E-Commerce

Why these execs say we should stop taxing secondhand items

Eliminating the tax would incentivize sustainable shopping, they say.
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An ad by Ikea Canada highlights that it is protesting the secondhand tax (SHT). Ikea Canada

· 5 min read

We’re not going to take this SHT anymore.

That’s been the sentiment recently from Ikea Canada, which has taken a stand against what it calls SHT, for “secondhand tax,” demonstrating the same adroitness for skirting censors as their fellow Canadians who brought us Schitt’s Creek.

“We want our federal and provincial governments to consider eliminating the tax from secondhand items, Canada-wide,” Ikea Canada stated in a March 22 Change.org petition aiming to end what they called the “double tax” on used items. “And if they say yes, we don’t have to do SHT.”

The petition had received 32,480 signatures toward its goal of 35,000 at the time of this article’s publication.

Note there is no dedicated “secondhand tax” per se, but Ikea Canada and its allies argue that the sales tax should not be applied to used items.

To mark the beginning of Earth Month, from April 2–11, Ikea stores throughout Ontario discounted items for its loyalty program members in its “As-is” marketplace, which includes used items, by 13%, the same percentage as the sales tax. (To fully appreciate Ikea Canada’s wordplay, the country’s combined federal and provincial sales tax, which is 13% in Ontario, is commonly called HST, for harmonized sales tax.)

The company was offsetting the tax to point out that it didn’t think it should be there in the first place. Ikea Canada placed ads in newspapers including the Toronto Star and Globe and Mail saying it was “calling on government stakeholders and companies everywhere to help us put an end to the double tax on secondhand items, so that all Canadians can shop circular for less.”

But it’s not just Ikea, or Canadians, who are speaking out against taxing used items. In a country where “about” isn’t pronounced like something you wear on your feet, executives at resale companies are decrying the practice of taxing used items too.

Same SHT, different country: James Reinhart, co-founder and CEO of resale marketplace ThredUp, has been beating the (gently used) drum against taxing secondhand items for years.

“Why do we tax secondhand goods?” Reinhart asked reflexively in an interview with Retail Brew in 2022. “They’ve already been taxed once. Isn’t that double taxation?”

Reinhart revisited the topic in a column in Fast Company in April.

“There’s a long history of our government playing a pivotal role in promoting sustainable choices by providing financial assistance to consumers,” Reinhart wrote. “Think: incentivizing the widespread adoption of electric vehicles through tax credits, or offering discounts for the use of reusable bags to reduce plastic waste.”

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Adam Seigel is co-founder and CEO of Recurate, which partners with brands—including Steve Madden, Michael Kors, and Mara Hoffman—to build their resale programs.

He said retail executives often broach the subject early in the process of entering resale.

“When we first work with a brand, or even before we officially sign a contract with the brand, the brand at some point in the process will ask, ‘So how are these products supposed to be taxed?’” Seigel told Retail Brew.

They’re not thrilled with his answer.

“We usually need to go through an education process and at that point, they’re going like, ‘Why do we have to pay sales tax a second time when we already sold the item once?’”

With Siegel, they’re preaching to the choir.

“There aren’t many situations that I can think of in our tax code where you can tax an action twice,” Seigel said. “Reducing or eliminating the sales tax on the purchase of secondhand items would be preferable because…it has a reduced impact on the planet.”

Bill withers: In 2023, Michael A. Jackson, who serves in the Maryland State Senate, sponsored a bill to exempt secondhand clothing and footwear valued at $20 or less from the Maryland sales tax.

In testimony before the state’s Budget and Taxation Committee last February, Jackson said the measure could help his cash-strapped constituents and the environment.

“Often those purchasing secondhand items have very fixed incomes and can greatly benefit from the savings that this modest exemption would create,” Jackson said. “This legislation would provide a clear economic impact for these individuals and ultimately a positive overall environmental impact for all Marylanders.”

The bill has yet to make it out of committee, according to the Maryland General Assembly website. But Siegel is optimistic that there will be future bills from other legislative bodies that will fare better.

“We’re probably going to enter a time of a thousand flowers blooming where different states are going to try different things with New York and California probably leading the country,” he said of tax elimination and other policies to encourage resale. “Some of those will shake out and will become the industry norm.”

Retail news that keeps industry pros in the know

Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.