Having one garage sale a year doesn't make you a business. But it might make you subject to sales tax, depending on the state where you live and have that sale. Several issues are involved here: (1) Income taxes on the profits from the sale, (2) sales taxes on the items sold, and (3) local permits and licenses. Let's take one at a time:
Income Taxes on Garage Sales
When you have a garage sale or yard sale you are selling items you already purchased and for which you have already paid the taxes. Kay Bell, of Don't Mess with Taxes, notes that the IRS says, "if you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, your gain is taxable as a capital gain." Kay explains that a garage sale nets you less than you originally paid, not more. So there's no gain to tax.
Garage Sales and Sales Taxes
Whether your state expects to collect sales taxes from your garage sale depends on the state. Most states aren't going to go out of their way to worry about a couple of hundred dollars from a once-a-year yard sale, but you never know. In Iowa, where I live, the state department of revenue classifies garage sales as "casual sales" and says these sales are not subject to sales tax. They define casual sales as (1) non-recurring (except for the sale of autos), and (2) the seller must not be engaged in a for-profit business for this sale. Iowa says two sales in twelve months is non-recurring, but three sales is recurring. Each state has different regulations regarding sales taxes. Check with your state's taxing authority just to be sure.
Garage Sales and Business Licenses/Permits
Whether you are required to get a permit for your garage sale depends on your locality. For example, Adam Knapp, Guide to Oklahoma City, writes that all garage sales in Oklahoma City must have a permit. Other towns and cities might not be this strict. But check with your city before you put that garage sale ad in the newspaper. Your town or city might also regulate placement of garage sale signs.
If you have several garage sales in a year, you might get a visit from a city official asking to see your business license. Again, it depends on the regulations of your city, so check before you start having a garage sale every other weekend.
Disclaimer: The information in this article and on this GuideSite is general and is not intended to be tax or legal advice. Every situation and location is different. Be sure to check with local and state regulators before having a garage sale or yard sale.
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