Thank you so much for your reply!

I'm sorry for dummy questions, but this is very new to me. I don't fully get how inventory works. If I have paid lets say $6,000 for t-shirts in 2019, and I have sold $200, I will have $5,800 inventory to begin 2020 with. Then If I sell $1000 in 2020, I will not pay income taxes on these, and my inventory will be $4,800 in the beginning of 2021. Am I getting this right?

I just don't want to sell all t-shirts for $500 and get a 1099 from Amazon on which I pay income tax while I actually paid $6,000 to earn the $500. 

Thank you much

Sincerely

Ivan

Here is how you treat inventory.

If you purchase $6,000 worth of t-shirts in 2019, sell $200 worth for $300, you have made a profit of $100 before other expenses. 

You will have $5,800 inventory to begin 2020 with. Then If you sell $1000 worth in 2020 for $1,500, you have made a profit of  $500 in 2020 before other expenses. Your inventory will be $4,800 in the beginning of 2021. 

You can't deduct the cost of inventory until you sell it.

If you sell off all of your $5,800 worth of inventory in 2020 for $1,000, you have a loss of $4,800 before other expenses.

Thank you again for your reply Robert,

I got it! Just one last thing.

If we take your example above, if I sell $5,800 of inventory in 2020 for a $1,000. How do I report that? When filing 2020 tax return I report ending inventory as 0 and sales $1,000 ?

Thanks again

Regards

Ivan