Obviously most garage and yard sales do not charge sales tax. Neither do other minor sales events like bake sales or library book sales or lemonade stands. And I’ve seen this extended to the point that some established flea markets do not charge sales tax even though they otherwise appear to be ongoing businesses.
Is there some legal basis for minor sales like this to not have to pay sales tax or is it just a case of the state tax authorities figuring it’s not worth the effort of collecting them?
US sales taxes are governed by state laws, and will vary, but it seems that the major point is that you don’t hold them regularly or operate it as a business. They generally have some sort of “occasional” or “isolated” sales exemption allowing you to sell personal items on a one-off basis without collecting sales tax or getting a business license.
ETA:
Some ongoing flea market operations are probably seriously bending the exception.
The fact that an item was sold previously does not exempt it from sales tax if sold again. The most obvious example is used cars sales which are taxed in many car states (perhaps all). I know in some states you cannot register a used car as a new owner unless you have proof you paid the sales tax. This applies to sales between individuals as well.
The exemption, as has been said here, is not because the item is used, but because you are only selling items occasionally, not as a business. The rules vary from location to location but if you are selling items less than a certain number of days per year, per month, and/or per week you are exempt from sales taxes.
As mentioned above, as the seller of items in a garage sale, doesn’t really have the system to collect and remit sales tax to the government, as they are not really a business. However, the buyer, in most states does have a duty to remit sales or use tax on items that they did not pay the tax on, when they file their state tax returns. I highly doubt that people actually include the tax on items they purchase at garage sales, but this is the mechanism where the state would collect it.
This is similar to how the state collects sales tax on large purchases like boats and cars. In order to get your license tag, you have to pay the tax.
My state charges the sales tax on such sales as well as out of state purchases. The problem is they can’t collect it all. They try to set an example by chasing major cigarette buyers and publicizing it. The tax form has a line for paying the amount due. It operates on sort of an honor system with the responsibility being on the buyer rather than the seller. Legislators keep working on shifting the responsibility to out of state sellers to collect the tax at the time of sale.
BTW, you also technically have capital gains for your income taxes. The IRS says:
and they offer an example:
Of course, the reason this doesn’t come into play 99.9% of the time is that you sell the stuff at your garage sale for far less than you paid for it, and have a loss. And no, you are not allowed to use losses on sale of personal property to offset other gains on your 1040D.
A use tax is a common term for “sales tax” outside a jurisdiction. For instance, Chicago charges a tax if you buy a “major appliance” or “major good” outside the city and bring it back into the city.
So if you buy a sofa or a washer or a refridgerator, you are supposed to pay Chicago sales “aka use” tax on it.
OK now you’re probably gonna say “How does the city collect it”?
Good question and it’s one that our Mayor Daley has complained about for years. He even tried to propose that companies that deliver major goods from suburbs to the city of Chicago collect it for the city. Well that lasted all of five seconds.
The OP question often comes up on eBay. If you sell once in awhile, you are not required to collect sales tax. Of course that leads to the question, “what is an occasional seller” and “What is not.”
One scam people run is they collect a “sales tax” but then don’t pay it. These occasional sellers convince people they need to pay a “sales tax” to boost their income.
It doesn’t work in Illinois, 'cause state laws say if you collect something as sales tax, even if you’re not required to do so, you’re required to pay it to the state as tax.
It’s the occasional or temporary nature that exempts garage sales here in WA. In fact, our laws also exempt some business sales, which makes for a great example:
Store X sells retail products in the course of business and obviously has to collect sales tax on them. After a while, Store X decides to move to a new location and they need to sell off all their old furniture, shelves, cash registers and light fixtures. They do NOT have to collect sales tax on these sales because they are an isolated sale and not in the course of business.
I know people who are eBay sellers who are just begging for an audit because they think they should be exempt from sales tax just like the garage sale down the street. But the difference is that these people are selling online every day and so the sales are not just occasional or isolated events, but represent a continuous business activity.
When I was growing up (50s – 60s) in Ohio, we used to have sales tax stamps (and no I’m not thinking of S&H green stamps or the like). When you made a purchase for $1 and paid the 3 cents sales tax, the clerk gave you a small state issued tax stamp for 3 cents (or 3 one cent ones). They had no stickum on the back.
I assume this was the mechanism that the state used to collect the tax. The merchant actually had to purchase the stamps from the state to give out. Probably to help enforce the stamps being distributed, charities and non-profits could collect the stamps for some kind of payoff. Perhaps anyone could, I’m not sure nor am I sure what the payoff was, but I spent many an afternoon sorting through tax stamps for my school – putting all the one cent, two cent, etc. in stacks and counting them. When somebody’s parents bought a car, they’d bring in those rare $1 and $5 tax stamps. We’d all marvel at them.
In NY , there is no requirement to collect taxes on certain sales from residence, as long as it is 3 days or less per year and less than $600/yr revenue. I have paid sales tax to an established flea market vendor - just because the flea market is a regular business doesn’t mean the vendors are.
I think they’re beyond stretching it , but I can’t even imagine how much it would cost to enforce it on those people- how many flea markets, how many booths, how to figure out which ones are businesses and which are people selling junk. It would probably cost more than the state could ever collect.
Not all states. Ones without sales tax don’t collect a tax on them, nor do you need to pay sales tax on a car bought out-of-state if your state has no sales tax.
For example, I bought a three-year-old car in Maine this winter, and I paid no sales tax on it all because New Hampshire doesn’t have one and Maine doesn’t collect it from us either. I found that kind of odd, because everything else I’ve ever bought in ME has been subject to their sales tax - I never bought anything like a major appliance there, though, so I don’t know how tax works with other big ticket items.