From William T Lasley,
Your Guide to Arts / Crafts Business.
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Whenever you sell retail crafts at shows, and sometimes online, you will need to charge retail sales tax. This is not a may or may not situation. You must pay your taxes or else you will eventually be put out of business by taxing authorities. The amount of tax you need to collect varies from state to state. To be sure you know the proper way to file and pay sales tax, look in the phone book or online to find out how to contact your state taxing authority.

• Collecting - Once you know how much sales tax to collect, you will need to add this amount onto each sale you make at shows and keep track of the amount collected. Many inexpensive cash registers that crafters use for shows will automatically add in the sales tax and keep track of what you collect. Sometimes crafters decide to include the tax within the price. I recommend against this practice since you will essentially be paying the tax for the customer. When most people see a price at shows, they expect tax to be collected on top of that figure. It’s better to display lower prices and add the sales tax on later than to display higher prices that include the figure.
• Filing and Paying - After you sign up for a retail sales tax permit, you will be issued an account number and documentation for filing your sales tax. How often you must report and pay will depend on state law. However, many times for crafters who have sales under a certain dollar amount it will be quarterly. Again, check with the state taxing authority for details.
• Different Jurisdictions - Crafters will face a different challenge when collecting and filing tax when they travel outside their home state. You must collect the amount and follow filing guidelines for the state you are selling, not where you reside. At larger shows you will see the tax authorities during the last hours or after the show. They will want the total sales figure and tax collected and you will need to pay then instead of filing later. To find out what the tax rates are and how to file, I recommend speaking with the event promoter beforehand.