Most often, this will depend on the type of item you sell and the original purchase prices of those items. Have it in mind that the IRS considers income from a flea market as taxable based on the sales price of your items. For instance, if you sell your personal possessions at your local flea market for less than the original purchase price, there is no tax payment required.
However, your business or involvement in the flea market will have to be meager and not a steady source of your income-earning over the year. In the United States, regularly selling in a flea market will warrant that you claim profits as business income on your federal taxes.
Have it in mind that selling your possessions at a flea market or yard sale for more than what you paid for them will require that you claim the profits as business income. Note that this will most often occur with possessions known to appreciate, including collectibles, sports memorabilia, or artwork.
According to the IRS, you are permitted to claim profits of $400 or more from the sale of appreciated assets as taxable income on your federal return using IRS Form 1040 Schedule C. Note that failure to disclose this income would cost you additional tax penalties coupled with an IRS audit.
Also note that selling a capital asset, including home furnishings and real property, will require that you file capital gains or capital losses with the IRS. In the United States, the capital gain is more or less the difference in the original purchase price of a capital asset compared to the price at which you sold the capital asset.
You are expected to report all capital gains to the IRS irrespective of the amount. For instance, if you sell an antique clock at a flea market for $250 and you only paid $70 for it, you must report the $180 difference as a capital gain. You may only report capital losses for the sale of investment properties.
Don’t forget that the same tax rules also apply to online auctions and garage sales. Occasional use of online flea markets doesn’t entail or warrant that you report income from these sites as taxes on your federal return. However, creating an online trade platform or used goods store requires you to pay taxes as a business owner. Note that you can make estimated quarterly tax payments to the IRS as a means of reducing your tax liability.
How to Prepare for Tax Season as a Flea Market Vendor
Flea market vendors are legitimate small businesses and they can benefit from a vast range of business processes as other small operations, including cash flow management. To get you ready for the tax season as a flea market vendor, here are tips and steps to consider;
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Keep Track of Purchases
In this line of business, you must save sales receipts whenever you receive them. Always remember to ask for receipts for every product you purchase with the aim to resell, even if you are buying from yard sales and storage locker auctions. If you make purchases that do not involve a receipt, consider keeping a journal that notes the amount you spent, the date, what you bought, and where you bought it.
Also, consider establishing a petty cash fund for your flea market business purchases, or set aside a precise amount for this purpose. However, if you create a petty cash fund, ensure it includes a petty cash journal listing necessary information about purchases made with these funds.
Keep Track of Sales
It is also necessary that you write receipts for customers or keep a journal noting what customers have bought and how much they spent. Although a flea market can be quite hectic and filled with the heat of the moment bargaining and cash transactions, consider providing simple receipts, both ensuring professionalism and maintaining accounting records.
Using a two-part receipt book will ensure you keep track of sales, and if you sell in a venue that requires profit-sharing, you’ll have an accurate way to figure out your contributions. If you sell at different venues, also track your sales at each one in order to accurately note where you are making the most money. Tally your sales figures in each category and also for each venue.
Consider Using a Ledger
Although small-business accounting software programs can help to simplify how you handle your flea market finances, consider using a paper ledger as it can be more practical owing to the direct portable, cash nature of the business.
If you decide to use a paper ledger, ensure to create a spreadsheet-style accounting process that offers you the platform to record where you purchase your items and the price you pay, coupled with the final price you resell the goods.
Also remember to have a separate record-keeping system for your expenses, such as licensing, travel and transportation, vendor rental agreement fees, and business expenses, such as packaging, display tables, and canopies.
Consider Your Flea Market Rules
Note that no two-flea markets are structured the same, so the responsibility to collect taxes varies based on the type of business you are in, the number of flea markets you sell at, and the state in which you are located. Most often, you will be expected to collect the taxes yourself and send them in, while sometimes, the flea market organizers are considered the legal seller.
In this arrangement, you get an envelope to give them the taxes that you collect at the end of the day. If you do this, don’t forget to ask for a receipt to ensure that you can balance out your sales receipts with the taxes that you give them. If not, you might end up paying tax on the income you received without being able to write off the sales taxes that you remitted.
Have it in mind that your tax obligation will most often vary based on where you sell, what you sell, how much you earn, and whether you charge sales tax. In the United States, the Internal Revenue Service mandates that all income from a flea market and swap meet sales be reported as earned income on your taxes.