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Sales Tax and Mobile Apps for Selling Your Old Stuff

  • May 16, 2016 | Bethany McDonald

Many new mobile apps dedicated to selling your old stuff have entered the marketplace in recent years. These businesses, including Wallapop, Letgo, Carousell, Poshmark OfferUp, Close5, 5miles, and Rumgr, are competing with more established websites like eBay and Craigslist to help both casual and professional sellers market and sell their products.

But unlike their more established website rivals, these marketplaces are designed primarily for mobile users. Once a user establishes an account on these apps, listing products is as easy as snapping a photo of the item with a smartphone.

When deciding whether or not to use one of these new mobile apps, first get acquainted with each selling platform in order to find the one that works best for your needs. While most of these apps are free to use, others, such as Poshmark, charge a commission fee.

Some may offer unique tools or interfaces. For example, OfferUp allows sellers to set either a firm price or an asking price, while Letgo will automatically link your sale items to your social media accounts, such as Facebook. In addition, some of these apps support shipping transactions, including Poshmark, while others do not.

What About Sales Tax?

After you’ve decided on a selling platform, it’s crucial that you understand your sales tax liability in order to reduce the chances of being audited by the IRS and potentially owing additional taxes. Regardless of the platform, professionals that are in the business of selling goods are typically required to register as retailers or dealers in the states in which they maintain nexus and collect sales tax.

However, if you’re simply selling your old camping equipment or clothing that the kids have outgrown, chances are you do not have to collect sales tax.  These types of one-off sales are known as occasional, casual, or isolated sales, and are often exempt from sales tax, as they are neither routine nor continuous.

These types of occasional sales are often limited by the number of transactions or the profit amount earned within a certain time period, depending on the state. For example, a person can hold one or two sales events tax-free during a 12-month time period in California, Texas, and FloridaMassachusetts and Illinois, on the other hand, do not impose a limit on the number of casual sales allowed in a calendar year. As the rules regarding occasional sales vary by state, it’s important to research sales tax exemptions in each state in which you have sales tax nexus.

For hobbyists, determining your tax liability can be more difficult. Put simply, if you’re turning a profit selling homemade jam or vintage apparel, your side hobby is most likely considered a for-profit hobby or even a business by the IRS.

Going Into Business

If you’ve discovered your weekend passion for buying and selling vintage t-shirts is considered a business, take the correct steps now in order to stay on the right side of the law and prevent future financial headaches, particularly if you should decide to expand your for-profit hobby into a full-fledged business.

These include keeping a separate bank account for your business, requesting proper business documents from the government, such as a federal tax identification number and income tax filing papers, and most importantly, tracking and remitting sales tax to the states in which you maintain nexus.

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
Bethany McDonald
Avalara Author Bethany McDonald