The short version
If you sell cards, sneakers, watches, coins, comics, or other collectibles through eBay, StockX, Whatnot, or another online marketplace, a Form 1099-K can feel like the IRS has already calculated your tax. It has not.
Form 1099-K is an information return. It tells the IRS and you that a payment settlement entity reported gross payments. It does not know your cost basis, platform fees, shipping, refunds, returns, grading costs, or whether the sale belongs on Schedule D or Schedule C.
The threshold has also whipsawed. Sellers heard about a $600 rule, then IRS transition relief, then a 2025 law change. As of the current IRS guidance, the federal third party settlement organization threshold is back to more than 20,000 dollars and more than 200 transactions. But a platform may still send a Form 1099-K below that threshold, and taxable income still has to be reported even when no form arrives.
(“Basis” generally means what you paid for the item, plus certain costs. “Gross payments” means the payment amount before the tax return subtracts the items that the Form 1099-K does not net out.)
What the law actually says (primary authority first)
Start with Internal Revenue Code Section 6050W. It requires a payment settlement entity to make an annual return showing the payee’s identity and the gross amount of reportable payment transactions. Reportable payment transactions include payment card transactions and third party network transactions.
For online marketplaces and payment apps, the key phrase is “third party settlement organization,” often shortened to TPSO. Section 6050W says a TPSO is the central organization with the contractual obligation to pay participating sellers in settlement of third party network transactions. A marketplace seller does not need that vocabulary for daily operations, but it explains why the rule is not unique to eBay, StockX, Whatnot, or any one platform. The federal question is whether the payment was settled through the kind of network Section 6050W covers.
The current Code threshold in Section 6050W(e) says a TPSO reports third party network transactions only when the amount exceeds 20,000 dollars and the aggregate number of transactions exceeds 200. The IRS says the same thing on its current 1099-K reporting requirements page: the One Big Beautiful Bill retroactively reinstated the pre-ARPA threshold for TPSOs.
That is the current rule, but it is not the whole story. Notice 2024-85 announced transition relief after the American Rescue Plan Act lowered the TPSO threshold to more than 600 dollars. The Notice described 2024 as a 5,000 dollar transition year, 2025 as a 2,500 dollar transition year, and 2026 and later as the 600 dollar rule. That is the source of much of the confusion. Current IRS guidance after the 2025 law change says the federal TPSO threshold reverted to more than 20,000 dollars and more than 200 transactions.
Two cautions. First, the TPSO threshold is not the same as the rule for direct payment card processing. The IRS Understanding your Form 1099-K page says a seller who takes direct credit, debit, or gift card payments can receive a Form 1099-K regardless of the number or amount of payments. Second, whether or not a Form 1099-K is issued, the IRS says income from selling goods or services still has to be reported.
How it works in practice
Suppose you sell collectibles across two marketplaces. One platform reports 18,000 dollars of gross payments across 150 transactions. Another reports 4,500 dollars across 60 transactions. Under the current federal TPSO threshold, neither platform is required to issue a Form 1099-K solely because of those marketplace payments, because each platform is measured against its own reporting obligation and neither crosses both 20,000 dollars and 200 transactions.
That does not make the sales invisible, and it does not make them non-taxable. It only tells you whether a federal information return is required from that TPSO. You still need to know what you sold, what you paid, what fees and refunds hit the transaction, and whether you were selling personal items, investment assets, hobby property, or business inventory.
Now change the facts. A platform issues a Form 1099-K showing 28,000 dollars in Box 1a. That number may be much higher than your actual profit. The IRS What to do with Form 1099-K page says Box 1a shows gross payments, and that the gross amount is not adjusted for fees, credits, refunds, shipping, cash equivalents, or discounts.
So the workpaper starts below the form:
- Gross payments reported on Form 1099-K.
- Less refunds, returns, credits, discounts, and payment reversals.
- Less platform fees, payment-processing fees, shipping labels, and other supported selling costs when the tax rules allow them.
- Less item basis, such as what you paid for the card, watch, sneaker, coin, comic, or other item.
- Then classify the result as a personal item gain, investment sale, hobby sale, or business sale.
A 1099-K does not answer that last question. A seller clearing out a personal collection, an investor selling long-held assets, and a reseller buying inventory for quick flips can all receive similar-looking forms. The tax reporting can be very different.
The numbers
The table below is the federal threshold timeline online sellers keep hearing in fragments. The important current-law point is that Notice 2024-85 explains the phase-in history, but current IRS guidance says OBBBA restored the old TPSO threshold.
| Rule or period | Federal TPSO dollar threshold | Transaction-count rule | What it means for a reseller | Main source |
|---|---|---|---|---|
| Current federal TPSO rule after OBBBA | More than $20,000 | More than 200 transactions | Current threshold for online marketplaces and payment apps that are TPSOs | IRC 6050W(e); IRS 1099-K reporting requirements |
| ARPA low-threshold rule | More than $600 | No transaction-count requirement | Historical rule that created the low-threshold concern | Notice 2024-85 background; IRS reporting requirements page |
| Notice 2024-85 transition plan for 2024 | More than $5,000 | No transaction-count requirement | Historical transition relief, not the current federal TPSO threshold after OBBBA | Notice 2024-85 |
| Notice 2024-85 transition plan for 2025 | More than $2,500 | No transaction-count requirement | Historical transition relief, not the current federal TPSO threshold after OBBBA | Notice 2024-85 |
| Notice 2024-85 stated plan for 2026 and after | More than $600 | No transaction-count requirement | Superseded for current federal TPSO threshold by OBBBA and current IRS guidance | Notice 2024-85; IRS reporting requirements page |
| Direct payment card processing | No IRS recipient-page minimum | No IRS recipient-page minimum | Separate rule from the marketplace TPSO threshold | IRS Understanding your Form 1099-K |
What this means for you
Do not treat the Form 1099-K as the taxable number. Treat it as a matching document the IRS also received. The return still needs the actual tax computation.
For a reseller, the minimum record set is item-level. Keep the marketplace report, sale date, gross sale price, buyer-paid shipping if included in gross, platform fees, payment-processing fees, seller shipping cost, refunds, returns, chargebacks, credits, grading or authentication fees, purchase date, purchase price, and any records that prove basis.
Then classify the activity. If you sold a personal item at a gain, the IRS says the profit is taxable and is generally reported through Form 8949 and Schedule D. If you sold a personal item at a loss, the loss is generally not deductible, but the IRS gives reporting methods to avoid paying tax on gross receipts that are not income. If you are operating as a resale business, the analysis can move toward Schedule C, cost of goods sold, inventory records, and possible self-employment tax. That classification question is separate from whether a Form 1099-K arrived.
If the form is wrong, do not ignore it. The IRS says to contact the issuer or the payment settlement entity, ask for a corrected form, keep the original form and all correspondence, and file even if the correction does not arrive in time. That is especially important when the form belongs to the wrong taxpayer identification number, duplicates another form, includes personal reimbursements, or reports gross payments that do not belong entirely to you.
The practical goal is simple: reconcile the number the IRS can see to the tax result your return reports. If the form says 28,000 dollars and your return reports a much smaller taxable gain, your records should make that bridge obvious.
Related reading
- Collectibles and the 28% Tax Rate: Why Coins, Cards, and Art Are Not Taxed Like Stocks.
- Recordkeeping for Collectors and Flippers: How to Track Basis Before the IRS Asks.
- Inventory, Cost of Goods Sold, and Sales Tax for the Serious Flipper.
The primary law and IRS guidance cited above are linked inline: IRC Section 6050W, Treasury Regulation Section 1.6050W-1, Notice 2024-85, the IRS 1099-K reporting requirements page, Understanding your Form 1099-K, and What to do with Form 1099-K.
How Sheepdog Tax can help
I am Noah Green, a CPA and Certified Fraud Examiner, and Sheepdog Tax is a veteran-owned practice. I help collectors and resellers reconcile marketplace tax forms to the real tax computation before the return is filed. If you sell through eBay, StockX, Whatnot, auction sites, payment apps, or other marketplaces, I can review the Form 1099-K, platform reports, basis records, fees, refunds, returns, and classification so the return does not simply copy a gross-payment number into the wrong place. To request a reseller tax review before the next 1099-K arrives, reach me at noah@sheepdogtax.com.
If the issue has already become an IRS notice or a 1099-K mismatch letter, that may belong on the Sheepdog Tax Resolution path. I would review the notice, the form, and the transaction records before deciding the response posture.
Sources (primary authority first, then IRS guidance)
- Internal Revenue Code Section 6050W, returns relating to payments made in settlement of payment card and third party network transactions, including gross-amount reporting and the current TPSO de minimis exception. https://www.law.cornell.edu/uscode/text/26/6050W
- Treasury Regulation Section 1.6050W-1, information reporting for payments made in settlement of payment card and third party network transactions, including gross amount and TPSO definitions. https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR31749dec6d4756f/section-1.6050W-1
- IRS Notice 2024-85, Revised Timeline Regarding Implementation of Amended Section 6050W(e), published in Internal Revenue Bulletin 2024-51. https://www.irs.gov/irb/2024-51_IRB#NOT-2024-85
- IRS, 1099-K reporting requirements for payment settlement entities, current OBBBA threshold update and TPSO reporting requirements. https://www.irs.gov/businesses/new-1099-k-reporting-requirements-for-payment-settlement-entities
- IRS, Form 1099-K FAQs, current public FAQ update on the restored TPSO threshold. https://www.irs.gov/newsroom/form-1099-k-faqs
- IRS, Understanding your Form 1099-K, recipient-facing explanation of who sends Form 1099-K, who gets it, and the current reporting threshold. https://www.irs.gov/businesses/understanding-your-form-1099-k
- IRS, What to do with Form 1099-K, gross amount, corrections, personal item gain or loss, and return-reporting mechanics. https://www.irs.gov/businesses/what-to-do-with-form-1099-k
- IRS, Recordkeeping, business recordkeeping purposes including tracking income, expenses, basis, and return support. https://www.irs.gov/businesses/small-businesses-self-employed/recordkeeping
Prepared by Noah Green, CPA, CFE.