Do You Pay Tax on Online Marketplace Sales? (2026)

By the Profitvana Editorial Team · Updated September 2026

If you sell online, a common worry is whether you owe tax on it. The short answer: it depends on whether you are selling as a hobby or a business, and how much you make. Here is a clear 2026 overview.

Hobby vs business

Occasionally selling personal items you already owned — clothes, furniture, an old phone — usually for less than you paid, is generally not taxable income anywhere: you have made a loss, not a profit, and losses on personal items are not deductible either. But if you buy or make things in order to resell them, that is a business, and the profit is taxable income whether you call it a side hustle or not.

Tax authorities look at intent and pattern rather than the platform: regular listings, buying stock, advertising, and profit as the aim all point to a business. The US IRS, the UK's HMRC and most other authorities publish 'badges of trade' along these lines. The volume threshold that triggers reporting is separate from the question of whether you owe tax.

The 1099-K threshold (US)

In the US, marketplaces and payment apps must report your gross sales to the IRS on Form 1099-K once you pass the annual threshold. The threshold has been a moving target: it was $20,000 and 200 transactions for years, the IRS phased in $5,000 for tax year 2024 and $2,500 for 2025, and legislation passed in 2025 restored the $20,000/200 threshold from tax year 2025 onward — check the current figure for the year you are filing. Some states set lower thresholds of their own.

Receiving a 1099-K does not itself create tax; it reports gross sales including shipping and sales tax collected, not profit. Personal-item sales at a loss can be reported as zero-gain; business sales are reported on Schedule C with expenses deducted. Not receiving a 1099-K does not remove the obligation to report business profit.

Outside the US: what platforms report

The UK requires platforms to report sellers with 30 or more sales or £1,700 in a year to HMRC under the OECD's digital-platform rules, in force since January 2024; the EU's DAC7 directive applies the same reporting across member states from the same date. Neither changed what is taxable — the UK's £1,000 trading allowance and the hobby/business distinction still apply — but both mean regular sellers can expect their totals to reach the tax authority. Canada, Australia and others have adopted or are adopting the same OECD framework.

Track profit, not just sales

Tax is owed on profit, so the record that matters is sales minus costs. For each sale keep the sale price, the platform's fees, the payment-processing fee, shipping paid, and the cost of the item. Marketplaces provide fee and payout reports you can download monthly; our fee calculators show the platform's cut per sale for anything the reports leave unclear. A simple spreadsheet with one row per order is enough for most side businesses.

What you can usually deduct

Ordinary business expenses reduce taxable profit: marketplace and payment fees, cost of inventory or materials, shipping and packaging, supplies, software subscriptions, a share of home-office costs where the rules allow, and mileage to the post office. Inventory rules matter: in most systems you deduct the cost of goods when they are sold, not when bought, so unsold stock at year end is not yet an expense.

Sales tax and VAT are separate from income tax. Since the US marketplace-facilitator laws and the EU and UK marketplace VAT rules, the big platforms collect and remit sales tax or VAT on your behalf for most orders; you still owe income tax on the profit. This is general information, not tax advice — rules vary by country and situation, so confirm with a qualified professional.

Frequently asked questions

Do I owe tax on selling my own used items online?

Occasionally selling personal items for less than you paid is generally not taxable income. Buying or making things to resell for profit is a business, and the profit is taxable. (General information, not tax advice.)

Does receiving a 1099-K mean I owe tax?

Not automatically — the 1099-K reports gross sales, not profit. Tax is generally owed on profit after fees, cost of goods, and shipping. It does mean the income is on record and should be reported.

What can online sellers usually deduct?

Marketplace and payment fees, cost of inventory, shipping and packaging, and supplies — good records turn a 1099-K into a simple profit calculation. Confirm specifics with a qualified tax professional.

Do platforms report my sales to HMRC in the UK?

Yes, since January 2024 platforms report sellers with 30 or more sales or £1,700 in a year. Reporting does not change what is taxable: the £1,000 trading allowance and the hobby/business distinction still apply.