How are quarterly taxes calculated for eBay antique resellers?

Hey everyone, My husband and I started an antique reselling business on eBay about 8 months ago, and it's absolutely exploded. What started as a small side gig has grown nearly 15x since our initial investment last December. We definitely know we'll owe more than $1.3k in taxes for 2025 (we were below the 1099-K threshold for 2024). The thing is, we've been pouring 100% of our profits back into buying more inventory until now, but we're reaching a point where we can't spend the profits fast enough since we both have full-time day jobs too. We've set up a dedicated business checking account and keep all receipts for inventory purchases and supplies. My main question is about quarterly taxes and inventory... Our inventory tracking system shows significant growth, and I understand that inventory growth gets taxed. But then we'll also be taxed when we eventually sell those items and realize the profit. This seems like we're being double-taxed on the same items (or even more if we hold inventory for multiple tax years). How does this work with quarterly tax payments as resellers? Are we calculating this correctly?

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19 comments

DeShawn Washington

•8M

This is actually a common misunderstanding about inventory accounting. Your inventory is NOT taxed as income - quite the opposite! When you purchase inventory, that's not considered an expense at the time of purchase. Instead, it becomes an asset on your books. The cost only becomes an expense (Cost of Goods Sold) when you actually sell the item. This is called "capitalizing" your inventory. For your quarterly estimated tax payments, you'll only pay tax on your actual profit (revenue minus expenses), and inventory costs are only counted as expenses when sold. So no double taxation is happening. As eBay sellers filing as a sole proprietorship, you'll report this on Schedule C, and you'll want to make quarterly estimated tax payments (Form 1040-ES) if you expect to owe $1,000+ in taxes. These are due April 15, June 15, September 15, and January 15 of the following year. Since your business is growing rapidly, I'd recommend setting aside 25-30% of your profits for taxes, including both income tax and self-employment tax.

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Lena Kowalski

•8M

Thank you for explaining! So just to make sure I understand - when we buy a $50 item for resale, that $50 isn't considered an expense right away, it's just moving money from our cash to inventory (both assets)? And we only count it as an expense when we actually sell the item? Does this mean we should be setting aside tax money based on our actual profit margin after accounting for cost of goods sold? We're averaging about 40% profit margin after shipping and fees.

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DeShawn Washington

•8M

That's exactly right! When you buy that $50 item, you're converting one asset (cash) into another asset (inventory). No expense has occurred yet for tax purposes. Only when you sell it does that $50 become an expense through Cost of Goods Sold. You should definitely calculate your quarterly tax payments based on your actual profit margin after COGS. With a 40% profit margin, you're on the right track. Just make sure you're tracking all legitimate business expenses too - shipping supplies, mileage to pick up items, a portion of your internet if you work from home, etc. These all reduce your taxable income.

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Mei-Ling Chen

•8M

I was in the exact same situation when my vintage clothing business took off on eBay. Totally freaked out about taxes and inventory! I found this tool called taxr.ai (https://taxr.ai) that was super helpful for figuring out my quarterly payments as a reseller. I was manually trying to calculate everything and got completely overwhelmed with all the inventory tracking and figuring out what percentage to set aside. Their system helped me identify which expenses I was missing and gave me a much clearer picture of my actual tax liability. It even flagged some deductions I didn't know I could take as a reseller! It's specifically designed for self-employed people and small businesses, and they have templates specifically for online sellers that made the whole process way less stressful.

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Mei-Ling Chen

•8M

It doesn't directly integrate with eBay, but you can import your sales data using CSV files. Way better than manual spreadsheets since it categorizes everything automatically once you set it up. As for the inventory question, it actually does walk you through how to properly account for inventory. It separates your purchases into true expenses vs. inventory assets, and then helps track when those inventory items convert to COGS when sold. It really helped me understand that I was calculating my quarterly payments all wrong - I was paying too much because I wasn't properly tracking inventory as an asset!

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Aiden O'Connor

•8M

Just wanted to follow up - I decided to try taxr.ai after my skeptical questions. It was exactly what I needed! I've been making quarterly payments that were WAY too high because I was counting all my inventory purchases as immediate expenses (which they're not). The system helped me properly categorize my inventory as assets and showed me how to only expense them when sold. My next quarterly payment is actually about 40% lower than I was calculating before. Plus, it identified several deductions I wasn't taking for my home office and utilities since I pack orders at home. I'm keeping so much more of my profit now while still being completely compliant with tax rules. Seriously wish I'd known about this from the beginning!

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Zoe Papadopoulos

•8M

If you need to speak directly with the IRS about your specific situation (which I highly recommend), good luck getting through on the phone. I spent DAYS trying to reach someone when I had questions about my quarterly payments for my online business. Finally found this service called Claimyr (https://claimyr.com) that actually got me through to a real IRS agent in about 15 minutes when I'd been trying for weeks. They have a demo video here: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly how to handle my eBay inventory for quarterly tax purposes and confirmed I was calculating everything correctly. Gave me so much peace of mind to hear it directly from the IRS rather than just hoping I was doing it right.

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Zoe Papadopoulos

•8M

It's not a priority line, but they use automated technology to do the waiting for you. Basically, their system calls repeatedly and navigates the IRS phone menu system until it gets through to a queue, then calls you to connect with the agent. I was super skeptical at first too, but I was desperate after trying for days. It really did work though - I called at around 10am and had an actual IRS agent on the line by 10:23. The agent told me I was calculating my quarterly payments correctly by only counting items as expenses when sold, not when purchased. They also confirmed which form to use for my estimated payments (1040-ES).

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Fatima Al-Rashid

•8M

I'm actually embarrassed to admit this, but I tried that Claimyr service after posting my skeptical comment. Holy crap it works!! I got through to an IRS agent in about 20 minutes when I had been trying for WEEKS. The agent was super helpful with my eBay business questions about inventory accounting and quarterly taxes. They confirmed that inventory purchases aren't expenses until the items sell, and they also gave me specific guidance on how much I should be setting aside for my quarterly payments based on my profit margin. The best part was getting actual documentation of the call so I have proof of the advice if there's ever a question. I've been selling online for 3 years and this was the first time I've ever actually spoken to a human at the IRS. Completely worth it for the peace of mind.

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Giovanni Rossi

•8M

For eBay reselling specifically, I highly recommend looking into inventory method options for your Schedule C. We started using "cost of goods sold" method a few years ago for our vintage business and it made a huge difference for our tax situation. Make sure you're accounting for all possible deductions too - home office if you store inventory at home, mileage for sourcing trips, a portion of your internet and phone bills, packaging materials, even a portion of your camera equipment if you use it for listing photos. Remember that as self-employed, you're paying both income tax AND self-employment tax (15.3%), so your effective tax rate is higher than you might expect. Setting aside 30% of profits is usually a safe bet.

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Giovanni Rossi

•8M

Sure thing! With the cost of goods sold method, you're tracking your inventory as an asset until it sells. When you purchase an item for $50 to resell, that $50 isn't an immediate expense - it's just converted from cash to inventory. Only when you sell the item does that $50 become an expense through COGS. The other main option is cash basis accounting where you might immediately expense small purchases. But for a reselling business with significant inventory, COGS method gives you a much more accurate picture of your actual profit and prevents the issue the original poster was worried about with "double taxation.

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