How to create relationships between Taxonomy vocabularies?
This can all be done with Drupal's built in taxonomy module and the User Terms module.


Create a node type for Items. 
Any Item a user creates is automatically tied to them by them being the author.
Create a taxonomy for Locations and assign it to Items and Users.
Create a taxonomy for Categories, assign it to Items, make it multi selectable.


You can then use Views to create all the different listings pages and blocks.