got my PayPal 1099 /// what now?

Even if I am selling it at a loss, the government still wants to tax me for the item 

That is incorrect, You only owe taxes if you had a profit. They want you to show you sold at a loss. If you did , you owe no tax.

It has always worked that way for a business. Second hand stores have always owed taxes on things they are reselling.

Nothing has changed except for enforcement of laws and rules that have existed for many years

they decided to go ahead and tax you if you made a profit, even it it was just luck.

The government has no way to know if a PayPal user is a business or not. If they did not do it like this, then every business would just say they are not a business, just a hobby, and pay no taxes. As others have said, simply state you sold at a loss and move on.

But since they aren’t letting you use losses to offset income, they may not let you use losses to offset gains made through other sales.

The gain or loss is not for a single item, it is the total for the year. It is that way for a business, it is that way for capital gains, it is that way for buying and selling anything whether you are a business or not, it is that way for this.

The difference between a hobby and a business is, if you lose money on a hobby, you can’t use that loss to offset other income.

Dodbnbav, huh? It is difficult to follow that rant it is so disjointed, but it appears you are talking about paying tax when you buy something. The topic of this thread is tax liability when you sell something. It has nothing to do with paying sales tax or use tax when you buy something.

I'm not sure what you are trying to say, but it is perfectly legal to use the amount you paid for an item to offset income when you sell that item. If you sell it for less than you paid, you have a loss. You do not pay income tax on a loss.

as a follow up.. I used HR Block on line to file. My return is very simple so it works well. I traded a lot last year and had almost $50K in sales on PayPal, none of which resulted in a gain. I filled out a form that listed the items I sold, the selling price, any costs associated with selling them (like PayPal fees)  and what I paid for them. It calculated zero owed which was to be expected. All done...... the IRS has already sent my tiny refund in less than a week after electronic filing.