, you can use a tracker app like Receipt Scanner: Easy Expense. Future you will thank you come tax season.
• Triple check everything – Mistakes happen all the time, even with tax forms. If your records don’t match the form you received, reach out to the platform to get things sorted before filing taxes.

Doing your taxes this way can be stressful, but it’s important to realize that the more organized you are, the easier things will be come April. Even a little effort during the year goes a long way during tax season.

Maximizing tax deductions as a reseller

One of the best parts of being a legit reseller? All those deductions. Some common write-offs for resellers include:

• Cost of goods sold
• Shipping costs
• Home office deductions
• Business supplies and equipment
• Business-related travel expenses
• Phone and internet bills

Be sure to hold on to as many receipts as possible and have an accountant run through them with you, you’d be surprised how many things count as business expenses.

Reseller permits help with taxes

A reseller permit, AKA a sales tax permit or resale certificate, lets you purchase products for resale without paying sales tax – a major profit boost for those high-dollar transactions. The process of getting a reseller permit differs from state to state, but generally involves these steps:

• Register your business – Get in touch with your state’s tax department, get an Employer Identification Number (EIN) from the IRS, and register your business name.
• Apply for your permit – Fill out application forms from your state’s tax department, providing info about your business, the types of products you plan to resell, and estimated annual sales.
• Don’t forget to renew – Stay on top of renewal processes and deadlines – some states require you to renew your reseller permit.

Organize and stay compliant as a reseller

The key to acing tax management as a reseller? Organization and compliance. Use accounting software or mobile apps to track income and expenses, and don’t hesitate to talk to a tax professional if you’re unsure about something. They’ll help you max out deductions and sidestep costly errors.

Reselling is an exciting and profitable hobby, but you need to be tax-savvy. Master the 1099-K form, save for taxes, take advantage of deductions, and boost your margins with that reseller permit. Keep your records organized, pay your taxes, and stay compliant. With this knowledge under your belt, you’re ready to grow your business and avoid getting locked up.

If you’re looking for another way to level up your reselling game, check out RC Elite. The community is filled with experienced resellers who are ready to share their knowledge and help you succeed in the reselling industry. By joining RC Elite, you’ll never miss a reselling opportunity again with access to exclusive content, expert advice, and networking opportunities with other like-minded resellers. It’s an excellent chance for you to learn from the best and elevate your reselling business.

Resell Calendar and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.