Ebay Sales - Trying to figure out inventory, cost of goods sold, etc.

[michaelc26]

This is the first year I have to filed taxes for my ebay store. We have gotten big enough to where it was reported to IRS and in their eyes is "acting in a business manner" No big deal.

Schedule C is pretty easy, have all the expenses put in, shipping charges, ebay fees, packing material etc. No problem

What is throwing me off is Cost of Goods Sold. See below to explain our situation.

First year filing, current inventory in my garage is about 950 items give or take a few. Ebay price for all items is around $34000

These items have accrued over the years, so not all were purchased last year. Last year When I added up all the reciepts for purchases it was around $1200

(We sell antique/collectibles on ebay so pretty much live at thrift stores, second hand stores etc)

So I read that if you don't know your inventory to claim 0 inventory for first/last and put in the cost of items purchased that year. Ok no problem

but then what do I do next year, even if I carefully track how much how much we pay for each item bought this year and how much it sells for I'm still left with the other 950 items in the garage from previous year that will hopefully sell this year and I have no idea how much they were purchased for.

I read on other posts that the IRS Doesn't get to cranky about tracking inventory unless you make over a million a year in gross, this past year gross we were at about $21000 that is from the 1099 which includes shipping charges etc.

Am I making any sense? haha

[PatriciaV · Accepted solution]

For simplicity in completing your tax return, you may ignore inventory completely since your gross receipts were under $1 million. In this case, simply report the purchase of inventory at cost as Materials or Supplies and answer that you had no inventory.

When you reach $1 million in gross sales, a bookkeeper can handle inventory for you.

See IRS Pub 334 Accounting for Inventory under "Qualifying Taxpayer"

[brandonhoer]

Technically it is under $1 million in gross receipts for the last three years together.

[Joe100]

So, how would you handle the following situation: you sell something on eBay that is a personal item you bought many years ago. Assume you paid $10 for it in 2004. In 2019, you sell it on eBay in pre-owned condition for $5. How would you report this for tax purposes? Specifically, what do you report as the cost of the item you sold? Is the cost $0 and you need to report a $5 profit?

[Nat97305]

Thank you! I was a daycare provider until my governor closed all daycares on March 25, 2020. For 21 years I knew what to do for taxes but in 2021 I was on unemployment. In 2022 I wanted to expand my eBay sales and be self-employed again. I have 40 years of collecting and finding my treasures in goodwill and estate sales. Now I feel so lost about the problem of inventory. I can only earn about $800 per month, due to injury and other health problems. I have cried feeling so overwhelmed and reading your answer was such a relief. Thank you so much. 

[jon90]

Is this still true in 2023, if so where do you entry it on the online version?

[DawnC]

Yes, the inventory reporting requirement is the same.   What income or expenses are you trying to enter exactly?  @jon90 

Inventory Exception for Small Businesses

Pub 334

Where do I enter Supplies Expenses in TurboTax Online?   

[jon90]

I am trying include my eBay inventory that sold this year COGS to write off on my gross income. So I was understanding that I could choose not to keep an inventory and put my 2022 COGS under non-incidental materials and supplies. Whatever remains unsold on the shelf, I will deduct that Cost of Goods in the future year it sells. Is this correct? If so not sure where to input it on TurboTax.

Would I select Cash accounting or accrual. 

[KrisD15]

Are you running this as a Business? (Are you filing Schedule C?) 

If not, you would only report these sales as Personal Items, much like a garage sale. 

Personal items sold cannot generate a loss. 

If you are selling personal items and claiming a loss (only) the IRS will see this as a hobby and may disallow the losses. 

Retail Taxpayers use Cash Accounting. 

[jon90]

Schedule C. I did not get a 1099k.

[HopeS]

It depends on whether or not you are selling on eBay as a business. Assuming your question relates to selling on eBay and you did not receive Form 1099K. If this is your situation,  you should still report the income and related expenses on Schedule C as follows:

1. Open or continue your return in TurboTax
2. Search for Schedule C and select the Jump to link at the top of the search results
3. Answer Yes on the Did you have any self-employment income or expenses? screen
   • If you land on the Your 2022 self-employed work summary page, select Review next to the work you're adding income for
4. Answer the questions on the following screens until you arrive at Let's enter the income for your work
5. Select Other self-employed income and select Continue
6. On the next page, you can enter any cash, personal checks, credit card payments, or cryptocurrency (Form 1099-K) related to your self-employment
7. You would follow through the interview and enter as cash or credit etc.

If you are not in the business of selling personal items it's possible to report the income without filing Schedule C.  If you sold any of the items for a profit, then you should report the sale as an investment sale on the tax return.  Any items sold at a loss would not be a deductible loss or required to be reported.  You must keep all your records as proof of each transaction with the tax records should you need to verify later.

See additional information in the links below:

Write off Business Expenses

How to report income from Self Employment

@jon90