Mercari Taxes: What Sellers Need to Know About Reporting and Deductions

Selling on platforms like Mercari can be a lucrative venture, but it also brings tax responsibilities that sellers must navigate. Understanding how to report income and claim deductions is essential to avoid issues with tax authorities. As online marketplaces evolve, staying informed about tax obligations is crucial for those conducting business through these channels.

When Mercari Sales Are Taxable

Sales on Mercari are taxable when they generate income, as required by the IRS. This includes profits from selling items like collectibles or goods purchased for resale. Selling personal items at a loss, such as used clothing, is generally not taxable since no profit is made. Distinguishing between a hobby and a business is key. If Mercari activities are conducted regularly with a profit motive, the IRS may classify it as a business, subjecting income to self-employment taxes.

Starting in 2024, platforms like Mercari must issue a Form 1099-K to sellers with gross sales exceeding $600. This form helps document sales activity for tax reporting. Sellers are required to report all taxable income, even if they do not receive a 1099-K.

Filing Thresholds and Exclusions

The new tax regulations for 2024 require online platforms to issue a Form 1099-K for sellers with gross sales over $600, significantly lowering the threshold from previous years. State-specific rules may vary, with states like Massachusetts and Vermont already using the $600 threshold. Sellers must be aware of these differences to ensure accurate tax filing.

Sales of personal items at a loss are excluded from taxable income. Maintaining detailed records of such transactions is important to support claims of non-taxable income in case of an audit.

Expense Deductions for Sellers

Mercari sellers can deduct ordinary and necessary business expenses to lower taxable income. The cost of goods sold (COGS), such as purchase prices and shipping fees, is a common deduction. For instance, if a seller buys an item for $100 and sells it for $150, the $100 purchase cost is deductible, reducing taxable profit to $50.

Other deductible expenses include business-related supplies and equipment, like shipping materials or a computer used exclusively for Mercari sales. Keeping detailed records of these expenses is essential when filing taxes.

Record-Keeping Approaches

Effective record-keeping is critical for managing tax obligations as a Mercari seller. A systematic approach to tracking financial transactions ensures accurate tax reporting and provides insights into business performance. Digital tools, such as accounting software that syncs with sales platforms, can automate the process of tracking income and expenses.

Organizing physical receipts and invoices by category—such as sales receipts and supply purchases—makes retrieval easier during tax season. The IRS recommends keeping supporting documentation for at least seven years to prepare for audits or discrepancies.

Tax Implications for Repeated Transactions

Frequent transactions may classify Mercari sellers as a business, subjecting them to additional tax obligations, including self-employment taxes. The IRS considers factors like sales frequency, time invested, and businesslike conduct to make this determination. Sellers meeting this threshold must file a Schedule C (Form 1040) to report income and expenses, unlike casual sellers who report income under “Other Income” on Form 1040.

Repeated transactions can also trigger state-level tax obligations, such as sales tax collection. Many states require sellers to collect and remit sales tax if they exceed economic nexus thresholds, often based on transaction numbers or gross sales. For example, a state may mandate sales tax registration if a seller completes 200 transactions or generates $100,000 in sales annually. Automated sales tax calculators or third-party services can simplify compliance with these requirements.