Watch Out: Garage Sale Tax in Texas
Posted By Vicki McClure Davidson on May 18, 2010
Garage sales are subject to taxation in Texas if you hold several a year
In most cases, profits are not ever made at garage sales. People cull and clean out dusty decades’ worth of used, still functional junk, ranging from outdated clothing to dogeared paperbacks, from kitchen gizmos and gadgets to incomplete sets of glassware… finding them hidden away in attics, closets, and basements. Old toys, machine parts, cracked aquariums, and lava lamps are sold for a fraction of their original cost, clearing up space in a home that will likely be filled, down the road, by different stuff that will wind up at a yard sale (some of you may be flashing back to that old George Carlin comedy sketch titled “Stuff” — I know I was).
Anyway, during economic recessions like the one we’re in now, garage, yard, rummage, and carport sales offer dirt-cheap bargains for buyers and a chance for a little extra spare cash for sellers. For those buyers on limited incomes, “garage saling” is a frugal shopping adventure filled with promise, and which may only cost a scant few bucks on a sunny Saturday morning… cheaper and a heck of a lot more fun and entertaining than buying a venti iced latte at Starbucks.
However, in some states, as pointed out in this piece by self-proclaimed tax geek and tax blogger Kay Bell (she’s also a Texas native), there are conditions that many garage sale folks are not aware of… when you DO have to pay sales tax in Texas.
If you don’t live in Texas, but hold a number of garage or yard sales at your home each year, it would smart for you to look into your own state’s tax rules, just to be safe.
From Don’t Mess With Taxes, Garage sale taxes in Texas:
Sales tax requirement: At a recent conference for small business owners, a representative from the Texas Comptroller’s office shocked the audience when, during a discussion of state sales tax rules, she informed us that if we hold more than two garage sales a year, we must get a sales tax permit from the state.
That’s right. If you are a serial garage sale holder, the Lone Star State wants to collect 6.25 percent of what you get for every old tchotchke you sell from your front yard.
And don’t forget, my fellow Texans, that depending on where you live, you’ve got up to 2 percent more in local sales taxes.
The reason, said the Comptroller employee, is that when you hold a lot of such events the state could construe that you’re doing so as a business.
And generally, businesses that are “selling tangible personal property or providing taxable services in Texas to customers in Texas” must obtain a sales tax permit.
More technically, regular garage sales could be construed as a temporary place of business, along the lines discussed in the state’s Local Sales and Use Tax Bulletin.
Enforcement issues: Several questions immediately come to mind, such as how would the state know?
Does the Comptroller’s office have a squad that searches classified ads and neighborhood newsletters for garage sales and then visits them all to see who’s repeatedly hawking goods?
I know that since Texas doesn’t have an income tax, it’s pretty serious about getting all the revenue it can from other tax sources, but this seems a bit extreme.
And perhaps even Texas tax officials think so, too. My Internet searching of the topic indicates that while a garage sale tax permit is required in some cases, it essentially is not enforced.
But the mention of the permit by the Comptroller employee makes me wonder whether in this tough economy, where the state has seen eight months of declining sales tax collections, Texas might be pulling some old laws out of mothballs in order to bring in a bit more money.
Related reading:
Garage Sale Police: No, I’m Not Kidding… Wish I Were
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