Garage sale taxes in Texas

Our neighborhood is a typical sleepy suburban community, especially on weekends … except for one Saturday each May and October.

On those two days, traffic picks up considerably as people drive the streets to check out who's selling what in the community-wide garage sale.

The hubby and I don't participate, either as buyers or sellers, for several reasons.

Yes, we have stuff we could get rid of, but we don't necessarily agree on the same items. Things I want to sell, the hubby wants to keep and vice versa. OK, it's usually vice versa, since I'm a bit of a hoarder sentimentalist.

On the few items we agree could go, then there's the difference of opinion on pricing.

But the main reason we don't set up a card table or wander down the street to see what the neighbors are offering is that we aren't morning people.

So we sleep in while other folks are picking up former family treasures at bargain prices.

Taxes and yard sales: The usual tax question in connection with garage sales is whether the money you make is taxable. In most cases, no.

At yard sales, you're probably selling items you purchased years ago for personal use. More to the tax point, you're selling them for less than you paid for them.

Garage Sale photo by E. Bartholomew

So no gain, no taxes.

Cool. You're in the federal tax clear when you dispose of your spouse's and kids' junk.

But in addition to dealing with your family about your sale choices, you might want to double check your state's tax laws.

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.

Business, fun, whatever: Regardless of what your reasons for or approach to selling your personal items, if you're thinking of having a yard sale, check out Mint Life's suggestions on how to run your garage sale like a business.

Related posts:

• Are garage sale proceeds taxable?
• Taxes on garage sale proceeds
• Yard sale yearnings
• State Tax Departments

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Comments

[Oxy]

Thanks so much for the helpful hints. I have been reselling items for 5 months now and I love it! I was wondering if you or your Mom could help me with something. I have recently read your article and thought I would give the book selling a shot. Today I picked up a Rupert's Adventure Book Authentic Edition 1940 in mint condition for $1.00. I was researching it online and found many listed prices for the book but I am not sure what to sell it for. I read that your Mom has that special scanner and I was wondering if she could give me a price for it?? I would love your help and in return I can try to help you out on my end if I find something that would be of interest to you both. Thanks!

[tinyhands]

1) If items at a garage sale are sold for less than their fair market value, doesn't the buyer have to report the gain?

2) Although the seller may not have to collect sales tax, aren't buyers supposed to submit "sales & use tax" just like they're supposed to when buying stuff online? Maybe that's only when buying stuff in another state. Port Arthurians should be careful of going to garage sales in Lake Charles.

[Debbie M]

Like a lot of things, enforcement is probably based on annoyed neighbors reporting on the garage salespeople.