Should You Charge Sales Tax on Your Craigslist Sales?
- January 4, 2016 | Katherine Gustafson
Raise your hand if you've ever sold something on Craigslist. An old dining table that's been replaced by a newer model. That exercise bike you got last Christmas and never used. The baby gear your kids have grown out of.
If you're like most occasional Craigslist sellers, it probably never occurred to you to wonder whether you should charge sales tax on your items.
Before you panic, let me say up front: You were probably right not to worry. Craigslist is designed to enable what state tax authorities usually call "isolated or occasional sales." One-off sales like those one turns to Craigslist for are usually sales tax-exempt.
Profits and Premises
These rules are based on the idea that such sales rarely make the seller a profit; you might well make a pretty penny reselling that bouncy castle you bought for your son's fifth birthday party, but it will still likely be less than you paid for it originally (and if it's not, good for you, but that's too piddly a "profit" on that one sale for authorities to take much interest in).
Many states specify that isolated or occasional sales are meant to occur at one's "premises" -- as in, home. This opens the way for people to host yard sales and garage sales without worrying about charging sales tax. Craigslist generally works the same.
However, most states say that isolated and occasional sales that happen away from the seller's property and are made by a third party, such as at an auction house, should be taxed. This is likely because the kind of occasional sales that occur at Sotheby's -- as opposed to those that happen in your garage -- can rack up some massive tax bills. So it's probably safe to say that even if you meet the prospective buyer for the novelty coffee mug collection you listed on Craigslist at the local Starbucks, you're still looking at a tax-exempt sale.
Occasional Seller vs. Businessperson
Of course every rule needs an exception, and here's the one for Craigslist: If your sales are more than just "isolated" or "occasional," you should be charging tax. And if you're purchasing your wares for resale on Craigslist, you should be charging tax.
If selling your rare books on Craigslist is part of the plan for your antiquities business, then your craigslist customers should be paying tax on those Craigslist-originating sales. If you make a habit of buying your artistic cousin's pottery and selling it to others on Craigslist to make a buck, then your customers should be paying tax on those mugs and bowls.
Each state has slightly different rules that apply this gray area of sales. It varies by state how regular, consistent, or lucrative your sales have to be to tip you from the isolated/occasional category into the businessperson category, so make sure to look up your local regulations. Most states make a distinction between a hobby and a business, and the line between those can vary as well. Hobbyists are generally regarded as those who sell items every once in a while without trying to profit from the sales.