Careers Business Ownership Having a Garage Sale or Yard Sale? What to Do First Sales Taxes, Income Taxes, Local Licenses, and Permits Share PINTEREST Email Print Daniel Grill / Getty Images Business Ownership Operations & Success Business Law & Taxes Sustainable Businesses Supply Chain Management Operations & Technology Marketing Market Research Business Insurance Business Finance Accounting Industries Becoming an Owner Table of Contents Expand Licenses/Permits for Garage Sales Income Taxes on Garage Sales Garage Sales and Sales Taxes By Jean Murray Jean Murray Jean Murray, MBA, Ph.D., is an experienced business writer and teacher. She has taught at business and professional schools for over 35 years. Learn about our Editorial Process Updated on 01/27/21 When garage sale time settles in, you know that having one garage sale or yard sale a year doesn't make you a business. But it might make you subject to taxes and local regulations, depending on the state where you live and have that sale. Before setting out items for your garage sale or yard sale, check on these issues involved with the "business" of holding a garage sale: Local permits and licenses for garage sales or yard salesIncome taxes on the profits from the saleSales taxes on the cost of the items sold Before you decide to have that garage sale or yard sale, do your research on these local, state, and federal laws, taxes, and permits. Check with your city or county to be sure you are complying with local ordinances for dealing with COVID-19. Many localities have set up specific COVID-19 procedures for applying for permits and conducting garage sales. Business Licenses and Permits for Garage Sales Business owners in many cities are required to get a business license or permit to open a business. Some localities include garage sales as businesses. Whether you are required to get a permit for your garage sale depends on your locality. Some typical regulations: Limiting the number of garage sales per yearLimiting the number of consecutive daysSpreading the number of garage sales out over the yearLimiting number of signsRequiring size and placement of signsRequiring that sale items be moved indoors at night Some towns and cities might not be this strict, butt check with your locality before you put your garage sale ad in the newspaper. Some localities require a special activity permit that limits the number of participants and/or vehicles. If you have several garage sales in a year, you might get a visit from a city official asking to see your garage salelicense. Again, it depends on the regulations of your city, so check before you start having a garage sale on a regular basis. Income Taxes on Garage Sales For tax purposes, garage or yard sales might be divided into three categories): The casual saleThe hobbyistThe business The casual seller is not looking to make a profit but to get rid of stuff and make a little money. The hobbyist wants to sell something, but may not be looking for a profit. The business seller is intentional about making a profit. Casual Sellers Most garage sellers are of the casual sales variety. When you have a garage sale or yard sale you are selling items you already purchased and for which you have already paid the taxes. The IRS says, "If you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, your gain is taxable as a capital gain." But a garage or yard sale usually nets you less than the price you paid for the items. In this case, you're just getting rid of things and hoping to get some money for them. If these items are sold at a loss, you don't have a capital loss. and you can't claim the loss on your income tax return. You also can't deduct the costsof holding the garage sale (buying signs, for example). Garage-Selling as a Hobby The hobbyist or business seller, on the other hand, probably has the intention of making a profit. If your garage sale turns into a hobby, you may be able to deduct costs up to the amount of your hobby income. While there is usually no paperwork on these sales, carrying on a business on a regular basis can draw the attention of the IRS. Garage Sales and Sales Taxes Whether your state expects to collect sales taxes from your garage sale depends on the state. Most states aren't going to go out of their way to worry about a couple of hundred dollars from a once-a-year yard sale, but you never know In Iowa, for example, the state department of revenue classifies garage sales as "casual sales" and says these sales are not subject to sales tax. They define casual sales as (1) nonrecurring (except for the sale of autos, on which sales tax must be paid for all transactions), and (2) the seller must not be engaged in a for-profit business for this sale. Iowa says two sales in 12 months is nonrecurring, but three sales are recurring. Disclaimer: The information in this article is general and is not intended to be tax or legal advice. Every situation and location are different. Be sure to check with local and state regulators before having a garage sale or yard sale.