How to add COGS for eBay business

[DianeW777]

It depends whether this is a hobby or a business, or the sale of personal items. 

If you decide it's a business, then the cost of goods sold (COGS) can be entered in your business Schedule C as materials and supplies. See more information below.

Note: You can decide if it is hobby or business income.  This IRS link will help you: Business or Hobby?

Key elements:

1. A hobby requires you to report the income you received and under the current tax law, Tax Cuts and Jobs Act (TCJA), no expenses are allowed to be used to reduce the money collected even if you itemize deductions.
2. A business allows you to deduct the costs necessary to obtain the income.  The law explains that 'you must be engaged in the activity to produce a profit'.  The test under IRS tax law is that you must show a profit three out of every five consecutive years to be considered a business.

Options for COGS from the Tax Cuts and Jobs Act:

1. Inventory options: According to Tax Cuts and Jobs Act (TCJA), businesses with gross receipts below $30 million for the past three years are considered eligible to use the cash method of accounting for their inventory.  This allows you to be free of inventory tracking on a regular basis.
   • This means you can enter all of your purchases for resale as materials and supplies to reduce your current year income instead of using the inventory section. Using the inventory section requests the cost of the products on hand as of December 31st and that amount is on hold until sold which will not reduce your income for the current tax year, but will be used in the following year when you actually sell your merchandise. This repeats each year if you choose it.
2. You should always track your inventory restocking costs and labor if it's part of the actual inventory cost and deductible against your business income (1099-K, all cash transactions or bartering).
   • How do I report self employment income?
   • Where do I enter my self employment business expenses

Hobby Income: If you should decide it's a hobby follow the steps below - no COGS will be used in this case.

Other Miscellaneous Income:

1. Go to the Wages and Income  section of TurboTax
2. Scroll to  Less Common Income > Select  Miscellaneous Income, 1099-A, 1099-C
3. Select Hobby Income and Expense > Enter the income

Sale of Personal Items (used for personal purposes and then sold later):

Enter an Investment sale for the personal use items using the instructions below.

To enter your sale in TurboTax, follow these steps. 

1. Open or continue your return.
2. Navigate to the investment sales section:
   • TurboTax Online/Mobile: Go to investment sales. If using this application, make sure it is open
   • TurboTax Desktop: Search for investment sales and then select the Jump to link.
     • Or Personal Tab > Continue > I'll choose what I work on > Scroll to Investment Income > Select Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (select this box)
3. Answer Yes to the question Did you sell any of these investments in 2025?
   • If you land on  the Investment sales summary or Your investments and savings screen, select Add More Sales or Add investments.
   • Click this link for more information. Where do I enter Investment Sales?
   • Select Type as Personal Items
   • If you aren't sure of the date of purchase you can can select 'Something other than a date' to select Various
   • Be sure you know your holding period (long term is over one year, everything else is short term)

If you did sell in different lots and times any sale that resulted in a gain is taxable and cannot be lumped with other losses.

@joy-lu-zhang

[Edited: 03/16/2026 | 11:27 AM PST]