PoshmarkPoshmark, 1099 Forms, and Taxes - A Seller’s Guide to 1099's
Written by OneShop Team
Poshmark is a great hustle that can also turn into a full-time job, especially when sellers make business income out of their closets. Similar to other online marketplaces like eBay, Mercari, and Etsy, Poshmark has fees and other related expenses that are involved with selling on the e-commerce platform.
Along with platform fees, online sellers are obligated to pay taxes. However, this does not apply to everyone, and some sellers may not even have to pay taxes at all. It all comes down to what you’re selling and exactly how much money you’re making from your online sales and why. To know more, let’s discuss the fees, taxes, and 1099-K and why they are important.
Unlike eBay, it is free to list items on Poshmark. Items that sell under $15 are charged with a flat fee of $2.95. For items over $15, Poshmark takes a 20% commission, so you keep 80% of the sales. According to Poshmark’s terms of service, you also get the following:
- Free pre-paid shipping label.
- Free credit card processing.
- Customer support and Posh Protect buyer protection.
- Sales tax is automatically calculated, collected, and remitted to the state on your behalf.
It is important to understand that your earnings are based on your listing price and that the actual net earnings will vary based on the final order price, seller discounts, and any other applicable taxes and discounts.
Online sales taxes boil down to what you’re selling, how much you made vs. how much you had to spend, and why you’re in the market, to begin with. The type of taxable items on Poshmark consists of used items, boutique items, and wholesale items.
How Poshmark Sales Tax is Calculated
The Sales tax is based on the following factors:
- Type of item purchased
- Buyer’s delivery address
- Seller’s return address
- Shipping costs
- Selling price
Luckily, Poshmark automatically calculates the sales tax for you.
Poshmark, 1099-K Forms, and the American Rescue Plan Act of 2021 (AKA Covid Relief Bill)
A 1099-K form tracks payments done through online payment networks or marketplaces, like Poshmark. A provision in the American Rescue Plan Act of 2021, better known as the COVID Relief Bill, requires companies to report a 1099-K to anyone over $600 sales per year, even if only in a single transaction. This new rule is effective beginning with payment transactions settled after December 31, 2021. Before this, you would need to have more than $20,000 in payments and 200 or more transactions for a 1099-K form from the payment network. With these new rules, for example, if sold $601 worth of items in 2022, even in a single transaction, the online marketplace and payment processor is required to file and send a Form 1099-K to you.
Do I need to Claim my Poshmark Earnings on my Tax Return?
For 2021, if you make more than $20,000 in sales and have 200 or more transactions, then yes. For 2022 and beyond, if you make more than $600 in profit per year in 2022, absolutely. There is always a chance that you will be subject to an audit by the IRS. You are accountable for reporting taxes on profits, and failure to report can mean big trouble. Even moreso, the IRS would charge interest on the taxes owed. Poshmark takes care of collecting sales tax, but it's up to you in reporting your income from Poshmark.
Tracking Poshmark Taxes
A great feature with Poshmark is that it allows its users to track their sales and taxes on their “My Sales Report.” Poshmark users can download a copy of their sales report by visiting their settings and selecting “My Sales.”
OneShop is an innovative tool that is designed to act as your Poshmark virtual assistant and get the advantage to boost your sales and expand your business to many marketplaces. It works 24/7 as your own sales expert to improve your reach by automating shares, relisting, follows, and sending offers around the clock. It has a built-in share jail protection that helps your listings get shared and sold faster.
To learn more about how you can boost your business, sign up for our 7-day free trial, with no credit card required! Give OneShop a try to start hitting your business goals!