Consumer Law

Sell Safely and Tax-Free at Your Garage Sale

Learn how to sell unneeded items without running afoul of the law.

Yard sales can be a fun way of getting rid of your unwanted items in exchange for a little cash, while also helping other people score some great deals. Before putting your stuff out in the driveway, however, you may need to consider some legal issues first.

Do You Need a Local Permit?

Depending on where you live, you might need to get a permit before having a yard sale. Some localities require a permit only if you plan on holding several sales in a year, or if you intend to have them regularly to supplement your income. The more your activities look like a business, the more likely it is that you will need a permit. There may also be rules on how and where you post your yard sale advertisements.

Where local governments require permits, the cost is usually minimal. The cost of a fine for operating without a permit, however, may not be. You should check your local requirements to avoid any unpleasant surprises.

Are Your Items Safe?

Do you realize that federal law regulates the safety of items sold at yard sales? The Consumer Product Safety Improvement Act of 2008 (CPSIA) strengthened requirements on manufacturers and sellers of consumer products to ensure that the goods they sell are safe. Under the CPSIA, manufacturers who sell products in the United States have to conduct more testing on their products, in particular on children’s products, for hazardous chemicals such as lead. Congress passed this law in response to the 2007 recall of millions of lead-tainted toys made in China.

The law’s purpose is twofold:

  • to prevent unsafe products from entering the flow of goods, and
  • to remove unsafe products already in the marketplace.

The interesting part is that CPSIA applies not just to manufacturers and primary sellers, but also to resellers—and a garage sale merchant falls within that definition. Therefore, individuals holding yard sales are legally responsible for the products they sell under the CPSIA.

It’s unlikely that federal agents are patrolling neighborhood yard sales for items that violate the CPSIA. However, you have an obligation to check if any items you offer for sale have been subject to recall—especially if you plan to sell children’s items, such as toys, car seats, cribs, playpens, or highchairs. Lists of recalled items are available on manufacturers’ websites, or the Consumer Product Safety Commission website.

If you find out you have a recalled item, do not sell it or give it away. Instead, explore returning it to the manufacturer for a refund. Even if you can’t, you wouldn’t be a good neighbor if you passed on a problem item to an unsuspecting customer.

(For more information, see Consumer Law Product Recall FAQ.)

Will You Need to Pay Taxes on the Profits?

As a general rule, the Internal Revenue Service might treat any money you obtain from any source as income. However, unless you plan on holding yard sales regularly or as a business, the amount you earn will likely be so small that the IRS won’t require you to pay taxes on it.

Additionally, the IRS assumes that you're selling household items you bought and used for personal use—as well as selling them for less than what you paid. Once you deduct the original cost of an item from the amount you received at the sale, the number left over is almost always negative. If there’s no profit, there’s nothing to tax.

Many states don’t require you to collect sales taxes on items sold at a yard sale, particularly if you don’t have more than a certain number of sales per year. Check with your state taxing authority before proceeding.

(You’ll find more information about tax obligations on the Lawyers.com Taxation topic page.)

Tips for a Successful Sale

Here are a few ideas that might help facilitate a smooth sale.

  • Talk with your neighbors before holding your sale to address potential problems with noise and parking. You may also get some customers.
  • If you post a notice about your sale on Craiglist or other online bulletin boards, refresh the notice on the morning of your sale. Some bargain hunters are early birds.
  • Make sure you have cash on hand to make change.
  • Stock up on supplies, such as tape and pens for marking prices, and extra bags customers can use to carry their items.
  • Offering coffee is a nice touch.
  • Organize your items by type so customers can easily see what you have.

Questions for Your Attorney

  • Does my local government require a yard sale permit?
  • Do I have to collect sales taxes?
  • Will I have to report the money I make to the IRS?

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