You just spent $47 on shipping supplies, $120 on gas driving to estate sales, and $15.99 on your inventory management subscription. By December, those numbers add up to thousands of dollars, money that could reduce your tax bill if you track it properly.
Most resellers leave money on the table because they don't know what qualifies as a deduction or they lose track of expenses throughout the year. This guide breaks down every legitimate write-off available to resellers, organized by category so you can systematically capture deductions you might be missing.
Whether you sell on eBay, Poshmark, Amazon, Mercari, or your own website, these deductions apply to your business. The key is understanding what the IRS allows and keeping records that support your claims.
A note before we start: this information applies to resellers operating as a business, not those selling occasional personal items. If you're buying inventory with the intent to profit, you're running a business in the eyes of the IRS.
Cost of Goods Sold (COGS)
Your largest deduction is typically the cost of the inventory you sell. This isn't technically a write-off, it's subtracted from your revenue before calculating profit, but the effect is the same: it reduces your taxable income.
What Counts as COGS
- Purchase price of inventory items
- Auction fees paid to acquire inventory
- Shipping costs to get inventory to you
- Sales tax paid on inventory purchases
- Import duties and customs fees
- Repair costs to make items sellable
- Cleaning and restoration supplies used on inventory
If you buy a jacket for $5 at Goodwill, pay $2 to dry clean it, and sell it for $45, your COGS is $7. You're taxed on the $38 profit (minus other business expenses), not the full $45.
Tracking COGS Accurately
The IRS requires you to track inventory using a consistent method. Most resellers use one of two approaches:
Specific Identification: Track the exact cost of each item you sell. Best for higher-value items or smaller inventory volumes.
Average Cost: Calculate the average cost of similar items. Useful for bulk purchases where individual tracking is impractical.
Whatever method you choose, keep receipts. A photo of a thrift store receipt saved to a cloud folder takes seconds and can save you hundreds in an audit.
Platform and Payment Processing Fees
Every dollar you pay to selling platforms and payment processors is deductible. These fees add up quickly, often 15-30% of your gross sales.
Marketplace Fees
- eBay final value fees
- eBay store subscription fees
- Amazon referral fees and FBA fees
- Amazon Professional seller subscription
- Poshmark's 20% commission
- Mercari's 10% selling fee
- Etsy listing fees, transaction fees, and payment processing
- Facebook Marketplace selling fees
- Depop fees
- Shopify subscription and transaction fees
Payment Processing Fees
- PayPal transaction fees
- Stripe fees
- Square fees for in-person sales
- Venmo business account fees
- Currency conversion fees on international sales
Most platforms provide annual fee summaries in January. Download these immediately, they're your documentation for this entire category.
Shipping and Packaging Expenses
Everything related to getting products to customers qualifies as a business expense.
Postage and Carrier Fees
- USPS postage (Priority, First Class, Media Mail, etc.)
- UPS shipping charges
- FedEx shipping charges
- DHL and international carrier fees
- Pirate Ship, Shippo, or other postage software subscriptions
- Insurance on packages
- Signature confirmation fees
- PO Box rental for business mail
Packaging Supplies
- Boxes (all sizes)
- Poly mailers
- Bubble wrap and packing peanuts
- Tissue paper
- Packing tape
- Labels and label printer supplies
- Thank you cards and branded inserts
- Custom packaging and branded materials
- Shipping scale
Pro tip: if you source free boxes from stores, that's great for your cash flow but doesn't create a deduction. Only money you actually spend counts.
Home Office Deduction
If you use part of your home exclusively and regularly for your reselling business, you can deduct a portion of your housing costs.
Two Calculation Methods
Simplified Method: Multiply your office square footage (up to 300 sq ft) by $5. Maximum deduction: $1,500. No receipts needed beyond measuring your space.
Regular Method: Calculate the percentage of your home used for business, then apply that percentage to actual expenses:
- Rent or mortgage interest
- Property taxes
- Homeowners/renters insurance
- Utilities (electric, gas, water)
- Internet service
- Home repairs and maintenance
- Depreciation (for homeowners)
Example: Your inventory room is 150 square feet in a 1,500 square foot apartment. That's 10% of your space. If your annual rent, utilities, and insurance total $18,000, your home office deduction is $1,800.
What Qualifies as Business Space
- Dedicated inventory storage room
- Photography studio area
- Shipping station
- Office space for listing and administration
The space must be used exclusively for business. A guest bedroom where you also store inventory doesn't qualify. A closet used only for inventory does.
Vehicle and Transportation Expenses
Driving to source inventory, drop off packages, or meet buyers creates deductible expenses.
Standard Mileage Method (2024: 67 cents per mile)
Track every business mile driven and multiply by the IRS standard rate. This covers gas, maintenance, insurance, and depreciation in one simple calculation.
Deductible trips include:
- Thrift stores and estate sales
- Retail arbitrage runs
- Wholesale pickups
- Post office and carrier drop-offs
- Supply store trips
- Storage unit visits
- Bank deposits for business
- Meeting buyers for local sales
Actual Expense Method
Alternatively, track all vehicle costs and deduct the business-use percentage:
- Gas
- Oil changes and maintenance
- Repairs
- Tires
- Insurance
- Registration fees
- Lease payments or depreciation
- Parking fees and tolls (deductible under either method)
Keep a mileage log with dates, destinations, purposes, and miles driven. Apps like Everlance, MileIQ, or Stride automate this tracking.
Technology and Software
The digital tools that run your business are fully deductible.
Hardware
- Computer or laptop
- Smartphone (business-use percentage)
- Tablet for sourcing or listing
- Label printer
- Barcode scanner
- Camera or lighting equipment
- External hard drives for backup
- Monitors
Software and Subscriptions
- Inventory management software like Voolist
- Accounting software (QuickBooks, Wave, FreshBooks)
- Photo editing apps
- Cloud storage (Google Drive, Dropbox, iCloud)
- Spreadsheet software
- Price research tools (Terapeak, Keepa, etc.)
- Website hosting
- Email marketing platforms
Communication Expenses
- Cell phone bill (business-use percentage)
- Internet service (business-use percentage or included in home office)
- Business phone line
For items with mixed personal and business use, estimate your business percentage honestly. If you use your phone 60% for business, deduct 60% of the bill.
Office Supplies and Equipment
The small purchases that keep operations running add up over a year.
General Office Supplies
- Printer ink and paper
- Pens, markers, and notebooks
- Folders and filing supplies
- Stapler, scissors, tape
- Desk organizers
- Calculator
Photography and Listing Supplies
- Mannequins and dress forms
- Photography backdrop
- Lighting equipment
- Props for photos
- Hangers
- Garment steamer
- Measuring tape
Storage and Organization
- Shelving units
- Storage bins and containers
- Clothing racks
- Labels and label maker
- Off-site storage unit rental
Professional Services and Fees
Money paid to professionals who help run your business is deductible.
Financial Services
- Accountant or CPA fees
- Bookkeeping services
- Tax preparation fees (business portion)
- Tax software (TurboTax Self-Employed, etc.)
- Business bank account fees
- Business credit card annual fees
Legal and Administrative
- Business license fees
- LLC formation and annual fees
- Legal consultation
- Trademark registration
- Sales tax permit fees
- Reseller certificate costs
Insurance
- Business liability insurance
- Product liability insurance
- Business property insurance
- Workers' compensation (if you have employees)
Education and Professional Development
Learning that improves your business skills qualifies as a deduction.
Courses and Training
- Reselling courses and workshops
- Platform-specific training
- Photography courses
- Marketing and SEO courses
- Bookkeeping and accounting classes
- Business coaching
Information Resources
- Books about reselling, ecommerce, or business
- Industry publications and subscriptions
- Paid newsletters
- Research databases
Events and Networking
- Trade show admission
- Conference registration fees
- Professional association memberships
- Meetup group fees
- Travel expenses for business events
Marketing and Advertising
Spending money to grow your customer base is deductible.
Paid Advertising
- eBay Promoted Listings
- Etsy Ads
- Amazon Sponsored Products
- Facebook and Instagram ads
- Google Ads
- Pinterest promoted pins
- Influencer marketing payments
Branding and Promotion
- Logo design
- Business cards
- Custom packaging design
- Website development
- Photography for marketing
- Social media management tools
- Email marketing software
- Promotional giveaways
Commonly Overlooked Deductions
These legitimate write-offs are frequently missed:
- Bank fees: Monthly fees, wire transfers, overdraft charges on business accounts
- Interest: Credit card interest on business purchases, business loan interest
- Refund losses: Money lost on returns where you can't recover the item or it's damaged
- Bad debt: Unpaid invoices from wholesale customers
- Theft and losses: Stolen inventory, packages lost in transit (not covered by insurance)
- Currency exchange losses: Money lost converting international payments
- Samples: Items purchased for product research or testing
- Background checks: If you hire help
- Contractor payments: VA services, photography, cleaning help
- Authentication services: Fees paid to authenticate luxury items
Self-Employment Tax Deduction
This one happens on your tax return, not during the year: you can deduct half of your self-employment tax from your income. This is calculated automatically when you file, but it's worth understanding.
Self-employment tax is 15.3% of your net earnings (Social Security and Medicare). The IRS allows you to deduct half of this amount because employers typically pay half of these taxes for employees.
Health Insurance Deduction
If you're self-employed and not eligible for employer-sponsored health insurance through a spouse, you can deduct 100% of health insurance premiums for yourself, your spouse, and dependents.
This includes:
- Medical insurance premiums
- Dental insurance premiums
- Vision insurance premiums
- Long-term care insurance (with limits)
Record-Keeping Best Practices
Deductions only count if you can prove them. Build these habits:
Daily Habits
- Photograph receipts immediately (apps like Dext or Expensify help)
- Log mileage as you drive
- Record cash purchases with notes
- Use a separate business bank account and credit card
Monthly Tasks
- Reconcile bank statements
- Categorize expenses
- Back up digital records
- Review mileage logs for completeness
Annual Tasks
- Download all platform fee summaries
- Calculate home office deduction
- Inventory count for COGS calculation
- Organize records by category
- Consult with a tax professional
How Long to Keep Records
The IRS can audit returns up to three years back (six years if they suspect significant underreporting). Keep all business records for at least seven years to be safe.
What You Cannot Deduct
Not everything is a write-off. Avoid claiming these:
- Personal clothing (even if you wear it in listing photos)
- Meals while sourcing (unless traveling overnight)
- Commuting from home to a separate business location
- Political contributions
- Personal expenses mixed with business
- Fines and penalties (parking tickets, late fees on personal accounts)
- Personal portion of mixed-use items
Quarterly Estimated Taxes
Deductions reduce how much you owe, but you still need to pay throughout the year. If you expect to owe more than $1,000 in taxes, make quarterly estimated payments to avoid penalties.
Due dates: April 15, June 15, September 15, January 15
Calculate payments based on your expected profit minus deductions. Many resellers pay 25-30% of net profit to cover both income tax and self-employment tax.
Moving Forward
Tax deductions are straightforward once you build tracking systems. Start with the big categories, COGS, platform fees, shipping, mileage, and home office, which likely represent 80% of your deductions. Then add the smaller categories as your record-keeping improves.
Set up a simple spreadsheet or use accounting software to track expenses by category throughout the year. When tax time arrives, you'll have everything organized instead of scrambling through receipts.
Consider working with a CPA or tax professional who understands ecommerce businesses. The cost is deductible, and they often identify deductions that more than cover their fees.
Every dollar you legitimately deduct is roughly 25-40 cents back in your pocket, depending on your tax bracket. For a full-time reseller with $50,000 in gross sales, properly tracked deductions can mean thousands of dollars in tax savings each year.
