So in this scenario - I bought a guitar 2 years ago for say $4k. I sold it in 2020 for $3k. I need to claim the $3k as income and prove that I paid $4k for the guitar 2 years ago. If I can't prove that, I just have to take the $3k tax hit? Correct? So I pay sales tax on the original purchase and then I pay income tax after I sell it for a loss. Awesome! I guess the lesson is keep your receipts and avoid Reverb, Ebay and PayPal at all cost.
You would include the $4K for the guitar along with any of your music-related expenses and revenue as part of your 2018 taxes, then the $3K sale goes against your 2020 taxes. What else did you buy in 2020 that might offset the sale? You can record as an expense (and probably depreciate) anything whose sale you'll later have to report as income. Unless you're turning a profit flipping gear, you'll pay less in taxes overall by reporting everything. The alternative, as others have said, is simply not to use Reverb/eBay/Paypal. If you want the autonomy of private sales for your personal gear, then don't do it as eCommerce. The states don't want internet sales cannibalizing the sales tax they'd otherwise get from local brick-and-mortars, and now everything is on the radar.
My take is that if the government wants me to report all of my gig revenue as income, then I'm sure as hell also going to include my expenses too, and I'm going to find every penny I can. I report amps, guitars, cables, mileage, hotel costs, meals, portions of my house used for music, gear insurance, strings, and any other meaningful expenses. Almost everything I purchase is via eBay, Reverb, or Sweetwater, so it's very easy to compile at the end of the year. Music unfortunately isn't my full time gig, but doing it this way decreases my taxable income by a couple thousand (or more) almost every year.
I keep my receipts, keep records of gigs and rehearsals, and I pay a CPA $300 every year to do my taxes, and it's totally worth it. I pay less taxes because of it, and I never worry about getting caught for under-reporting. For those people who are looking for ways to bend the rules and do things under the radar, at least be smart enough not to advertise it.