You sold an old guitar. Maybe some vintage Pokémon cards or that designer handbag that’s been gathering dust in the back of your closet since 2019. Now you’re staring at your PayPal or eBay Managed Payments dashboard and wondering if Uncle Sam is watching. It’s a valid concern. The short answer is yes, eBay does report sales to the IRS, but the "how" and "when" have been a total mess of shifting deadlines and legislative chaos over the last few years.
Tax season used to be simple for casual flippers. You basically flew under the radar unless you were doing massive volume. But things changed. Then they changed again. And then the IRS got cold feet.
Understanding whether does eBay report sales to IRS depends entirely on your total gross sales and how the government is feeling about its own rules this week. Right now, we are in a weird transition period. For the 2024 and 2025 tax years, the IRS has been playing a game of "delay and see," which has left a lot of sellers scratching their heads about whether that 1099-K is actually coming in the mail.
The $600 Rule That Kept Getting Delayed
If you’ve been following the news, you’ve probably heard about the $600 threshold. This was part of the American Rescue Plan Act of 2021. Before this law, eBay only had to send you a 1099-K if you hit $20,000 in sales AND had over 200 transactions. That is a lot of sneakers. Most casual sellers never even came close to that.
The new law dropped that bar significantly. Down to $600. No transaction count required.
But here is the kicker: the IRS realized that mailing out millions of tax forms to people selling their used baby clothes would be a logistical nightmare. So, they delayed it. They delayed it for 2022. They delayed it for 2023. For the 2024 tax year (the forms you get in early 2025), the IRS announced a "phase-in" threshold of $5,000.
Basically, if you sell more than $5,000, eBay is legally required to report those gross proceeds to the IRS. If you're under that, you might not get a form, but that doesn't mean the income isn't taxable. There is a huge difference between "eBay reported this" and "I don't owe taxes on this."
Why the 1099-K isn't a bill
A 1099-K is an information return. It tells the IRS how much money flowed through your account. It does NOT tell them how much profit you made. This is where people freak out. If you sold a laptop for $800 that you originally bought for $1,200, you have a loss. You don't owe taxes on a loss. However, eBay doesn't know what you paid for that laptop. They just see the $800 coming in.
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You have to be the one to tell the IRS, "Hey, I actually lost money on this." If you don't, and eBay reports that $800, the IRS might assume it's all pure profit. That's a recipe for a very annoying audit letter.
State Laws vs. Federal Laws: The Secret Catch
Here is something most people miss. Even if the federal IRS threshold is $5,000 right now, your state might be way more aggressive. States like Massachusetts, Vermont, Maryland, and Virginia have had much lower reporting thresholds for years.
If you live in one of those states, eBay might send a 1099-K to your state's Department of Revenue even if you only sold $600 worth of goods. They’ll send a copy to the IRS too, because once the data is generated, it's out there. You can't assume that just because the federal limit is high, you're "safe" from reporting.
Check your local state tax website. It’s boring, but it’s better than getting a surprise bill from your state capital three years from now with interest tacked on.
Garage Sale vs. Business: The IRS Distinction
The IRS cares about your intent. Are you a hobbyist or a business?
If you are just cleaning out your garage and selling stuff for less than you originally paid, the IRS generally views this as selling "personal effects." You don't get to claim a loss on your taxes for personal items, but you also don't owe tax because there's no gain.
- Scenario A: You sell a treadmill for $400. You bought it for $1,000. No tax owed.
- Scenario B: You buy vintage watches at estate sales for $50 and sell them on eBay for $200. That’s a business. Or at least a "hobby for profit." You owe taxes on that $150 gain.
The IRS uses a set of factors to determine if you’re a business, including whether you carry out the activity in a business-like manner and if you depend on the income for your livelihood. If you're hitting the eBay search bar every morning looking for "underpriced" inventory to flip, you're a business in their eyes.
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Keeping the receipts (Literally)
If eBay reports your sales, you need documentation. This is the part everyone hates. You need a folder—digital or physical—filled with:
- Original receipts or bank statements showing what you paid for items.
- eBay fee summaries (that 13% adds up fast).
- Shipping labels and packaging costs.
- Home office expenses if you have a dedicated space for your inventory.
Without these, the IRS will default to the highest possible tax burden. Don't let them.
What Happens if You Don't Report?
Let's say eBay sends the IRS a 1099-K because you sold $7,000 worth of collectibles, but you decide not to mention it on your Form 1040.
The IRS computers are very good at "matching." They see a 1099-K attached to your Social Security number from eBay, but they don't see a corresponding entry on your tax return. A few months or years later, an automated CP2000 notice arrives. It will propose an increase in your taxes, plus penalties, plus interest.
Penalties can be steep. We’re talking 20% of the underpayment for accuracy-related penalties. It’s almost always cheaper to just report it correctly the first time.
The "Total Gross" Trap
Keep in mind that eBay reports the gross amount. That includes the price of the item, the shipping the buyer paid you, and sometimes even the sales tax eBay collected.
Wait, why would they report sales tax you never even touched? Because the law requires them to report the total transaction volume. You then have to "deduct" the sales tax, the shipping costs, and the eBay fees on your Schedule C (or Schedule 1) to arrive at your actual taxable income. It feels like extra homework because it is.
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Practical Steps for eBay Sellers This Year
Don't wait until April to figure this out. If you’re wondering does eBay report sales to IRS, you should act as if they do.
First, download your reports. Go to the "Payments" tab in the eBay Seller Hub. Look for "Reports" and then "Tax Documents." Even if a 1099-K isn't generated for you, you can download a CSV of every single transaction.
Second, separate your "Garage Sale" items from your "Flipping" items. If you are selling your own old stuff, try to find some proof of what you originally paid. Even an old email confirmation helps. If you can't find it, a reasonable estimate of the original retail price is better than nothing, but the IRS prefers paper trails.
Third, update your taxpayer information. eBay will eventually restrict your account if you don't provide a valid Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). They are legally required to withhold "backup withholding" (usually around 24%) if they don't have your tax info on file and you hit the thresholds. You definitely don't want the IRS taking 24% off the top of your sales before you even get your money.
Fourth, consider a separate bank account. Even if you’re a small-time seller, having a dedicated "eBay" checking account makes tax time 100x easier. You can see exactly what went out for inventory and what came in from sales without digging through your grocery bills and Netflix subscriptions.
Ultimately, the reporting landscape is messy because the government keeps moving the goalposts. The $5,000 threshold for 2024 is a reprieve for many, but the $600 threshold is still the "intended" goal for future years. Treat your eBay selling like a professional endeavor, and the tax reporting part becomes a simple math problem rather than a source of anxiety.
Summary of Action Items
- Verify your state's threshold. Don't assume the federal $5,000 limit applies to your state return; it might be as low as $600.
- Download your eBay financial summary. Use the Seller Hub to get a clear picture of your gross sales versus net payouts.
- Gather "Cost of Goods Sold" (COGS) data. Find receipts or records for everything you sold to prove you didn't just make 100% profit.
- Account for every deduction. Remember that eBay's 1099-K includes the money you spent on shipping and fees, which you must subtract manually on your tax return.
- Consult a professional. If your sales are high enough that you're worried, a CPA or Enrolled Agent is worth the couple hundred dollars to ensure you aren't overpaying or triggering an audit.