Have you ever wondered how Poshers are filling out their income tax return forms? Do you know whether or not you should be claiming your earnings to the IRS? Most of you are probably already Poshmark savvy and know that filling out your income tax return forms can be a hassle because of the side earnings we receive from Poshmark. However, if you are anything like me, it is hard to find anything online about this topic. It comes to no surprise that many Poshers like Gina are looking for some “Posh expert tax advice”. Many Poshers don’t know what they should know about Poshmark income. So, if you fall under this category, you’re not alone!
As I was browsing around the internet trying to find the answers to all my questions, I found my answers in a hard-to-find place… a Poshmark post. Well, here’s to Google who couldn’t answer my questions for once! I came to find out that I was not the only one who had all sorts of questions about what to do, or if I should even worry about it. In fact, Gina made a great point, “we need some Posh expert tax advice”. Indeed! If you are someone who sells stuff online (that being eBay or any other platform) you would know that normally, you can request a 1040 form that summarizes and gives all the money details you need to fill out your taxes. I know for sure that PayPal does this. However, Poshmark is not a company that does this; but before you start freaking out, ask yourself whether or not you should claim your earnings to the IRS or not. Don’t know? No problem. With the help of other Poshers, I was able to gather this information; so, here’s some great details.
Ok, so how do I find out if I should be claiming my Poshmark earnings?
You should file IF:
- You are profiting from your sales. In other words, if you are selling items that you bought as wholesale or for a cheaper price and then reselling them for a higher price, then you are considered to be a sort of small online business. Therefore, you are profiting.
Example: Let’s say that you went to T.J. Maxx and bought a Michael Kors bag for a whole lot less than it’s retail price. Let’s say the bag was $180, but the retail price on the Michael Kors tag was $400. Then you post it on Poshmark for less than retail, but more than what you paid for; say, $300 or $280. At this moment, if a customer buys the bag for your listed price, or any price above what you originally paid for the bag ($180), then you have made profit and you should report these earnings to the IRS.
Don’t worry about it IF:
- You are NOT profiting from your sales. If you are selling your items on Poshmark for prices less than what you paid for originally, then you are considered to be no different than having a garage/yard sale. Thus, you are not really making profit.
Example: Let’s say that your closet is just overflowing with clothes, shoes, hats, belts, and jewelry. You have no idea what to do with so much stuff! You decide to sell it on Poshmark to make some money while you are making room in your closet. One of the items you sell is a pair of Zara ankle boots. You originally paid $130 for them at retail price, but since they have been used and you just want to get rid of them, you list the price for $80. You are obviously not going to make any profit and you don’t have to report your earnings to the IRS.
One of the great things about Poshmark is that as a community, we all help answer each others questions. Some Poshers have even made posts on Poshmark about this topic. Yet, because it is not always easy to know where to look or how to find these posts when you are a new Posher, I have decided to write about it hoping that others would find this helpful.
Thanks to Christine and Wenrella who did a little research online about this topic, I think it is fair to say that we can now lay back and relax from reporting our Poshmark earnings to the IRS. Christine says, “I wondered the same thing. Well I did some research and asked my tax guy and this is what I [found].” Christine shared with the community what I consider the ultimate link to the IRS website that all Poshers should read: IRS Tax Tips for Online Auction Sellers.
Wenrella gives us a little more detail about how Poshmark works. She states that “PM… are the ones making profit from us by charging 20% of our sale of USED items that we already paid taxes on when we purchased new.” In other words, Poshmark as a company pays taxes for their business, and anyone who doesn’t make profit by selling on Poshmark does not have to worry about claiming their earnings to the IRS. Poshers making profit are considered entrepreneur “Poshinistas that are using PM as a business”.
Basically, if anything you have sold on Poshmark is equivalent to selling something at a garage sale, then you should not report it. Why? Because you have no profit to claim. You paid for your items more than what you sold them for.
On the other hand, if you are making profit, then you are considered to be a small online auction business. Thus, if you are buying, say, wholesale items and sell them on Poshmark to make profit (sell them for more than what you paid for), then you should be reporting your end-of-year earnings to the IRS.
Ok, it seems I am going to have to claim my earnings. Now what?
Do you have any clue about what to do on your tax form? For starters, you have to go into your Poshmark account and figure out how much profit you have really made. This is the number that Poshmark provides as how much you have earned that is located in your Closet Stats section. Let’s break it up:
- You must go through every listing you have sold over the year. (I know, how devastating!) JUST KIDDING- but not really kidding! Although Poshmark already provides you with a number of total earnings you have made, it does not include the Poshmark fee, nor is it broken down by year. So, if you have been on Poshmark for 2 years, that number reflects your total earnings for the past 2 years.
It would be easier if you have been keeping track of your profit gains over the year. If you haven’t, you must do so now and in the future avoid this hassle by keeping track. Here’s a good link that the IRS provides that you might find helpful: How to find the cost of goods sold. - Remember to take into consideration the fees that Poshmark takes for selling through them. You can find that information HERE in their FAQs page, but here’s a breakup:
- Sales under $15- Flat 2.95 fee per sale
- Sales $15 or more- Posh fee is 20% of the sold price.
- Have you been saving your receipts? Yes, you can claim purchases used towards your “business”. Things like:
- tissue paper/wrapping paper/etc.
- scissors/tape/etc.
- pens/markers/etc.
- freebies(compact mirrors, pencils, lotions, notepads, etc.)
- thank you cards
- the receipts for the items you buy to sell
- gas receipts (for going to the post office and shopping)
- Posh Fest expenses (gas, airplane tickets, hotel, etc.)
- Any other expenses that would count towards your business
- Create a Microsoft Excel or any type of spreadsheet to keep track of all the expenses you made that contributed to your business on Poshmark. The name of your business would be the name you have chosen for your closet. **You can change this if you want on Poshmark settings.
- If it is your first time claiming your profit gains as a small online auction business to the IRS, I would suggest to go with a professional tax person. Ask questions. Learn how to fill out your own forms. When you learn, then you don’t have to pay someone to do it for you and you can do it at home.
Fabulous! What about handmade items?
I’m going to disclaim here: I am not entirely sure if I am correct, so anyone is welcome to correct me, but the statements below is what I understand according to the IRS website. 
If you are familiar with selling on Etsy, well, then you know the answer to this question. If you’re not, its ok. Handmade goods that you sell should be claimed because you are making profit. Obviously, you have bought materials to make something and you sell it for more to make profit. A lot of times we want to think, “well, I didn’t really sell that much anyway. So, maybe I don’t have to claim it”. I think this is where most Etsy sellers got penalized by the IRS. To assume that you don’t have to claim any earnings is the same thing as breaking the law, according to the government. Many people sell handmade food for profit, but receive payments in cash. These are called underground businesses; and its against the law to not claim those earnings and pay taxes. Yet, if you are selling handmade items on Poshmark that you personally made (scarves, jewelry, custom painted shoes, etc.) then you have to realize that you are not getting paid cash. This means that you can’t hide the fact that you have been receiving funds that might look suspicious to the IRS. Thus, the next thing you know is you were knitting a pretty little scarf and suddenly your mailman brought you a letter to your door from the IRS about how you will be audited for suspicious activity. UH-OH. So whether you are not making much, I think it is safe to say that you should be claiming any handmade goods that you are selling on Poshmark.
But what if I spent more on materials this year than what I sold?
From my understanding, it doesn’t matter. This is one of the disadvantages of being a small business. Everything is at risk. You invest in something hoping that it will help you make money; help your business grow, or make some profit. A little harsh, right? I think that people should know that we are all responsible for paying taxes. Whether we sold five scarves in one year or we sold 500. In the end, you might not have to end up paying taxes if you didn’t earn much anyway, but it is a person’s responsibility to claim your earnings if you were profiting.
If you still feel like there is a way around it, then by all means go ahead. I really like what Gloria says about being a small business: “I obtained a business permit and file reports on a quarterly basis … when in doubt always check with an accountant or tax expert”. I am no tax expert. I am simply sharing some thoughts on the handmade business. I myself have sold some handmade items in my Poshmark closet like head warmers and 
scarves, so I know what it is like to invest on materials and not sell right away due to competition. I will definitely be asking my tax guy this year about all of this.
Questions? Thoughts? New info? Leave a comment below! 🙂
Mrs. Nayla 
thank you so much for your information on taxes for Poshmark!
I have been looking for this for a bit and found it! thanks again! @loeunl
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Hi Laura! Sorry for the late feedback. I have been out of town for the holidays and been busy with school finals. Anyway, I am so happy to hear that you found this article helpful. I was getting aggravated about not being able to find anything useful about this topic. I will definitely look for you on Poshmark! 🙂 Thanks for your username! Happy Poshing!
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Hi there!
Thank you for this post! I’m not sure if you’ll have an answer for this, but from what I was always told, you have to file when you make more than $600. However, I fall under the category of a garage sale type seller and not actually making any profit. Do you know if the $600 rule is irrelevant in this case? (Sorry if this comment sent a bunch of times–wasn’t sure if it was working!)
Thanks!
@klindsey163
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Kayla,
I’m not sure if I will have the proper response to this either. However, I tried doing a little research on what you brought up; which by the way is an excellent question. According to the IRS under the Tax Tips for Online Auction Sellers, “If your online auction sales are the Internet equivalent of an occasional garage or yard sale, you generally do not have to report the sales. In a garage sale, you generally sell household items you purchased over the years and used personally. If you paid more for the items than you sell them for, the sales are not reportable. If your online garage sale develops into a business and/or you have recurring sales and are purchasing items for resale with the intention of making a profit; you may have started an online auction business.” What I get from this is that if you initially started selling on Poshmark just to sell your items for less than what you paid for, then it is not reportable. However, if your closet begins to make profits because you start selling items for more than what you paid for (like a resale), then you are supposed to claim gains.
Now, about the $600 rule: according to the New York State law, if you sell more than $600 it should be reported. Yet, in Texas, the garage limit is $3,000. Thus, I am not sure if it is subject to the state you live in, but it seems this way. Please take a look at these links below from where I got my information from. I hope this helps.
On another note, H&R Block have also given their input on online garage sales which I found to be a little more helpful. Basically, what they say is that it doesn’t matter how much you have made throughout the year if you were at loss the entire time. In other words, if you have been selling your items for less than what you paid for, then it is not reportable because it does not cause capital gain as opposed to when you sell for more than what you paid for which does. Here is the link to this article: http://blogs.hrblock.com/2012/07/25/garage-sale-money-does-the-irs-need-to-know/
https://www.irs.gov/Businesses/Small-Businesses-%26-Self-Employed/Tax-Tips-for-Online-Auction-Sellers
https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/sales_from_your_home.htm
Click to access tx94_437.pdf
http://www.revenue.state.il.us/Individuals/FAQs-Use-Tax.htm
-Mrs. Nayla
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Thank you, that is a great answer! I will check with my state law, too.
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No problem. 🙂 Let me know if you find out anything different/interesting from what I acquired.
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It you would like to make a profit on Poshmark do you need a business license from the city you live in?
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No.
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Hi Nayla,
Thank you for writing this informative post! So if you earn less from Poshmark than what you paid for the items, you don’t have to file taxes? Do you know what the reportable earnings threshold for Michigan is? I’m having trouble finding it online.
Thanks again!
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Thank you R! According to how I understood the article from the IRS, yes. As for Michigan state, I found this: http://www.michigan.gov/taxes/0,4676,7-238-43519_43529—,00.html
and
Click to access 948_2010-012TY_AdminCode.pdf
I’d look at pages 11 and 14. They seemed to have the best available information I could find for your state. Still, ask your tax preparer just to make sure. Remember, that although you might not have to claim such earnings to the IRS, you might have to pay taxes for your state. I’m not a professional tax advisor, so I recommend reading the article and browsing a bit; but it is always easier to just ask a professional.
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Have you tried the Bottom Line app? It’s amazing to keep track of inventory, expenses, sales, etc. I was using an excel spreadsheet and this is sooooooo much easier! Love your blog!
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Hi Treviesmommy!
No, I actually haven’t! I’m going to look into it! Thanks for the suggestion. I’m sure others will find this information very helpful! Much love, and I’m glad you’re enjoying this space! 👏🏻😊
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Hi, this addresses the income tax question however, what if I’m in NJ, doesn’t Poshmark have to charge NJ sales tax? Or, is this type of resale site sales tax exempt? Thanks!
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HI! I’m very behind on this post! As a new poshmark seller I was wondering about the taxes and thought I better google it before tax season and I panic! I do resell items for higher and will have to pay the taxes. My question is about receipts. I have a spreadsheet of every dime I have spent and made (so far still at a loss), but I have not kept the receipts. Will my spreadsheet suffice or should I keep everything?
Thanks so much!!
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Heather,
For the OCD, it would probably be best to keep as many receipts as possible as they are the real “evidence of your purchases”. If you do not like all the clutter, I think it would be a good idea to scan them into your computer and then discarding/recycling them phsycially. Since you haven’t been keeping your receipts, I think you’re not in big trouble. They’re really only useful if you ever get audited and should be disposed of after 7 years or so. If it gives you peace of mind, go ahead start keeping them and scanning them into your computer in a Poshmark folder.
Other than that, welcome to the Poshmark selling community! I wish you the very best! 🙂
-Mrs. Nayla
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Hi! For federal reasons, do you think that if you are not making a profit per say, but you are generating a cash flow and it’s being offset with expenses (shipping supplies), you could possibly have a requirement for reporting this as a hobby, given you meet all the super specific criteria for it?
A garage sale is not considered a hobby unless you make a hobby out of having garage sales. But it seems like a lot of people may fall under this category with Poshmark.
This garage sale scenario can also be applied to selling at a retail shop. It’s not something that you are in “control” of or do on a regular basis (unless you do often sell on a regular basis there for some reason, and in that case I assume you’re going home and re-selling the clothes so therefore you’re at square one in thinking about this).
I wonder if Poshmark will be distributing 1099s for the 2018 tax year. Just wanted to see if you had any thoughts on this one!
Thanks!
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What about quarterly sales tax for my business?
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Hi! Thanks so much for this post. It’s so hard to find any information on this topic, this was really informative and helpful! I do have one additional question I was hoping you might know the answer to.
Am I legally required to have a business license if I am selling items for a profit on PM, or is it acceptable if I just report the profit to the IRS as additional income without having a license? I have made about $1000 profit on items I have flipped (paid less than I sold them for) since February of this year and made an additional $2000 from my own items that were in my closet that I wanted to get rid of. I am planning to wind down my sales on PM over the next few months once I have sold all of my inventory, so I would prefer not to go through the headache of setting up a legal business, but I want to make sure I am not doing anything illegal.
Thank you in advance for your help!
Elise
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Thank you so much for this information! I was stressing about how all of this is handled and you answered a lot of questions I had. However, I have a very different situation: My mother passed away recently and she left behind some wonderful designer clothing (never worn) that I would like to post on Poshmark. Will this be considered profit? I have never heard of anyone paying taxes on an Estate Sale, so I am hoping it falls into the same category. Let me know your thoughts on this. Again, thanks for the great information!
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What is the Poshmark address and tax id number for us to use on our tax forms?
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You need to contact Poshmark.
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I’m Jessica irwin I sell small items on poshmark do I need to report it to the IRS as income because I haven’t being doing that I didn’t know I needed to. I sell new keychains for 13 a piece I’m not really making a profit I don’t think
My user name is jessie87
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Hello, Jessica!
If you are making profit by selling on Poshmark, you are considered to have business. Basically, if the amount of money you spend on these keychains before you sell them is MORE than what you sell them for, then you are NOT making a profit. If you spend LESS on these keychains than what you sell them for, then yes, you are making profit. Therefore, you are a small business and you should report.
-Mrs. Nayla
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Hi Nayla,
I guess only you can help me.
I’m green card holder and my suppose doesn’t want me to earn money, so I started to sell my used bags “Burberry” to clean my closet and put Money without his knowledge. Then I started to sell my cousins closet too, I just focused on Burberry only used Burberry . So for some old days we paid 500$ and then I sell now for 250$ so since 1 year from eBay and poshmark I saw money in amount gross 11k$ But actually I paid more for this bags. So should I report to irs. I have no any single idea what my husband does for tax returns and he shouldn’t know about the closet sale how and what am I suppose to do know !
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Hi, Daysinus!
If you initially paid more money for the items you sold than what you re-sold them for, then in theory you don’t have to report it because you made no profit from it.
However, where you live might have different rules. Every state has their rules. 11k seems like a lot of money to make on Poshmark, so congratulations! I don’t know where you live, but you might want to ask a tax preparer in your area. You don’t have to tell your husband about it. You can just go to a tax preparer in your city/town and go ask these questions. I’d go and ask two or three different people. I’m not a licensed tax preparer, so I cannot give you official recommendations on what to do, but I can tell you how to find your answers. Go ask a professional. Try H&R Block. I hope this helps your situation!
Thank you for stopping by and may you have a blessed day! 😊
-Mrs. Nayla
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Finally. Someone answers this question. Thank you.
I do not want my main checking acct. tied up with Posh.
So, I went to another bank to open up a checking acct.
They said if I have many direct deposits that’s a business
acct. =/ They can’t do that. UGH. Do I need to open up a
business account checking? I just want to sell some items
on Posh without opening a business checking acct.
Help if you can.
Thank you so much.
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You’re so welcome, dear! I think that keeping a separate checking account for your growing business is always a smart move as it’ll allow you to see itemized activity versus having to swim in your personal one.
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Something to think about – maybe take some action – definitely ask questions. THANK YOU🎈
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Thank you for this post! Now with Poshmark charging sales tax to buyers on items, do the rules change? I’m a case where I’m selling everything for less than what I paid.
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Do you know what the rules are for Florida? I recently started selling some used/worn clothing and other items of mine trying to clean out my closets on Poshmark/Mercari in an alternative to a garage sale due to covid times. I am selling things for way less than I bought them for as they are worn/used items.
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Ms.Nayla, I have been considering selling some clothing and household items on Poshmark. I have an Etsy shop and sell original vintage dolls, some that I have restored. I do not like new terms Etsy has set on participation in an advertising program and the associated fees. I have seen some vintage dolls listed on Poshmark . Thinking of moving my shop to Poshmark or Ruby Lane. When listing expenses for tax profits, can the extensive time I invest in painting/sealing/and sewing be used to upwardly adjust my basis for selling on Poshmark. If so, how? By a cost per hour? Thanks, lynn
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What if I make a bunch of money but then keep it in the app to buy new stuff?
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You’ve still earned income regardless of how you decide to spend it.
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