How to calculate taxes when buying and selling goods where you already paid sales tax on purchases?

Thanks for explaining that. I'm in a similar situation but I'm selling on eBay. Do I need to collect sales tax from my buyers too? Or does eBay handle that? And can I deduct the eBay and PayPal fees from my income too?

For platforms like eBay, they typically handle the sales tax collection and remittance to the states on your behalf, so you don't need to worry about collecting it yourself in most cases. However, you should verify this in your seller dashboard as policies can vary. Yes, you can absolutely deduct the eBay fees, PayPal fees, shipping costs, packaging materials, and any other ordinary and necessary business expenses from your income. These would be listed as business expenses on your Schedule C, separate from your cost of goods sold.

Does it work if most of my sales are through different platforms like Facebook Marketplace, OfferUp, and some local sales? I'm never sure how to keep track of all that stuff together.

I'm a bit skeptical. How does it actually know what's legitimate business expenses vs personal? Like if I buy something and decide to keep it instead of reselling, does it flag that somehow?

It works great with multiple platforms! You can upload sales data from different sources or even input cash sales manually. The system can consolidate everything into one place so you have a complete picture of your business across all channels. For separating business from personal expenses, it doesn't automatically know this distinction - you'll need to categorize items correctly when you input them. But it does have a feature that lets you mark items as "converted to personal use" which helps track inventory that you decided to keep rather than sell. This ensures you're only claiming business deductions for actual business inventory.

Wait, how is this even possible? I thought it was literally impossible to get through to the IRS these days. Last time I tried I was on hold for over 2 hours and then got disconnected. Does it work for all IRS departments or just general questions?

This sounds too good to be true. The IRS phone system is notoriously awful. I'm guessing this service just puts you in the same queue as everyone else, so what's the point of paying for that?

It works by using technology to navigate the IRS phone system and wait on hold for you. When an agent finally picks up, you get a call connecting you directly to them. So you don't waste hours listening to hold music - you just get notified when an actual human is ready to talk. It works for most IRS departments! I've used it for both business tax questions and personal tax issues. The key difference is that you don't have to do the waiting yourself. Instead of being stuck on hold, you can go about your day and just grab the phone when they connect you to an agent.

I did file a police report right after it happened! Good to know that'll help with the tax situation too. Do you know if there's a specific form I need to use to claim stolen inventory? Or does it just go on the regular Schedule C somewhere?

It goes on your Schedule C as a business loss, not as part of cost of goods sold. Your tax software should have a section for "casualty and theft losses" within the business section. If it's a significant amount, you might want to attach a statement explaining the theft with your tax return. Include details like when it occurred, that you filed a police report (include the report number), and documentation of the value. This helps prevent questions if you get audited.

This is really important! I sell on Etsy and they collect sales tax for me, but when I do local sales I have to handle it myself. The threshold varies by state - some care about number of transactions, others care about total dollar amount.

Great questions! For receipts, digital photos or screenshots are generally acceptable for tax purposes - the IRS just needs documentation showing the date, amount, and business purpose of the expense. For cash purchases where you don't get a receipt, try to create your own documentation right away - note the date, amount spent, what you bought, and where. A simple notebook or phone app works fine. For vehicle expenses, you can choose either actual expenses (gas, insurance, repairs, etc.) or the standard mileage rate (65.5 cents per mile for 2023). Most small resellers find the standard mileage rate easier since you just track miles driven for business purposes. Keep a mileage log showing date, starting/ending locations, miles driven, and business purpose. Whichever method you choose, you need to stick with it for that vehicle for the entire tax year. The key is consistency - pick a system that works for you and stick with it throughout the year. It's much easier than trying to reconstruct everything at tax time!