Do I Have to Pay Taxes on My Depop Sales?

If you’ve made extra cash selling clothes, art, or collectibles on Depop, you might be wondering Do I have to pay taxes on Depop sales? The short answer: yes, in many cases you do — especially if your selling activity goes beyond the occasional closet clean out.

Understanding how Depop income fits into your overall tax picture can save you from unpleasant surprises come tax season. Whether you sell casually or are an up-and-coming reseller, knowing what counts as taxable income, which forms to expect, and how to track your deductions can help you stay compliant and maximize your tax savings.

Key Highlights

• Depop online sellers may owe federal income tax or self-employment tax, depending on how frequently they sell and whether they earn a profit.

• The IRS requires all income to be reported, even if you don’t receive Form 1099-K, Payment Card and Third Party Network Transactions.

• Platforms like Depop automatically collect and remit state sales tax for many U.S. orders, but sellers are still responsible for reporting their income.

• Deductible expenses — such as packaging, shipping costs, and platform fees — can lower your taxable profit.

• Professional bookkeeping and tax guidance from 1-800Accountant can simplify compliance and help you claim every deduction you’re entitled to.

Key Tax Rules That Apply to Depop Sales

Income vs. Hobby (Casual Sale)

If you’re occasionally selling personal items on Depop, for example, offloading a few old jackets at a loss, you probably don’t owe tax on those sales. But the line between a hobby and a business depends on your intent and frequency.

The IRS expects you to report all income unless it’s clearly excluded. That means if you buy inventory to resell, advertise your items, or regularly earn a profit, the IRS will likely treat your activity as a business, and you will owe online reselling taxes. You’ll be subject to income tax and possibly the 15.3% self-employment tax that funds Social Security and Medicare. 

The $400 Rule (Self-Employment Net Earnings Threshold)

Once your net profit from self-employment, including Depop resales, exceeds $400 for the year, you typically owe self-employment tax. 

Even if you make less than $400, you may still owe income tax if your overall income is high enough. Keeping accurate records from the start helps you determine where you stand at year-end.

1099-K Reporting Rules & Changing Thresholds

Most first-time sellers have questions about Depop income tax reporting. Depop (through Stripe) issues Form 1099-K to certain sellers, summarizing total payments processed. Historically, sellers only received a 1099-K if their payments exceeded $20,000 and 200 transactions in a year.

While proposed changes would have lowered the 1099-K reporting threshold to $600, the passage of the One Big Beautiful Bill Act in 2025 has preserved the historical threshold of  $20,000 and 200 transactions.

Regardless of whether you receive the form, the IRS requires you to report all income. Depop may also request your tax ID if your gross sales exceed $5,000 annually. Remember, receiving a Depop 1099-K doesn’t automatically mean you owe taxes on the full amount — it simply reports gross payments before expenses.

How Depop Handles Sales Tax (Depop Marketplace Tax)

Marketplace Facilitator Model

The platform operates under the marketplace facilitator Depop sales tax rules used by most online platforms. This means Depop automatically calculates, collects, and remits state sales tax on behalf of U.S. sellers when an order ships to a U.S. buyer. According to the Depop state sales tax policy, you don’t need to manually collect sales tax yourself in most cases.

However, Depop’s automatic collection may not cover all states or product categories, so it’s wise to verify your specific obligations based on where your buyers are located to remain compliant.

Nexus and Seller Responsibilities

Sales tax “nexus” refers to your connection with a state — through physical presence or sales volume — that triggers tax responsibilities there. Even though Depop handles sales tax collection, you may still need to report those sales on your state personal tax return or maintain proper documentation.

If you operate across multiple states or use several resale platforms, professional help from 1-800Accountant’s e-commerce accounting experts ensures you remain compliant in every jurisdiction.

Calculating Taxable Income from Depop

Gross Receipts vs. Net Profit

For tax purposes, you’ll report your gross receipts — the total amount you receive from sales, including shipping and handling. Then you subtract your cost of goods sold (COGS) and other eligible expenses to determine your net profit.

Example: You buy an item for $20, sell it for $50, and pay $5 in Depop fees and $7 for shipping.
Your taxable gain = $50 – ($20 + $5 + $7) = $18.

Deductible Business Expenses

Depop sellers can deduct many ordinary and necessary business expenses, including:

• Shipping supplies and postage

• Packaging and labeling materials

• Depop, PayPal, or Stripe transaction fees

• Internet and phone expenses used for your business

• A portion of home office costs, if applicable

• Bookkeeping or virtual outsourced tax prep fees

Maintaining receipts and digital records ensures you can claim every deduction and substantiate your expenses in case of an audit.

What if You Sold at a Loss?

If you sell personal items for less than you paid, the loss generally isn’t deductible. For instance, selling a used jacket for $30 when you originally paid $80 doesn’t create a deductible loss — it simply reduces your taxable income to zero on that sale.

However, if you operate a bona fide resale business, legitimate losses may be deductible against other business income, depending on your structure. It’s best to consult a tax professional to determine eligibility.

Reporting Depop Income to the IRS

Schedule C / Self-Employment Tax

If your Depop activity qualifies as a business, you’ll report income and expenses on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). Your net earnings over $400 are also subject to self-employment tax for Social Security and Medicare.

1-800Accountant’s personal income tax preparation services can handle these filings for you, ensuring your deductions and credits are maximized.

Estimated Quarterly Taxes

Self-employed sellers who expect to owe at least $1,000 in tax for the year generally need to make quarterly estimated tax payments. Timely payments can help you avoid penalties and interest, while encouraging accuracy.

State Income Tax Considerations

Most states also tax income from online sales. Thresholds vary, but in many cases, any profit must be reported. Check your state’s Department of Revenue website for details, or rely on a trusted accountant to manage state filings alongside your federal return.

Common Questions & Edge Cases

What if I Don’t Receive a 1099-K?

You’re still required to report your income regardless of the forms you receive. The IRS states that all income must be reported, even if you don’t receive a 1099-K. Use Depop transaction summaries, PayPal records, and bank deposits to reconstruct your earnings in the absence of this form.

Occasional “Virtual Garage Sale” vs. Resale Business

If you sell items occasionally without intent to profit, you’re likely in hobby territory. But consistent activity — buying items to resell, running promotions, or earning steadily — signals a business. The IRS determines this status by evaluating factors like:

• Frequency

• Marketing

• Time spent

Multi-Platform Sellers & Split Income

Are you selling items across Depop, Poshmark, eBay, or Etsy? If so, you must aggregate all your resale income and deduct expenses proportionally. Maintaining a unified bookkeeping system prevents underreporting and simplifies tax prep.

Audits & Documentation Best Practices

Audit and documentation best practices include keeping digital copies of:

• Original purchase receipts

• Shipping labels and expense invoices

• Depop and PayPal transaction records

• Inventory spreadsheets

Using bookkeeping tools or 1-800Accountant’s virtual bookkeeping solution will provide clear records that stand up to IRS scrutiny.

Practical Tips for Depop Sellers

Whether you're a hobbyist or have made Depop selling a full-time business, these practical tips will help you get the most out of the platform. 

• Start record-keeping early — log every sale and expense.

• Use accounting software or spreadsheets to reconcile monthly income.

• Review Depop’s reports against your payment processor and bank records.

• Track quarterly estimated tax deadlines to avoid penalties.

• Partner with professionals like 1-800Accountant to handle filings, optimize deductions, and ensure compliance.

Next Steps for Depop Taxes

While casual hobbyists have few responsibilities, most Depop sellers who earn a consistent income should expect to report their profits and possibly pay self-employment tax. Understanding distinctions — like hobby vs. business income and the evolving 1099-K thresholds — can make tax season a lot easier. 

If you’re earning through Depop or other resale platforms, you don’t have to navigate these complexities alone. Let 1-800Accountant, America's leading virtual accounting firm, help you stay compliant, organized, and ahead of the curve with expert bookkeeping and personalized tax planning designed to help online entrepreneurs focus on what they do best: sell.

Schedule a free 30-minute consultation with a small business expert to get started.