Is Selling on Poshmark Considered a Business? Paying Taxes, Handling Expenses & More

So, you’ve been selling stuff on Poshmark and want to know what this means for tax season. Selling or flipping clothing and other items online has risen in popularity over the last few years, probably because Millennials and Gen-Z are generally more eco and budget-conscious than previous generations.

If you’ve sold some clothes on Poshmark or another, similar platform, you’ll probably have a few questions after you’ve been at it for a while.

Is selling on Poshmark a business? Do you have to report what you make selling your old stuff online? What if you resell clothes from thrift stores on Poshmark? Let’s talk about it.

Disclaimer: There may be affiliate links in this post, which means that if you decide to make a purchase through one of my links, I’ll earn a commission on that purchase. This helps keep my site up, so if you do – thank you!

First, figure out whether you’ve got a business or a hobby on your hands

I’m not a financial expert, but the IRS says that selling goods and services in order to make a profit should be considered a business. On the other hand, if you’re just doing something recreationally, it’s considered a hobby. Here’s the breakdown of the differentiation from the IRS itself, if you want to go check it out.

That being said, income from hobbies still needs to be reported (IRS says so.)

As a business, you’re able to deduct expenses to reduce the amount of taxes you owe during tax season. You can choose to file your businesses’ taxes yourself with a tool like TurboTax or something similar. Or, you can get with a tax professional to help you out with this.

Since you can deduct expenses as a business owner, it does benefit you to go through the effort to set up your business if you plan on selling on Poshmark for profit. Especially if you’re planning on flipping many items.

Hobby sellers still need to report their income

Even if you don’t have a business on Poshmark, you’ll need to report your income if you make any money. If you’re unsure about this, consult a tax professional in your area to get clearer information.

Essentially, if you are audited for whatever reason and the IRS sees deposits from Poshmark that you didn’t report, you will likely have to pay any relevant taxes or fees on those deposits.

Business-owning Poshmark sellers can report expenses to reduce taxes owed

There’s a bit more work that goes into officially owning a business. You’ll need to set everything up in the beginning. This might include getting:

  • Business license from your state
  • Resale certificate/license
  • Business bank account (Highly recommend this no matter what area you live in)
  • EIN number

I also recommend looking up your intended business name on the trademark database to make sure you’re not using something that’s already taken.

You’ll also need to keep any relevant licenses or permits up to date and, of course, pay sales and income taxes. A lot of the above list really depends on the laws in your state, so check out your secretary of state website for all of the instructions on how to start a business in your state!

Don’t forget to track your sales and expenses to make tax time simpler

Poshmark makes it pretty easy to keep track of your sales without much work since you always have access to your sales history inside the app.

It’s a good idea to use a third-party tool to track expenses for your Poshmark business, though. Just make sure that you have a separate bank account for business use only or things could get messy during tax season.

I love Freshbooks for automated expense and profit tracking and being able to see how I’m doing at a glance. I’ve found that it’s less expensive than other, similar tools and it saves me a lot of time.

Long story short

So, yes, you do have to report income from Poshmark. But whether or not you’re running a business is a little less clear-cut. At the end of the day, it comes down to whether you’re just offloading a few items from your closet or if you are buying items to sell on the app for a profit.

Poshmark is still an awesome platform to make some extra money as a side hustle and if that is the category you fall into, I highly recommend setting up your business officially and starting to track your expenses and profits so that you can see everything at a glance and you won’t have to scramble to get all your numbers together come March or April.

Thanks for reading and let me know any questions you have!

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Is selling on Poshmark a business? Paying taxes, handling expenses, and more
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