Schedule C for buying-group resellers, line by line.

If you received a 1099-NEC from a buying group, you're a sole proprietor (or LLC member) for federal tax purposes, and Schedule C is the form that turns that gross 1099 figure into the net income you actually pay tax on. Mess it up and you'll pay tax on the gross. Get it right and you'll pay tax on a small fraction of it.

The structure, in plain English

Schedule C has three meaningful parts: Part I (income), Part II (expenses), and Part III (cost of goods sold). For a typical reseller, Part III does most of the lifting — your cost of inventory shipped through the group is by far your largest deduction.

Part I: Income

Line 1 (Gross receipts) is where the 1099-NEC totals go. If you received multiple 1099s, sum them. Don't worry that this number looks shockingly high — that's why Parts II and III exist. The IRS already has copies of every 1099 issued to your taxpayer ID, so be sure your Line 1 matches the sum of those forms exactly.

Part III: COGS — the line that matters most

Cost of goods sold is the price you paid retailers for inventory shipped through the group, shipping costs, and any direct material costs. For a typical buying-group reseller, COGS will be 90–95% of Line 1. Track it precisely:

• Beginning inventory: what was on hand January 1.
• Purchases: every receipt, summed by year. This is your big number.
• Cost of labor: probably zero for a solo reseller.
• Materials and supplies: boxes, tape, labels.
• Other costs: warehouse fees if you use 3PL prep.
• Ending inventory: what was on hand December 31. For a clean sourcing-to-scan operation, this should be near zero.

Part II: Operating expenses

These are the costs of running the business that aren't tied to a specific unit. Common reseller deductions:

• Car and truck expenses (Line 9): mileage to retailers, hubs, and the post office. Track with MileIQ or similar; standard mileage rate is far easier than actual expenses.
• Office expense (Line 18): printer ink, software (Stamps.com, Bankbonus.app, accounting tools).
• Supplies (Line 22): packaging, tape, labels not allocated to COGS.
• Travel (Line 24a): trips to scout retailers in other states (only if a clear business purpose).
• Utilities (Line 25): allocable portion of phone/internet used for business.
• Wages (Line 26): only if you actually have employees and run W-2 payroll.
• Home office (Line 30): allocable portion of rent/utilities for a dedicated workspace.

The four lines that draw audits

1. Line 9 (Car/truck): IRS knows the median mileage for resellers. Reporting 40,000 business miles when your odometer shows 50,000 total is a flag. Keep contemporaneous logs.
2. Line 24b (Meals): generally zero unless you have a real, documented business purpose. Don't deduct your weekly Costco lunch.
3. Line 30 (Home office): only deduct if you have a space used regularly and exclusively for the business. The exclusivity test is what most people fail.
4. Part III ending inventory: a number that's wildly different from your physical reality is the easiest deduction the IRS can disallow. Document with photos and counts.

Self-employment tax

Net income from Schedule C flows to Schedule SE, where you'll owe self-employment tax (15.3% on the first ~$169k of net earnings, with 2.9% Medicare-only after that). This is on top of regular income tax. A common mistake is budgeting only for the income tax bracket and getting hit with a 25–30% effective rate at filing time.