If I received a 1099 K from Paypal for Ebay sales, where do I report the cost of goods and fees and commission/postage costs? I in fact incurred a loss in the process.

You report your cost of goods sold, your business expenses, as well as your income on Schedule C of your tax return.  It looks like you are using TurboTax Premier.  You will need to upgrade to TurboTax Self-Employed in order to do so.