Thrift Store and Consignment Business Guide to Resale Certificates

The secondhand market is booming—with U.S. thrift retail estimated at over $14 billion in 2025 and growing 12-17% annually. Whether you run a thrift store, consignment shop, or flip vintage finds online, understanding resale certificates and sales tax is essential for your business.

This guide covers the unique tax considerations for secondhand businesses.

Thrift Store

Types of Secondhand Businesses

For-Profit Thrift Stores

You buy used items outright and resell them:

• Purchase from individuals, estate sales, auctions
• Price and sell to consumers
• Keep 100% of sale proceeds

Consignment Stores

You sell others' items and split the proceeds:

• Accept items from consignors
• Display and sell the items
• Pay consignor their share when items sell

Online Resellers

You source secondhand items and sell online:

• Poshmark, eBay, Mercari, Depop
• Vintage Etsy shops
• Facebook Marketplace

Nonprofit Thrift Stores

Charity-operated stores like Goodwill or Salvation Army:

• May have different tax treatment
• Often exempt from collecting sales tax
• Rules vary significantly by state

Sales Tax Rules for Secondhand Businesses

For-Profit Thrift Stores

Clear-cut requirements: You must collect and remit sales tax just like any other retailer.

The fact that items are used doesn't change your sales tax obligations.

Consignment Stores

Consignment creates unique tax situations:

The basic flow:

1. Consignor brings items to your store
2. You display and sell items
3. When items sell, you split proceeds with consignor

Tax treatment:

You collect sales tax on the full sale price to the customer—not just your commission.

Nonprofit Thrift Stores

Nonprofits have more complex rules:

Check your state's specific rules for nonprofit retailers.

Using a Resale Certificate in Secondhand Businesses

When You Need One

Your resale certificate is essential for:

• Buying inventory from wholesalers or liquidators
• Purchasing from suppliers who charge sales tax
• Buying items specifically for resale
• Opening wholesale accounts for new merchandise

When You Typically Don't Need It

Many secondhand sourcing scenarios don't involve sales tax:

When to Provide Your Certificate

Starting a Thrift or Consignment Business

Step 1: Choose Your Business Model

Step 2: Register Your Business

1. Choose a business structure (LLC recommended)
2. Register with your state
3. Get an EIN from the IRS
4. Open a business bank account

Step 3: Get Your Tax Documents

Essential documents:

Get Your Resale Certificate →

Step 4: Set Up Your Store

• Choose location (physical or online)
• Set up POS system with tax calculation
• Establish pricing strategy
• Create inventory tracking system

Consignment-Specific Considerations

The Consignment Agreement

Every consignment relationship should have a written agreement covering:

• Commission split (typically 40-60% to store)
• Pricing authority
• Markdown schedule
• Unsold item handling
• Payment timing

1099 Requirements

If you pay a consignor more than $600 in a calendar year, you may need to issue them a Form 1099-NEC.

Track payments to each consignor carefully.

Sales Tax on Consignment Sales

You collect sales tax on the full sale price:

Example:

• Item sells for $100
• Your commission: 40% ($40)
• Consignor receives: 60% ($60)
• Sales tax collected: $100 × 8% = $8
• You remit the full $8 to the state

Record Keeping

Maintain detailed records for each consignor:

• Items received
• Items sold (date, price)
• Items returned
• Payments made

Online Reseller Considerations

Platform Marketplace Facilitator Rules

Major platforms handle sales tax collection:

Your Responsibilities as Online Reseller

Even with platforms collecting:

1. Register in your home state
2. Get your resale certificate
3. Track all income
4. File any required returns
5. Report income on your tax return

Sourcing for Online Resale

Where to find inventory:

State-Specific Used Goods Rules

States With Used Goods Exemptions

Some states exempt certain used items:

Casual Sale Rules

Many states have "casual sale" exemptions for:

• Individuals selling personal belongings
• Occasional, non-business sales
• Sales below certain thresholds

These generally don't apply to businesses—if you're regularly buying and selling, you're operating a business.

Record Keeping for Secondhand Businesses

What to Track

Why Records Matter

1. Audit protection - Prove business legitimacy
2. Profitability tracking - Know what sells
3. Tax preparation - Accurate cost basis
4. Consignor payments - Track what you owe

Tools for Tracking

Common Secondhand Business Tax Questions

"Do I charge sales tax on used items?"

Yes—in most states, used items are taxed the same as new items. The fact that something is secondhand doesn't change its taxability.

"What if I can't prove what I paid for an item?"

For tax purposes, you need to track your cost basis. Keep receipts or at least document your purchase costs. Without records, you may have difficulty proving deductions.

"Is consignment income taxable?"

Yes. Your commission from consignment sales is taxable income. You'll report it on your tax return like any other business income.

"Do I need a resale certificate for garage sale purchases?"

Generally no—individuals at garage sales aren't charging sales tax, so there's no tax to exempt.

"Can I deduct items I donate?"

If you donate unsold inventory to a qualified charity, you may be able to deduct the fair market value. Keep records of donations.

Growing Your Secondhand Business

Scaling Tips

1. Systematize sourcing - Regular routes and schedules
2. Know your niche - Specialize in what sells
3. Price for profit - Factor in all costs
4. Build repeat customers - Loyalty programs, email lists
5. Expand channels - Multi-platform selling

When to Formalize

Consider upgrading your business structure when:

• Revenue becomes significant
• You want liability protection
• You're hiring employees
• You're opening a physical location

Checklist: Starting a Secondhand Business

Essential Steps

1. ☐ Choose business structure (sole prop, LLC)
2. ☐ Register with your state
3. ☐ Get EIN (if not sole prop)
4. ☐ Apply for sales tax permit
5. ☐ Obtain resale certificate
6. ☐ Open business bank account
7. ☐ Set up accounting/tracking system
8. ☐ Establish sourcing channels
9. ☐ Set up sales channels (store, online, both)
10. ☐ Create consignment agreements (if applicable)

Start Your Secondhand Business Right

Get properly registered and set up for success. Your resale certificate opens doors to wholesale purchasing when you need new inventory to complement your secondhand finds.

Apply for Your Resale Certificate →

Questions about thrift or consignment business taxes? Contact us for guidance.