Thrift Store and Consignment Shop Resale Certificate Guide: Buy Inventory Tax-Free

The secondhand market in the United States is projected to exceed $70 billion by 2027. Thrift stores, consignment shops, vintage boutiques, and secondhand resellers are a growing segment of retail. If you buy used goods to resell them, a resale certificate lets you make those purchases tax-free.

But the secondhand business has unique tax questions that standard retailers do not face. How is consignment income taxed? Do you owe sales tax on donated goods? What about buying from individuals at garage sales? This guide answers all of it.

Thrift Store

How the Resale Exemption Works for Secondhand Businesses

The core rule is simple: if you buy an item with the intent to resell it, that purchase qualifies for the resale exemption. This is true whether the item is new or used. A vintage jacket from a wholesaler, a box of books from an estate sale, or a pallet of returned goods from a liquidation company are all resale purchases.

You present your resale certificate to the seller (when they are a registered business), skip the sales tax, and collect sales tax when you sell the item to your customer.

The wrinkle: many of your purchases will be from individuals (garage sales, estate cleanouts, online sellers) who do not charge sales tax in the first place. In those cases, the resale certificate is not needed for the purchase itself, but having one establishes your status as a legitimate reseller for other transactions.

Apply for Your Resale Certificate

Three Business Models, Three Tax Treatments

Model 1: Buy and Resell (Thrift Store)

You purchase inventory outright and resell it at a markup.

• Buy from: Wholesalers, estate sales, liquidation companies, individuals, auctions
• Tax on purchase: Use your resale certificate when buying from businesses. No tax when buying from individuals (they are not charging tax).
• Tax on sale: You collect sales tax from the customer at the point of sale.
• Your taxable income: The full sale price minus your cost of goods.

This is the most straightforward model. You own the inventory. You set the price. You handle all tax collection.

Model 2: Consignment

You display and sell items on behalf of the original owner. You take a commission (typically 40% to 60% of the sale price) and remit the balance to the consignor.

• Ownership: The consignor retains ownership until the item sells.
• Sales tax collection: You, the consignment shop, collect sales tax on the full sale price, not just your commission.
• Resale certificate: You do not need a resale certificate for consignment items because you are not purchasing them. You are acting as an agent for the sale.
• Taxable income: Your commission is ordinary income. The consignor receives the balance.

In most states, the consignment shop is responsible for collecting and remitting sales tax on the entire sale. The consignor is not a party to the tax transaction.

Model 3: Donation-Based (Nonprofit Thrift Store)

Nonprofit thrift stores like Goodwill and Salvation Army receive donated goods and sell them to fund charitable programs.

• Tax on acquisition: No purchase occurs. Donations are not taxable transactions.
• Sales tax on sale: Varies by state. Some states exempt nonprofit thrift store sales from sales tax. Others tax them like any retail sale.
• Resale certificate: Nonprofits may have a separate tax-exempt certificate for purchases. The resale certificate applies when the nonprofit buys goods (not receives donations) for resale.

If you are a for-profit thrift store, do not confuse your tax treatment with nonprofit thrift stores. Your sales are taxable in every state that has sales tax.

What You Can Buy Tax-Free

When purchasing inventory from businesses (wholesalers, liquidators, other retailers), your resale certificate exempts these purchases:

Inventory for Resale

• Clothing and shoes (new or used, any category)
• Furniture (vintage, antique, modern)
• Books, records, and media (vinyl, CDs, DVDs, books)
• Electronics (tested and working items for resale)
• Housewares (dishes, cookware, small appliances)
• Jewelry and accessories (costume, vintage, fine)
• Art and collectibles (paintings, prints, figurines)
• Sporting goods (used equipment, vintage gear)
• Toys and games (vintage and modern)
• Liquidation pallets and lots (mixed merchandise for sorting and resale)

For more on liquidation sourcing, see our liquidation pallets resale certificate guide.

What You CANNOT Buy Tax-Free

Shopping Bags: A Common Question

In many states, bags you provide to customers at checkout (paper or plastic) are considered packaging that transfers to the customer, making them exempt as a resale item. However, some states treat shopping bags as a business supply. Check your state's specific guidance, especially if you are in a state that charges a bag fee.

Buying From Individuals: Tax Rules

A large portion of thrift store inventory comes from individuals at garage sales, estate sales, and through online marketplace purchases. Here is how the tax works:

Individual sellers do not charge sales tax. When you buy a box of vintage clothing from someone's garage, no sales tax changes hands. The individual is not a registered business. You do not need to present a resale certificate.

You still owe sales tax when you resell. The fact that you did not pay tax on the purchase does not exempt you from collecting tax on the sale. You bought those items for resale. When you sell them, you collect sales tax from the customer and remit it to the state.

Keep records of your purchases. Even though no tax is involved, document what you paid. This establishes your cost of goods sold and protects you in an audit.

State-Specific Notes

Texas

Texas taxes all secondhand retail sales at up to 8.25%. Consignment shops collect tax on the full sale price. Occasional garage sales by individuals are exempt, but if you are buying from those individuals to resell, your sales are not occasional. The Texas guide has more details.

California

California requires a seller's permit for all retail sales, including secondhand goods. Consignment shops must collect sales tax. The state has specific rules about items sold "as-is." Review the California guide.

New York

New York taxes secondhand goods at the full state and local rate. Clothing under $110 per item is exempt from state sales tax in New York, which is significant for thrift stores selling affordable clothing. Local tax may still apply. See the New York guide.

Florida

Florida taxes all retail sales of used goods at 6% plus local surtaxes. Consignment shop sales are taxable. Florida does not have a clothing exemption.

Oregon

Oregon has no general sales tax. If your thrift store or consignment shop is in Oregon, you do not collect sales tax on local sales. However, if you sell online to customers in other states, you may have nexus obligations.

Record-Keeping for Secondhand Businesses

Auditors scrutinize secondhand businesses because inventory sourcing is informal and documentation is often thin. Protect yourself.

What to Keep

• Purchase records for every acquisition. Even $20 garage sale buys should be documented (date, seller, description, amount paid).
• Consignment agreements. Written contracts with every consignor showing the split, terms, and responsibilities.
• Resale certificates on file. Copies of certificates provided to every business supplier.
• Sales records by category. Your POS system should track sales by type (clothing, furniture, electronics, etc.).
• Inventory counts. Periodic counts help reconcile purchases with sales and support your cost-of-goods-sold calculations.
• Liquidation invoices. If you buy pallets or lots, keep the invoice and a list of what was in each lot.

The Audit Risk

Thrift stores and consignment shops face higher audit risk than average retailers because:

• Many purchases are cash transactions with no formal invoices
• Inventory comes from non-business sources (individuals, estates)
• Consignment creates complex ownership and tax collection questions
• High-volume, low-dollar transactions make record-keeping difficult

Good documentation is your best defense. A simple notebook logging each purchase (date, source, items, price) is far better than no records at all.

Real Savings for Secondhand Businesses

Note: Tax savings apply only to purchases from businesses where you would otherwise pay sales tax. Purchases from individuals (who do not charge tax) do not generate direct tax savings from the certificate.

Common Mistakes Secondhand Sellers Make

Not Collecting Sales Tax on Used Goods

Used goods are taxable. The fact that the item is secondhand does not make it exempt. Every sale from your shop requires sales tax collection (in states with sales tax).

Consignment Shops Not Collecting Tax on Full Price

If a consignment item sells for $50 and your commission is $25, you collect sales tax on the full $50, not just your $25 commission. The consignor owns the item, but you are the retailer making the sale.

Using the Certificate for Store Furnishings

The vintage table you bought as a display fixture is not inventory, even if it came from the same estate sale as your inventory. Business-use items are taxable.

Failing to Track Inventory Sources

When an auditor asks where your inventory came from, "various sources" is not an acceptable answer. Document every purchase, every donation (for nonprofits), and every consignment intake.

How to Get Started

1. Apply for your resale certificate. Use your state's tax authority or our application service.
2. Register to collect sales tax. Every for-profit secondhand retailer must collect and remit sales tax.
3. Set up consignment agreements. If you accept consignment, use written contracts that clearly define tax responsibilities.
4. Provide your certificate to business suppliers. Liquidation companies, wholesalers, and other business sellers should have your certificate on file.
5. Create a purchase log. Track every inventory acquisition, especially from individuals and informal sources.

Apply for Your Resale Certificate Today

Related Articles

• Thrift Store and Consignment Business Guide to Resale Certificates
• Liquidation Pallets and Resale Certificates
• What Can You Buy Tax-Free With a Resale Certificate?