laws for resale business

It seems so many people are getting into the resale business these days. The COVID pandemic spurred the growth of the reseller industry on both sides. Newly unemployed people got involved to provide an alternative source of income for their families and people also started shopping from home more because of lockdown restrictions. Unfortunately, many people start out in the business without preparing themselves for everything it entails. New resellers often think about how to get inventory or where to resell items, but they might not consider the business’ administrative needs. For example, is it even legal to resell items? Reselling items you have purchased is usually legal, but there are some murky areas to consider. This is just one of many legal concerns it’s critical to gain clarity on before you venture into the resale business.

Items You Cannot Sell 

All online resale platforms have a page listing prohibited items. However, there are items that are prohibited regardless of if you sell them on eBay or via your own e-commerce store. These include alcohol, guns, tobacco, fresh fruits and vegetables, animals, prescription drugs, and illegal items. You can never resell software and digital media because the creators of those items have intellectual property rights. Resellers cannot sell recalled items because of safety concerns. You can find the recall status of any item at http://www.cpsc.gov/recalls or https://www.saferproducts.gov/. 

Items You Cannot Ship 

Besides items you cannot resell, there are several items you cannot ship. You can find examples of these items below.

  • Aerosols
  • Airbags
  • Alcoholic beverages
  • Ammunition
  • Animals
  • Cigarettes
  • Dry ice
  • Explosives
  • Fresh fruits and vegetables
  • Hazardous materials
  • Nail polish
  • Perfumes
  • Perishables
  • Poison

Follow this link for a full list of prohibited items on the USPS website.

Tax Considerations

If you resell items and generate over $400 in revenue, you must report your earnings to the Internal Revenue Service. Below is the official statement from the IRS website.

“While most people are aware they must include wages, salaries, interest, dividends, tips, and commissions as income on their tax returns, many don’t realize that they must also report most other income, such as,

Cash earned from side jobs

Barter exchanges of goods or services

Awards, prizes, contest winnings, and gambling proceeds”

It is important you keep excellent records of all your transactions, regardless of if you are buying or reselling items.

If you make income from items you resell, you will need to account for sales tax. You will need to get a resale permit. This tax permit often called a Sales Tax Resale Permit, will be available through your state’s Department of Revenue. Here is a link to a state-by-state guide for getting a resale permit.

Once you get your resale permit, you will not pay sales tax when you purchase your inventory, but you will charge sales tax when you resell it. You will also need to file sales tax returns per state requirements. Depending on your annual revenue, the returns might be due monthly, quarterly, or annually. You will receive information about filing sales tax when you apply for your resale permit.

Trademarked Items

Online listing sites, such as Etsy, prohibit you from selling items with a manufacturer’s trademark. In 2013, the Supreme Court ruled that once you buy an item, you own that item, and you may resell it. This includes name-brand products. However, you cannot use the logo or trademarked images of brand-name products to sell your items. For example, you can sell Nike shoes, but you cannot use their logo or the phrase “just do it.” When you are describing your products in your online listing, you can use the word “Nike,” but again, refrain from displaying the logo or other images.

Other

  • If you purchase an item with a warranty, the warranty does not transfer to the person who buys it from you. Resellers can request to become an authorized seller, but that can be very costly, depending on the manufacturer.
  • You cannot sell counterfeit items.
  • You cannot price gouge during times of crisis when reselling items.

 

Reselling is a great business to get into, but it is hard work and there are many things to consider before you get started. Business licenses and sales tax are only the beginning. There are also laws specific to self storage auctions to consider as well. If you want to learn more about the laws related to self storage auctions, just one means to buy items for resale, check out our article Legal Webinar for Bidders from leading industry attorneys. The article has a link to access the video at the end.

If you need to find more items to resell, go to www.StorageTreasures.com any day or night to find units in your area.

Recommended Posts