I have a business idea, which involves retail. I don’t want to create the business yet, because im not sure if the channels i have in mind work. So, lets say i wanted to start out at the garage sale or flea market level. Im sure if i did it once or twice, nobody would care. How long could i operate at that level before the government would come after me for sales tax and excise tax?
To me, its a chicken or egg thing…you can’t afford to start a business unless you are already making money from the business, so the government must allow some business activity before the legal business entity is created.
Sales and Use tax laws are assessed by states and localities, so there are thousands of separate laws regarding these, so it depends on your locality for the specific laws.
As a general rule, you are required to collect sales tax for sales when the customer is in the same state as you, or you have a “physical presence” in the state of the customer. There are usually exceptions on what items you have to collect sales tax on, but it varies by locality. Items sold for resale are exempt from the requirement to collect sales tax in most jurisdictions, for example.
Do most people collect sales tax at garage sales? Probably not. Are they legally required to do so? Probably yes, depending on their locality.
Asking how long you can “get away” with not collecting sales tax is not a question I will even attempt to answer, but if you are thinking about starting a retail business, I would still apply for a sales tax license from your state and any applicable localities and start collecting and remitting sales tax.