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Sales Tax Reporting on Casual Sales

  • Business
  • Apr 7, 2015 | Ryan O'Donnell

A casual sale is a sale made by a person who is not in the business of selling the type of property involved. For example, the sale of used office furniture by an attorney or the sale of a bulldozer by a contractor is a casual sale.  Another example is a family selling their swing set or old piano. These sales are neither routine nor continuous.  

With the rise of the 'do it yourself' economy, more and more people are selling goods online. Ecommerce platforms like Etsy have made it easy for anyone with a computer and a hobby to get their goods online. However, understanding when the sales you make are casual vs. business can be tricky. In this post, we explore the nature of casual sales and sales tax.

Casual sales and your business

If you are a registered business and you sell your office equipment or your machinery, you must collect and remit sales tax in most states. This is the case in Washington State.

Some states like Rhode Island stipulate how many casual sales you can have in a year before it becomes taxed. For example if you have more than 5 casual sales in a 12 month period, your sales are no longer casual and you must remit sales tax.

Do I need to pay sales tax on my garage sale?

Most states consider a garage sales to be a casual sale so no sales tax needs to be collected or remitted. Maine and Alabama fall into this category.

Do I have to pay sales tax on my hobby sales

This depends on whether your hobby is a business or not. If you are selling your hobby product on Etsy or Custommade on an ongoing basis and making a profit doing it, you are likely running a business and will need to collect and remit sales tax. If, on the other hand, you occasionally make and sell a sweater for a friend, the sale is likely to be considered a casual sale and thus not taxed.

Do I have to pay sales tax on bartered items

The whole idea behind barter is that no cash is exchanged between the engaged parties. The IRS wants the fair market value of the bartered item to be reported.  States like Washington, Texas, California and New York require sales tax to be collected and remitted.

Do Auctions Need to Pay Sales Tax

Professional auctions are a business and when tangible goods are purchased, sales tax must be collected and filed with the state or local taxing authorities. However, there are some gray areas. In Indiana, for example, items not sold for resale auctioned at an individual’s house are considered a casual sale and no sales tax needs to be collected.

Do I have to pay sales tax when I sell my watercraft, car, camper or airplane?

Yes you do need to pay sales tax on these sales. Most states will not allow you to register these items until sales tax is paid.

Do I have to pay sales tax on a car given to me by a parent?

Many states allow the tax-free transfer of a vehicle between immediate family members. Michigan, Rhode Island and Massachusetts follow this rule. You should review your state’s definition of immediate family member as it varies from state to state.

Sales Tax and Nonprofit Organizations

Nonprofit organizations (also known as 501(c)(3) of the Internal Revenue Code) need to understand their state’s rules for fund raising and casual sales.

Massachusetts exempts nonprofit organizations from sales tax if the sales are casual and isolated and are used for fundraising for the organization. This means you can have your rummage sale. Many states, however, limit the number of sales you can have per 12 month period as well as the duration of the sale. West Virginia, for example, says such sales cannot exceed 84 hours or sales tax will be owed on all taxable purchases.

Be careful here. If your nonprofit regularly sells an item, your organization will need to pay sales tax. For example, if your organization sells t-shirts in an ongoing manner then sales tax is most likely owed because the sale is not casual.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Ryan O'Donnell
Avalara Author Ryan O'Donnell