Understanding Compliance Rules for Wholesale Sellers on eBay

Introduction

Wholesale sellers on eBay are no longer flying under the radar. In 2025, the IRS and state tax authorities are tracking inventory movement, cross-border transactions, and 1099-K reports more strictly than ever.

Whether you’re reselling in bulk to other businesses or shipping hundreds of SKUs daily, you must understand the tax compliance rules that apply to wholesale eBay operations or risk audit exposure, penalties, and lost profit.

This blog covers what you need to know to stay compliant and confident.

IRS Tax Code References

• IRC §162 – Business deductions (shipping, supplies, reseller tools)
• IRC §263A – Inventory accounting for wholesalers
• IRC §448 – Accrual method for businesses with inventory
• IRC §6050W – 1099-K reporting from eBay
• IRC §6001 – Recordkeeping for all income and expenses

Relevant IRS Forms

• Schedule C (Form 1040) – Report wholesale business income
• Form 1099-K – Issued by eBay when gross payments exceed $600
• Form 4562 – For depreciation of warehouse equipment and tools
• Form 1040-ES – For quarterly tax payments
• Form 8300 – Report cash payments over $10,000 received in trade

Example: A Compliant Wholesale eBay Seller

Example: Ramesh sources electronics in bulk and resells them on eBay. In 2024:

• He grossed $450,000 from 2,000+ eBay sales
• Received a Form 1099-K from eBay for $448,500
• Paid $290,000 to suppliers and $35,000 in shipping/warehouse expenses
• Hired two part-time workers and purchased shelving & packing machines

Tax Strategy:

• Uses accrual method under IRC §448 for inventory
• Deducts operating costs and depreciates warehouse tools using Form 4562
• Reports income and expenses on Schedule C
• Submits Form 1040-ES to pay quarterly taxes

Step-by-Step Guide for IRS & State Compliance in 2025

1. Track Inventory at SKU-Level
   Use tools like QuickBooks Commerce, Zoho Inventory, or eBay-integrated software to track COGS per product, per transaction.
2. Use Accrual Accounting If You Hold Inventory
   Per IRC §448, if your wholesale business holds physical stock, you must report income and expenses when they are earned/incurred not paid.
3. Reconcile 1099-K Against Internal Sales Records
   eBay will issue Form 1099-K in 2025 for gross sales exceeding $600. Cross-check monthly to avoid mismatches.
4. Document Reseller Certificates & Sales Tax Exemptions
   If you sell to other businesses (B2B), collect resale certificates to exempt those sales from sales tax in your state.
5. Deduct All Business Expenses (IRC §162)
   Claim deductions for:

• eBay seller fees
• Shipping materials
• Fulfillment software
• Worker wages (via W-2 or 1099-NEC)
• Equipment purchases (via depreciation)

6. Report Cash Transactions Over $10,000
   Using Form 8300, report any large cash payments accepted for wholesale lots.
7. File State Sales Tax Returns
   Even if eBay collects and remits sales tax, you’re still responsible for reporting sales volumes and exempt sales in your nexus states.
8. Pay Quarterly Estimated Taxes
   Use Form 1040-ES to pay taxes throughout the year, especially if your profit margin is above 20%.
9. Separate Personal & Business Banking
   Helps ensure clean audit trails and protect business expense deductibility.
10. Keep Records for Minimum 3-5 Years
    Digital and physical receipts, resale certificates, supplier invoices, shipping bills all required per IRC §6001.

Conclusion

Running a wholesale operation on eBay in 2025 is a serious business and the IRS sees it that way too. If you’re shipping in bulk, buying large inventory, or operating across state lines, you must be intentional with how you track, report, and file.

When you know the rules, you don’t just stay compliant you also keep more of your money.

Call to Action

Are you a wholesale eBay seller unsure about inventory tracking, reseller compliance, or how to handle multi-state tax obligations?

Book a strategy session with Anshul Goyal, CPA, EA, FCA
Anshul specializes in helping bulk eCommerce businesses optimize for tax savings and compliance. You’ll get expert advice on:

• IRS audit-proof bookkeeping for wholesalers
• Sales tax reporting for resale transactions
• COGS tracking systems
• Proper handling of Form 1099-K and Form 8300
• Estimated tax planning and depreciation strategies

Book your consultation today: https://calendly.com/anshulcpa/
Let’s make your wholesale business more scalable and audit-safe.

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. Do wholesale sellers on eBay need to collect sales tax?
Not always. If selling B2B with resale certificates, those sales may be exempt but you must report them properly.

2. Is the accrual method required for wholesale eBay sellers?
Yes, if you maintain inventory and meet gross receipts thresholds under IRC §448.

3. How do I track inventory and COGS for large volumes?
Use SKU-level inventory software that integrates with eBay and QuickBooks.

4. Do I still file if eBay collects sales tax?
Yes, you’re still required to file sales tax returns in your nexus states to report exempt or wholesale transactions.

5. What happens if I don’t report a large cash sale?
Failure to file Form 8300 for cash sales over $10,000 can lead to penalties and increased IRS scrutiny.