Are you planning to sell at a flea market or craft fair? Here’s what you need to know about taxes.
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Use a POS app to track everything.
To make life easier, don’t just pocket all the cash and count it easier. Use a point of sale system app to enter all of your transactions so you have a sales report as soon as the day is done.
PayPal, QuickBooks, and Square all have easy-to-use apps that you can download on your smartphone or tablet. The only cost is usually for credit card processing. You do want to accept cards since so few people regularly use cash anymore. Most payment processors offer a free or cheap credit card reader that plugs into your headphone jack.
Will you need to pay the IRS?
Treating it like a garage sale? Probably no tax.
If you’re just going to a flea market or craft fair a couple of times to clear out your basement or attic, you probably don’t need to worry about income taxes. That’s assuming you’re selling everything for less than it cost you new. And, no, you don’t get a deduction, either.
Selling collectibles? Capital gains or hobby tax.
If you’re selling coins, baseball cards, art, or other collections, it depends on why you bought it. If you bought collectibles expecting them to rise in value so you could sell them later, you’ll have to pay capital gains taxes like any other investment. If your collection is more of a hobby and you’re trying to make space or raise money for a new purchase, you’ll pay hobby taxes.
Is this your business? Income tax and self-employment tax.
If you want to make a business out of selling in weekend markets, whether as your main income or a side gig, you get taxed like a business. That means paying regular income tax and self-employment taxes on your profits. Your profits are the cash you take in minus your expenses. In addition to the cost of merchandise, your expenses may also include booth fees, credit card fees, supplies like paper bags, and other ordinary and necessary business expenses.
What about state income taxes?
State income taxes will usually follow the IRS classifications described above. However, the rules may vary by state, so be sure to check for your state. In some places, you may not have to pay tax even when you owe the IRS, and other states may charge you tax when the IRS doesn’t.
What about sales taxes?
The rules for sales tax will vary by state. If you’re selling new items, sales tax will almost always apply. If you’re selling used items or collectibles you may or may not need to collect sales taxes.
This may also depend on whether you’re a casual seller or making it more of a business. To get an official answer, check with your state department of revenue or a local accountant.
What about business licenses or permits?
A business license or permit may not seem like a tax, but it effectively is when the only requirement is paying the fee. Some jurisdictions are very strict where even a tiny flea market or craft fair booth needs a business license. Others have requirements that may include size or type of product sold.
To know if you’ll need a business license or permit, you’ll need to check with the city, county, and state that you’ll be doing business in.