You must charge sales tax if your business has nexus (a physical or economic connection) in a state and you sell taxable goods or services there. Generally, tangible personal property is taxable, while services may be exempt depending on the state. Check if you meet state-specific revenue/transaction thresholds and register for a permit.
If you sell physical goods, you're likely required to collect sales tax. Only five states don't have a sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. So if your business location is in one of the other 45 states and you sell physical goods, you'll need to collect sales tax from customers.
If you're genuinely selling your own possessions, it's unlikely you will need to declare your earnings and pay tax. If you're buying or making things for the sake of selling them at a profit, then you're likely 'trading' and you might owe tax on what you make.
All orders to buyers in the U.S.
At the time of purchase, Whatnot will charge U.S. buyers sales & use tax at the applicable rate and remit it to the relevant tax authority. Sellers inside and outside the U.S. have no responsibility to collect U.S. sales and use tax on any orders to U.S. buyers.
Not all goods and services are taxable, and if the items you are selling are not taxable, then you are not required to collect sales tax on those items.
Zero-rated supplies
Profit: This happens when you sell something for more than you paid for it. If you purchased an item for $150, sold it for $450, and you had $50 in fees, your profit is $250. That $250 is considered your net profit. Any net profit (gross profit minus any expenses) is subject to federal, state, and local income taxes.
This is a very popular misconception - the reality is that any online or offline selling activity in which the main motive is to make a profit is deemed by the IRS to be a business - this applies no matter how much you are making in revenue.
Techniques like installment sales, 1031 exchanges, QSBS exemptions, and charitable trusts offer ways to defer or reduce taxes, preserving more capital for reinvestment or personal goals.
For sole proprietors and other pass-through businesses, 2025's tax-free threshold is $15,000 for single filers and $30,000 for married couples filing jointly. C corporations will pay a flat tax rate of 21% for 2025. Small business owners with net income of $400 or more must pay self-employment tax.
How to pay sales tax for small business
One of the most common tax mistakes businesses make is failing to maintain a clear separation between personal and business expenses. Mixing personal and business finances can create confusion during tax time, making it difficult to accurately track deductions and file the right amount of taxes.
You have to start charging GST/HST on the supply that made you exceed $30,000. You exceed the $30,000 threshold 1 over the previous four (or fewer) consecutive calendar quarters (but not in a single calendar quarter).
Once you have established nexus in a state you are required to register as a retailer with the state before collecting and remitting sales tax for that state. Before a company starts collecting tax it must register with the Department of Revenue or Taxation in the state.
Inheritances, gifts, cash rebates, alimony payments (for divorce decrees finalized after 2018), child support payments, most healthcare benefits, welfare payments, and money that is reimbursed from qualifying adoptions are deemed nontaxable by the IRS.
The "3-year hobby rule," or IRS Hobby Loss Rule, is a tax guideline stating that if an activity makes a profit in three out of five consecutive years, the IRS presumes it's a legitimate business for tax purposes, not a hobby, allowing for business expense deductions; otherwise, it's presumed a hobby, and losses can't offset other income. The IRS examines factors like business-like operations, expertise, and time spent, but the profit test is a strong indicator, with exceptions for horse-related activities (2 of 7 years).
The federal self-employment tax is 15.3%, so you could save money if your income from an activity or pastime qualifies as hobby income. And if your activity generates less than $400 in 2025, you don't need to pay self-employment taxes, even if your income doesn't qualify as hobby income.
Items not taxed generally include most staple groceries (unprepared food), ** prescription medications**, certain essential clothing/school supplies (often during holidays), prosthetic devices, and purchases made by non-profits or governments, but this varies by location, with prepared foods, electronics, and luxuries usually taxed; look for state-specific sales tax holidays for temporary exemptions on items like clothing or emergency supplies.
GST-Free Items:
Canada has three main sales taxes: GST (federal), PST (provincial), and HST (a combined tax used in select provinces). Tax obligations vary by province: Businesses must register and apply the correct rates based on where customers are located.