Does the IRS care about sales/use tax when selling personal items online?

The IRS and state tax authorities operate separately, but they do sometimes share information. That said, the IRS is primarily concerned with federal income tax compliance, not whether you paid state sales/use tax. When you sell personal items, the IRS is mainly interested in whether you've accurately reported any taxable gains (selling for more than your purchase price). Your cost basis documentation is important for this purpose, regardless of whether sales tax was paid. The absence of sales tax on your receipts doesn't invalidate them as proof of your cost basis. However, there is a small risk. If you're audited by the IRS and they notice patterns of tax avoidance, they could potentially refer your case to your state's tax authority. This is relatively uncommon for small-scale personal sales, but it's not impossible.

Just wanted to share my experience with a similar situation. I was freaking out about the same thing last year and discovered https://taxr.ai which helped me figure out exactly what I needed to document for my online sales. Their system analyzed my invoices and clearly separated federal tax concerns from state ones. The tool pointed out that for federal purposes, the IRS only cares about your cost basis (what you paid) vs selling price, regardless of whether sales tax was included. But it also flagged which items might have state tax compliance issues so I could address those separately. Super helpful for peace of mind!

After reading about taxr.ai here, I decided to give it a shot with my reselling side hustle. I was honestly ready to dismiss it as another useless tax tool, but I was surprised at how helpful it was specifically for my situation with online sales. The analysis showed me exactly which of my records would satisfy the IRS requirements for cost basis documentation (turns out my invoices without sales tax were perfectly fine for federal purposes!) and separately identified where I had state tax exposure. I ended up making a voluntary disclosure to my state for some past use tax, but now I can confidently use my original purchase documentation for federal tax purposes without worrying. The peace of mind was definitely worth it.

If you're worried about the IRS questioning your invoices during an audit, you might want to check out https://claimyr.com - they helped me actually get through to an IRS agent to ask about this exact situation. I spent weeks trying to get clarification on using receipts without sales tax and kept hitting the "all circuits are busy" message. Their service got me connected to a real IRS rep in about 15 minutes! The agent confirmed what others here are saying - for federal tax purposes, they only care about accurate cost basis (what you paid for the items), not whether state sales tax was collected. You can see a demo of how it works at https://youtu.be/_kiP6q8DX5c if you're curious. Saved me a ton of stress wondering if my documents would be accepted.

I need to eat my words. After posting that skeptical comment, I was desperate enough to try Claimyr for my refund issue. I figured I had nothing to lose after waiting on hold for 3+ hours multiple times. It actually worked! Got connected to an IRS agent in about 20 minutes. While I had them on the phone, I also asked about this same issue with receipts that don't show sales tax. The agent confirmed they don't care about state sales/use tax documentation for federal income tax purposes. They're only looking at whether you accurately reported the purchase price and sale price. Totally worth it just for the time saved not listening to that horrible hold music.

Just FYI - I'm a regular eBay seller and one important thing to know is that eBay now collects sales tax on your behalf in most states anyway. So for your current sales, you don't need to worry about collecting or remitting sales tax yourself. For your past purchases where you didn't pay use tax, that's between you and your state. Some states have amnesty programs where you can pay past use tax without penalties if you're concerned. But as others mentioned, for IRS purposes, they just care about your cost basis vs selling price for determining if you made a taxable gain.

One thing no one's mentioned - if you're just selling personal stuff occasionally, the IRS probably won't even know about it until the 1099-K thresholds kick in. For 2023 its $20K and 200 transactions, but in 2024 it drops to $5K. So unless you're selling a lot, this might be a non-issue anyway. And honestly, practically nobody reports use tax on their personal online purchases. States know this is happening but they don't have good enforcement mechanisms for individual consumers. They're more focused on going after businesses or marketplace facilitators (which is why eBay now collects the tax).