[HoustonCPA]

Only thing I'd add is regarding the 2% floor on expense deductions for hobby income. Depending on your AGI, that can be a fair amount that you owe tax on.

Correct. This would be an incentive to actually show positive taxable income periodically to be classified as a business and take advantage of all of your expenses.

but I'm curious what some of these methods are.

This is where things can get complicated. When you select a method, you will need to provide adequate support and maintain the method over the life of the business. If you choose a method and later decide to try a different method, things can get quite complicated.

An alternative method to the one described in the original post would be to allocate more of the cost to higher valued items. Let's use the same $100 box from Blowout that contains 100 cards. Each of these boxes is guaranteed to contain 4 hits. Past indications of this product have shown that hits sell for around $5 a card. We can allocate $20 of the $100 to these 4 hits and then prorate the remaining $80 of the box over the other 96 cards ($0.83/card). Later, when you sell the cards, you could allocate $5 of purchase costs to the hits and 83 cents to the base cards. As you can see, this can get very tedious very quickly.

I have always wondered if the IRS would ever look at the cards I have as "assets" and try to tax them as such? I understand all the cost, expenses, profit, net loss/gain aspects of this post. But what I am wondering is if the cards themselves, the ones I'm keeping for my own personal collection, would ever be considered assets and therefore taxable in any way?

As premium1981 pointed out, taxes would apply in the event that you sold the cards. Another event that could trigger taxes would be to die and leave the cards in your estate. Depending on the value of the estate, there could be tax implications, but for most people, our estates will not be more than the threshold exemption.

postage should be in the cost of the sale. If you choose to offer free shipping that is your choice. I don't think you can deduct that (could be wrong though?)

As Ajax1723 said, I would consider the amount you received for shipping part of your sales price and would then treat the actual shipping costs as an expense. Your only alternative would be to treat the cash you received as part of an escrow which would not be taxable to the extent that you used the funds to ship items. As mentioned before, this can be tedious, especially if you are not charging the actual shipping costs. Saying an item has FREE SHIPPING does not preclude you from being able to deduct the actual shipping costs.