Handbook / Side business

Selling online taxes for 2026: income, 1099-K, sales tax and records

Tax-year note: Tax information on this page applies to the 2026 tax year (returns filed in 2027), from IRS pages checked in November 2026. Figures and dates are labelled with their tax year where they appear. Check current IRS pages before you rely on them.

Selling online, whether handmade goods, products you source, or digital downloads, can grow from a hobby into a real business. Taxes follow the money. This guide covers the 2026 tax year, for returns filed in 2027. Rules and thresholds can change, so check the linked IRS pages before you file.

Business selling or personal sales

The tax treatment depends on what you are doing:

• Selling as a business: buying or making goods to sell for profit. Profit is self-employment income.
• Selling personal items: clearing out your own clothes, furniture or electronics. The IRS explains that payments for personal items sold at a gain are taxable; items sold for less than you paid generally produce no taxable gain.

Keep a simple record of what you paid for personal items you sell, in case you need to show there was no gain.

Form 1099-K

According to the IRS, payment apps and online marketplaces must generally send a Form 1099-K when payments for goods or services total more than $20,000 in more than 200 transactions. They may send one with lower amounts or fewer transactions. Payments from family and friends as gifts or repayments should not be reported on a 1099-K.

Whether or not you receive one, you must report business income. The amount on a 1099-K is gross payments, before fees, refunds and cost of goods, so it will not equal your profit. See the guide to Form 1099-K.

Reporting business sales

Business sellers generally report on Schedule C:

1. Gross receipts: total sales, including shipping charged to buyers.
2. Returns and allowances.
3. Cost of goods sold: inventory purchased or the materials used to make products.
4. Expenses: platform and payment fees, shipping labels, packaging, advertising, software and supplies.

The Schedule C instructions explain cost of goods sold and inventory methods.

Records to keep

• purchase receipts for inventory and materials
• platform sales reports and fee statements
• shipping costs
• payout records matched to your bank account
• year-end inventory counts if you hold stock

Self-employment tax

Net profit from a selling business is subject to self-employment tax. The IRS rate is 15.3% on 92.35% of net earnings, and it generally applies when net earnings are $400 or more. For 2026, the Social Security part applies up to a wage base of $184,500, combined with wages. See Schedule SE.

Estimated payments

If you expect to owe $1,000 or more for 2026, you may need quarterly estimated payments, due April 15, June 15 and September 15, 2026, and January 15, 2027. See Form 1040-ES.

Sales tax

Sales tax is separate from income tax and is set by states and local governments. Key points:

• Since the Supreme Court's 2018 decision in *South Dakota v. Wayfair*, states can require remote sellers to collect sales tax even without a physical presence.
• Many states require marketplaces to collect and remit tax on sales they facilitate. Check each platform's policy and your state's rules.
• Sales from your own website may require you to register and collect tax yourself.
• The Streamlined Sales Tax Governing Board has resources on member states.

Start with your home state. The guide to a sales tax permit explains registration.

Hobby or business

If you sell occasionally without a profit motive, hobby rules may apply instead of business rules. Hobby income is still reportable, but hobby expenses are treated differently. If you are unsure, read the IRS guidance on hobby versus business or talk to a professional.

Year-end checklist

• annual sales and fee reports from every platform
• any Forms 1099-K received
• inventory purchase receipts and year-end stock count
• shipping and packaging costs
• estimated payments made
• sales tax returns filed

Reconcile platform totals with your bank deposits before filing.

Keep business and personal sales separate

Use separate accounts or clear labels for business inventory and personal items, so your records show which sales are business income.

Report business profit whether or not you get a 1099-K, track cost of goods and fees, budget for self-employment tax, make 2026 estimated payments if needed, and check sales tax rules in each state.