Introduction
Want to hit 6 figures on eBay in 2025? Then product research isn’t optional it’s your business blueprint. What you sell, how you price it, and where you source it determine whether your store thrives or tanks.
But top eBay sellers don’t just chase hot trends they master tax-smart research, inventory planning, and profit tracking. If your products don’t match demand and the IRS expects more than you report, your growth could trigger audits or penalties.
This guide walks you through how to research winning products and stay fully compliant as you scale.
IRS Tax Code References
- IRC §162 – Deductible business and product sourcing expenses
- IRC §263A – Inventory capitalization and tracking requirements
- IRC §6050W – Reporting rules for eBay via Form 1099-K
- IRC §6001 – Recordkeeping for product sourcing and revenue
- IRC §471 – Cost accounting rules for inventory-based businesses
Relevant IRS Forms
- Schedule C (Form 1040) – Report gross sales and deduct sourcing costs
- Form 1099-K – Received from eBay when gross sales exceed $600 in 2025
- Form 4562 – For depreciation of tools/software used in research or sourcing
- Form 1040-ES – Pay estimated taxes on growing profit
- Inventory Sheets – Not a form, but IRS expects accurate valuation and method
Example: Scaling from Product Research to 6 Figures
Example: Arjun sells refurbished gadgets on eBay. In 2024:
- He researched niche products using Terapeak and eBay Sold Listings
- Found a supplier offering iPad lots at 40% below resale value
- Scaled to $160,000 in revenue
- Incurred $90,000 in COGS and $20,000 in overhead
Tax Approach:
- Deducts software, product sample purchases, and testing under IRC §162
- Tracks inventory using FIFO and complies with §263A and §471
- Reports all sales on Schedule C
- Pays estimated taxes via Form 1040-ES
Step-by-Step Product Research Guide (With Tax Compliance in Mind)
- Start with Demand Data
Use eBay’s Terapeak Research, completed listings, and trending items reports. Look for:
- Products with >50% sell-through rate
- Consistent sale prices (not volatile or seasonal only)
- Low competition (less than 100 sellers per niche keyword)
- Run Profit Margin Calculations Before Sourcing
Always factor in:
- eBay final value fees
- Shipping costs
- Payment processing
- Sales tax (where applicable)
- Returns buffer
- Record All Product Sourcing Costs
Travel to trade shows? Buy samples? Use Alibaba or liquidation platforms? These costs are tax-deductible if tracked properly under IRC §162. - Choose an Inventory Accounting Method
For IRS compliance, use either:
- FIFO (First-In, First-Out)
- Specific Identification for unique items (like collectibles)
Be consistent year-over-year or file Form 3115 to change methods.
- Track Research Software Subscriptions
Subscriptions to Terapeak, Jungle Scout (if cross-selling), or inventory tools are deductible as business tools. - Forecast Demand for Tax-Efficient Purchasing
Avoid overstocking in Q4 that pushes inventory carryovers into the next year. This can affect:
- COGS deduction timing
- Year-end tax liability under §263A
- Understand Marketplace Rules for High Volume Sellers
If you exceed $600 in gross receipts, eBay will issue Form 1099-K. Don’t just rely on their data keep your own gross/net logs. - Plan for State Sales Tax Obligations
If your sourcing shifts you into multi-state shipping or warehousing, you may owe sales tax registration and filing in multiple states. - Keep Audit-Proof Records
Document:
- Supplier invoices
- Product research process
- Sample tests and reviews
- Inventory logs
This protects you during audits and supports deductions.
- Review & Reinvest Quarterly
Set up a quarterly review of:
- Your best-performing SKUs
- Total profit after tax
- Product returns and margin leaks
Use these insights to scale with strategy, not just hustle.
Conclusion
Selling on eBay is no longer just about flipping products. To hit and maintain a 6-figure revenue stream, you must pair data-driven research with tax-smart planning. When you track what works and what it costs and keep your IRS documentation tight you build a brand that scales.
The best sellers in 2025 won’t be the trend chasers. They’ll be the ones who research, record, and reinvest with precision.
Call to Action
Looking to scale your eBay store to 6 figures but unsure how to stay IRS-compliant with product research, inventory, and COGS tracking?
Book a strategy session with Anshul Goyal, CPA, EA, FCA
Anshul has helped dozens of sellers go from part-time hustles to full-time, compliant businesses. In your call, you’ll get advice on:
- Tax-deductible product research
- Smart COGS tracking and inventory planning
- 1099-K reconciliation strategies
- eBay fee deductions and software write-offs
- How to avoid overpaying estimated taxes
Schedule here: https://calendly.com/anshulcpa/
Start scaling like a pro on eBay and with the IRS.
About Our CPA
Anshul Goyal, CPA, EA, FCA
Anshul brings 15+ years of U.S. and international tax experience. He specializes in helping online sellers, foreign founders, and U.S. residents with IRS and multi-state compliance. Known for his deep knowledge in Shopify and Amazon seller tax strategy, Anshul has helped hundreds of entrepreneurs minimize taxes and scale legally.
Disclaimer
This blog is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified tax professional regarding your individual tax situation.
Top 5 High-Searched FAQs for 2025
1. What tools should I use to research products on eBay?
Terapeak (free inside eBay), Jungle Scout, and Google Trends are great starting points.
2. Are product samples and research trips deductible?
Yes, if they’re related to your eBay business, they qualify under IRC §162.
3. Do I need to report inventory I haven’t sold?
Yes. Unsold inventory must be tracked and reported under IRC §263A/§471.
4. How do I reconcile 1099-K with real profit?
Compare gross sales to your net revenue after fees and refunds. Use your own books not just eBay’s dashboard.
5. Is overstocking a tax liability?
Yes. Excess inventory at year-end delays COGS deductions and may increase tax liability for the current year.