Someone starting an Internet consignment business — selling other people's used goods online via Internet auctions and taking a commission — asked whether they need to charge sales tax, since they rarely see other online sellers doing so.

Plain-English summary

A taxpayer planning to start an Internet consignment business — selling other people's used goods through online auctions, mailing the items to buyers, and charging the original owners a commission — asked what taxes (beyond ordinary income tax) would apply, noting that other online sellers rarely seemed to charge tax.

The Comptroller's response: sales of tangible personal property are subject to Texas sales tax, and neither of two facts the taxpayer thought might matter actually changes that — it doesn't matter that the goods belong to someone else and are placed with the seller on consignment, and it doesn't matter that orders are taken over the Internet rather than in person. The one real exemption available: goods that the seller sells AND delivers to points outside Texas are exempt from Texas sales tax, but the seller must keep records documenting that out-of-state delivery to support claiming the exemption. The Comptroller pointed the taxpayer to Rule 3.311 and the state's "Window on State Government" website for further reference.

What this means for you

Internet/online consignment and auction sellers based in Texas

Don't assume that selling someone else's goods, or selling through an online marketplace/auction, exempts you from collecting Texas sales tax — neither fact matters. The general rule that sales of tangible personal property are taxable still applies to your consignment commission-based business model.

Sellers shipping to buyers both inside and outside Texas

Keep clear delivery records (shipping records, buyer addresses) for every out-of-state sale — that documentation is what lets you treat those specific sales as exempt from Texas sales tax, while sales delivered within Texas remain taxable.

Anyone assuming "everyone else on this platform doesn't charge tax, so it must be legal"

The prevalence of noncompliance among other online sellers (as this taxpayer observed) doesn't establish that the activity is actually exempt — it just means other sellers may not be following the law. This letter confirms consignment/Internet sales of tangible goods are taxable by default.

Common questions

Q: Do I have to collect Texas sales tax on goods I sell online that belong to someone else (consignment)?
A: Yes — the fact that the goods are on consignment doesn't create an exemption.

Q: Does selling through Internet auctions rather than in person change the tax treatment?
A: No — orders taken over the Internet are still subject to Texas sales tax the same as any other retail sale.

Q: Is there any exemption available for this kind of business?
A: Yes — goods you sell AND deliver to a location outside Texas are exempt from Texas sales tax, as long as you keep records documenting the out-of-state delivery.

Q: Can I rely on this letter for my own online consignment business?
A: No. It's based on the facts presented, and the letter notes the opinion may change on additional or different facts.

Citations and references

• 34 Tex. Admin. Code Rule 3.311 (referenced by the Comptroller for further guidance on this topic)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9804481L

Original ruling text

April 1, 1998

Dear Mr. **:

Thank you for your recent email which is restated in part with response below.

I am currently starting a consignment business where I would sell other
people's used goods on the Internet, and then proceed to mail the goods to the
buyers. I would then charge the customers whose goods I've sold a commission.
My question is, besides taxes on my business' income what other taxes would I
be responsible for? Basically I would sell them on different Internet
auctions, and I rarely see anyone charge taxes on their sold goods. I haven't
been able to find any information like this on these web pages. Please email
and possibly send me some more specific information.

Response: Sales of tangible property are subject to sales tax. The fact that
the items belong to another and are placed with the seller on consignment or
that the orders are taken over the Internet does not serve to exempt the sales.
Goods sold and delivered by the seller to points outside Texas are exempt from
Texas sales tax. You must retain records to document the out of state
delivery.

I am enclosing Rule 3.311 for your reference. You will find this rule and a
wealth of other information on our Window on State Government web site at
through the Texas Taxes window.

This opinion is rendered based on the facts presented. If there are additional
or different facts, the opinion may change.

You may call me toll free at 1-800-531-5441, ext. 3-4680. The direct line is
512/463-4680. You may also write to Tax Policy, Comptroller of Public
Accounts. The email address is .

Sincerely,

Al Van Allen
Tax Policy Division