The form
Schedule C for resellers, section by section
Schedule C (Form 1040) is where a sole proprietor reports business income and expenses. Most of its lines don't apply to reselling. The ones that do decide your tax, and the 2025 form, filed in 2026, is the latest final version.
The official form and instructions are on the IRS site as Schedule C (Form 1040). What follows is orientation, not a substitute for reading them.
What goes in Part I, income?
Part I of Schedule C starts with line 1, gross receipts: everything customers paid you, including the shipping they paid. Line 2 is returns and allowances, meaning refunds. Line 4 is cost of goods sold, carried from Part III, and line 5 is gross profit (2025 Schedule C).
The error to watch for here is entering payouts instead of gross receipts. Report only what landed in your bank and you've quietly deducted marketplace fees without recording them. Your figures then won't reconcile to a 1099-K. For eBay sellers, what eBay's 1099-K includes is the starting point for line 1.
How does Part III, cost of goods sold, work?
Part III of Schedule C turns inventory into cost of goods sold. Line 35 is inventory at the start of the year, line 36 is purchases less items you took for personal use, line 41 is inventory at the end of the year, and line 42 is cost of goods sold, which carries to line 4.
Opening inventory + purchases − closing inventory = cost of goods sold (lines 35 to 42).
Inventory you bought but didn't sell isn't an expense this year. It sits in closing inventory and becomes cost of goods sold when it sells. Cost of goods sold for resellers covers the count, bulk lots and the small-business option.
Which expense lines apply to reselling?
Most of Schedule C Part II doesn't apply to a reseller. Of its two dozen or so expense lines, about a dozen usually do, listed below by their numbers on the 2025 form. For a seller who ships, selling fees, postage, supplies and mileage are the core four.
| Line | Typical reseller content |
|---|---|
| 8 Advertising | Promoted listing fees and other paid placement |
| 9 Car and truck expenses | Sourcing and post office miles, with a log kept at the time |
| 10 Commissions and fees | Marketplace final value fees, per-order and payment processing fees |
| 13 Depreciation and section 179 | Equipment you don't deduct another way |
| 15 Insurance (other than health) | Business insurance |
| 17 Legal and professional services | Bookkeeping and tax preparation |
| 18 Office expense | Postage, printer ink, labels |
| 20b Rent or lease, other business property | A storage unit used for inventory |
| 22 Supplies (not included in Part III) | Mailers, boxes, tape, poly bags, tissue |
| 23 Taxes and licenses | Business licenses and permits |
| 25 Utilities | The business share of phone or internet, where you can split it |
| 27b Other expenses (from line 48) | Software subscriptions and costs not listed elsewhere |
| 30 Business use of home | Form 8829 or the simplified method |
Two lines have instructions worth quoting. For line 18 the IRS says to include "your expenses for office supplies and postage." For line 10 it tells a dealer in property, someone who regularly sells property in the ordinary course of business, to enter the commissions and fees paid to sell that property (2025 Schedule C instructions).
Shipping buyers paid you is income on line 1, and the postage you bought is an expense on line 18. Report both. Netting them in your head is how mismatches with a 1099-K start. The reseller tax calculator follows the same order, from line 1 down to net profit on line 31.
Can resellers deduct a home office?
Resellers can deduct home space used to store inventory under a rule many home-office guides skip. Normally the space must be used regularly and only for business. IRS Publication 587 (2025) drops the exclusive-use test for storage space if all five hold: you sell products at wholesale or retail, keep the inventory at home for the business, have no other fixed business location, use the space regularly, and it's a separately identifiable space suitable for storage.
You figure the deduction on Form 8829, or with the simplified method at $5 per square foot for up to 300 square feet (IRS). Deductions resellers miss has the rest.
Where do reseller errors cluster on Schedule C?
Reseller errors on Schedule C cluster in five places: reporting payouts instead of gross receipts, deducting inventory when it's bought, skipping the mileage log, netting shipping income against postage, and skipping the year-end inventory count. Each one either hides a deduction or moves it into the wrong year.
- Reporting payouts as gross receipts. It hides your fee deduction and won't reconcile to a 1099-K.
- Expensing unsold inventory. Inventory becomes an expense when it sells, not when you buy it.
- Leaving out mileage. A large deduction for sellers who source by car, and it needs records kept at the time.
- Netting shipping. Report the income and the expense, not the difference.
- No opening or closing inventory figure. Without a count, cost of goods sold is a guess.
Do resellers file Schedule C?
Where does postage go on Schedule C?
Should I report gross sales or my payout?
Can I deduct inventory I haven't sold yet?
Disclosure We build FlowLister and publish Reseller Taxes. FlowLister writes eBay listings from item photos, with a price taken from sold listings, and for a reseller that listing becomes part of the record of what sold. It's AI, so it misses things. It doesn't prepare taxes or keep books, and nothing on this site is tax advice.
Keep reading
Cost of goods sold for resellers
Why unsold stock isn't a deduction yet, and how to track cost without drowning.
Reseller tax basics: what's taxable and what isn't
Profit, not sales. Personal items, hobby or business, and the self-employment tax people forget.