Your gross profit on that item would be $3.00. As a cash basis taxpayer, in your example, you have $10 in sales revenue, $5 in supplies/materials expense or COGS, and a $2 Ebay expense. If your revenues average less than $30 million a year, you can use cash basis accounting.
In TurboTax, you can report these costs in the inventory section as COGS or in the expenses section as supplies. Either way, you don't have to report inventory but you do need to carefully track what you paid for the products, materials, and supplies that go into your inventory.
See this TurboTax FAQ and choose your platform. Basically, you will enter your costs (what you paid for the items) as either expenses or cost of goods sold - either entry will give you the same result. If you use COGS, both your BOY and EOY inventory amounts will be zero. Or you can skip all the COGS/BOY/EOY entries and just expense all of your purchases as supplies or materials.
@OneSmallBlonde
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