Tax Help for E-Commerce and Online Sellers

Selling online looks simple: list a product, ship it, collect the payment. The tax side is less simple. Platforms report your sales to the IRS, inventory has to be valued, sales tax rules vary by state, and the costs of running a store come in dozens of small pieces. This page is for sellers on Amazon, Shopify, Etsy, eBay, Walmart and similar platforms, in Naperville, Aurora, Chicagoland and across the country.

Hobby seller or business

If you regularly sell to make a profit, you report on Schedule C and owe self-employment tax. Occasional sales of your own used belongings are different. Gains are taxable, but losses on personal-use property are not deductible (Topic 409). A reseller who buys items to flip is running a business even if sales are small.

Matching the 1099-K to your books

The federal Form 1099-K threshold is back to more than $20,000 and more than 200 transactions. Some platforms and states still send forms at lower amounts, and you must report all income regardless. Because a 1099-K counts gross payments, it can include shipping charges, and sometimes sales tax, that you pass along. Reconcile it to your platform settlement reports each month so that returns, fees and chargebacks reduce your income correctly instead of being missed. Our 1099-K and 1099-NEC guide shows the flow.

Inventory and cost of goods sold

Cost of goods sold is often your largest deduction. Under Publication 334, a small business taxpayer, meaning average gross receipts of $31 million or less over the prior three years (2025), can choose not to keep formal inventories and may deduct inventory costs when items are sold. Sellers who do keep inventory generally use an accrual method for sales and purchases of inventory, and must value inventory at the start and end of each year. Small business taxpayers are also exempt from the uniform capitalization rules.

Include in cost the purchase price, freight in, and generally customs duties and fees on imported goods. Keep supplier invoices, entry paperwork and Amazon inbound shipment records. Inventory sitting in a fulfillment center is still yours. Damaged or lost units, samples and returns need clear records. See the inventory and cost of goods sold guide.

Sales tax

Sales tax duties depend on where you have nexus, which can come from a physical presence, such as inventory stored in a warehouse in that state, or from sales volume. In Illinois, remote retailers must collect when they reach $100,000 in cumulative Illinois receipts or 200 separate transactions in the previous 12 months. Illinois sources many sales to the destination, and marketplace facilitators apply the same thresholds. Most states have marketplace laws under which the platform collects tax on sales it facilitates, but your own website sales, wholesale sales and sales through other channels are usually your responsibility. Illinois returns are filed monthly, quarterly or annually and are due the 20th of the following period, and larger filers must pay electronically. When you sell for resale, check that the buyer's resale number is active. See sales and use tax, sales tax nexus and multi-state tax.

Sales tax you collect is not your income; it belongs to the state, so keep it in a separate account.

Deductions sellers miss

• Platform referral and fulfillment fees, payment processing fees and advertising.
• Shipping supplies, labels, packaging and postage.
• Storage, prep centers, software and subscriptions.
• Business mileage to suppliers, post offices and markets: 70 cents a mile for 2025, 72.5 cents for 2026.
• Equipment such as scanners, printers and cameras. Items costing $2,500 or less per invoice item can often be deducted at once.
• A home office. The exclusive-use rule has an exception for a space used to store inventory or product samples when your business has no other fixed location.
• Contract help. Form 1099-NEC is required for payments of $2,000 or more made after 2025 ($600 before).

Entity and registration questions

Many sellers start as sole proprietors, then form an LLC for liability reasons and later consider an S corporation. Domestic companies no longer need to file beneficial ownership reports with FinCEN under the rule effective in August 2026, but state registrations, sales tax permits and local licenses still apply. See business formation.

Red flags and records

Keep platform settlement reports, bank and card statements, supplier invoices, shipping logs, inventory counts and sales tax filings. Common problems include a 1099-K that does not match the return, personal expenses run through the business, margins that look unrealistically low, sales tax not collected in states with nexus, and constant losses. Payments to suppliers or freelancers abroad need documentation. Foreign contractors are generally not issued a Form 1099, but keep their signed tax forms, such as Form W-8BEN, and contracts on file.

How we can help

We reconcile marketplace reports, prepare Schedule C or business returns, review states for sales tax exposure and set up bookkeeping that follows inventory. See business tax preparation. This page is general information, not advice for your situation.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.