2026 tax year
E-commerce seller taxes and deductions
The form reports gross. Your 1099-K shows everything the platform processed before fees, refunds, shipping and the cost of the goods themselves. And reconciling that figure down to actual profit is most of the work on an e-commerce return. Report the gross and deduct the difference; do not report a net figure the form does not match.
Inventory is not deductible when you buy it. It becomes cost of goods sold when it sells, which is why a profitable-feeling year with a warehouse full of stock produces a tax bill that makes no sense. Selling into other states creates sales tax obligations once you pass their thresholds, and those thresholds are about your sales rather than your presence.
The rest of the e-commerce seller deduction list
Ordinary and necessary business expenses, deductible in full in the year you pay them, provided they are genuinely for the business:
- Stock, as cost of goods sold
- Platform fees
- Shipping
- Client advertising spend
- Software subscriptions
- Storage and warehousing
- Packaging
- Returns and refunds
Worth knowing
Your 1099-K reports what came in, not what you made, and the gap between the two is most of the return.
That is what is specific to this trade. The larger deductions are the universal ones, see the full checklist.
What each deduction is worth to you
On $100,000 of profit with no state income tax, $1,000 deducted saves $305, 30.5%, because it comes off self-employment tax and income tax together:
| Net profit | Saved per $1,000 deducted | Effective |
|---|---|---|
| $40,000 | $231 | 23.1% |
| $100,000 | $305 | 30.5% |
| $200,000 | $297 | 29.7% |
The last row is worth less than the one above it, and that is not a mistake: past the Social Security wage base the self-employment part of the saving drops from 15.3% to 2.9%, and the higher income-tax bracket does not quite make up the difference. A deduction is worth most in the middle.
Add a state income tax and every row rises. The 1099 calculator applies that layer.
What these words mean
- 1099-K
- The form a payment platform or marketplace sends when it has processed money on your behalf. It reports what came in, before fees and refunds, not your profit.
Related
- Full deductions checklist
- Every profession
- 1099 taxes by state
- Quarterly payments
- Is an S-corp worth it?
- Local income tax
General information about how these deductions work, not tax advice. Whether a particular expense is deductible for you depends on facts this page does not have, check with a tax professional before claiming anything listed here.