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4 Replies Last post: Nov 10, 2007 11:42 AM by Lighthouse24

Tax on used clothing?

Nov 8, 2007 7:30 PM

loadsoflove 5 posts since
Nov 8, 2007

I am interested in opening another resale shop but this time I want to be able to price alot cheaper "like thrift". The last shop I had for 8 years and done well as an "upscale consignment shop" however the larger part of the profits went to the IRS for sales tax and the other to consignors. This venture I'm looking into now is "donation" only. I know in Tennessee the big chain donation centers like "Goodwill" don't add sales tax any more to their sales. I am curious to know if that also goes for the "little" stores? I never understood why tax was added to "used" goods.
Thanx...Pam

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LUCKIEST 7,928 posts since
Aug 6, 2007

1. Re: Tax on used clothing? Nov 8, 2007 9:15 PM

Taxes are a part of doing business. Do you have a BUSINESS PLAN??
Do you have an Accountant?? Every State has different Sales Tax rules.
Sales tax does NOT go to the IRS, Sales tax goes to the State.
If you think about it, Sales Tax is NOT an expense. It is an exchange.
You collect the sales tax from the customers and pay the sales tax to the state.
NO income, No expense/
Good luck, LUCKIEST

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Ed O'Gee 215 posts since
Oct 25, 2007

2. Re: Tax on used clothing? Nov 9, 2007 9:26 AM

The best advice is to contact your state income tax department. A couple of things, the big boys like Goodwill have special designations, because their businesses support non profit efforts like hiring of mentally and physically handicap individuals, hiring of ex convicts, and donation profits and items to shelters, etc.

Sounds like your business will really be a pure for profit entity which in that case you'll have to pay sales tax just like any other retailer. But paying sales tax shouldn't be an issue, price your items such that you make a profit and the sales tax is dollars on top of that, which customers have to pay anyway.

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loadsoflove 5 posts since
Nov 8, 2007

3. Re: Tax on used clothing? Nov 10, 2007 11:32 AM

in response to: Ed O'Gee

Thank you for your reply. I am finding out more information thru this forum than I expected. Are you sure you don't charge for this...LoL

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Lighthouse24 2,396 posts since
Oct 10, 2007

4. Re: Tax on used clothing? Nov 10, 2007 11:42 AM

As Luckiest noted, your state (not the IRS) is taxing your customers (not you) to help pay for the services it provides to the general public. Your business is just the "middle man" -- collecting the tax and passing it on. They charge sales tax on all retail purchases because it is a relative fair way to ensure that people who have more money (and therefore usually spend more money) pay a larger portion of the state's expenses. Someone who buys a used coat is still a citizen of your state and should help pay for the cost of its services, right? Yet someone who buys a new coat will pay a lot more for that, and therefore more tax. Make sense?

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Tax on used clothing?

Nov 8, 2007 7:30 PM

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