The sneaky second-hand tax that cheats shoppers out of vital savings

Shoppers are often unknowingly paying sales tax twice on the same item because of an unfair quirk in the system.

Thrift stores have boomed in popularity in recent years as households seek out bargains and opt for more sustainable alternatives. 

But resale giants have highlighted how consumers are being deprived a vital saving.

This is because sales tax is still charged on items purchased second-hand - even though it was already paid on the initial purchase.

Resale giants such as The RealReal, Vestiaire Collective and ThredUp, are now backing a petition calling for the elimination of double taxation. 

Rachel Kibbe, 43, has become the face of the movement. The New York native's coalition, American Circular Textiles, advocates for sustainable fashion and circularity in the US. 

Kibbe, along with the coalition's 40 member organizations, penned the petition addressed to US state lawmakers asking for consideration for eliminating sales and use taxes on secondhand clothing on a state-by-state basis.

'This practice is stifling sustainability and stifling businesses who are trying to do the right thing by reselling products,' Kibbe told DailyMail.com.

Young people who have turned to thrifting secondhand clothes are also complaining about increased prices after the extra tax is added. 

One user on Instagram asked: ‘Why am I paying sales tax on secondhand items at a thrift store?’

Another said: ‘If we really cared about the environment we would not tax secondhand stores so people would be encouraged to recycle goods. 

'One man’s junk is another man’s treasure but in the US capitalism reigns and consumerism fuels it.’

An X user added: 'I don’t see how anyone should impose a sales tax or income tax on used, RESALE items… so wrong. 

'They’re lucky that used s**t doesn’t just go into a landfill. B******s are lucky we repurpose thru thrifting, Etsy, eBay… stop taxing the s**t out of us!!!!'

Clothing is tax-exempt in only four states - Delaware, Montana, New Hampshire and Oregon. In all other states, clothing is generally subject to sales tax with occasional exceptions. 

The additional tax is not applicable in all states as some have specific exemptions for certain types of wearables or transactions.

In California and Tennessee, some nonprofits and thrift organizations providing clothing to people in need are tax exempt.

In Ohio, Virginia and South Carolina some protective clothing may be tax exempt and in Idaho exceptions regarding free clothing for charities can apply.

Despite the tax complication, the secondhand apparel market continues to grow. 

ThredUp - an online consignment and thrift store - revealed in its annual report that US consumers spent nearly half of their clothing budget on secondhand items.

The report also noted an 18 percent increase in last year's global secondhand market, reaching a $197 billion valuation.

Secondhand clothing sales are on track to make up a tenth of the global fashion market next year as the cost of living crisis and sustainability concerns send consumers seeking hand-me-down products, The Guardian reported.

ThredUp estimates that the US secondhand market will reach $73 billion by 2028 increasing an average of 11 percent annually. 

For sellers, offering up already-worn goods is an easy way to make money. 

Reselling also can also benefit local communities by sourcing items from small businesses, secondhand shops or garage sales. 

But even as the resale market grows consumer culture reigns supreme. 

A staggering 85 percent of discarded textiles end up in landfills, with 17 million tons of textile waste piling up across the US. 

The petition states that the elimination of the tax will incentivize reuse and repurposing of garments to reduce the fashion industry’s environmental impact.

The document also argues that the change would additionally benefit lower-income individuals and families.

If the secondary-tax on clothing was removed Kibbe believes small businesses like thrift shops, alteration services and repair shops would flourish 'providing essential services and creating jobs.'

Kibbe said: ‘Ending double taxation is not only the fair and just thing to do, it will also spur economic growth and strengthen the trend towards shopping for well-made clothing that can be reused or repaired rather than tossed into the ever-growing piles of textile waste.’ 

Kibbe and the ACT penned the petition on National Secondhand Day, August 25.