I’m assuming that for most people, one of the important things in life would include a place to take care of business (and I would agree)! This is certainly one of the more awkward questions people ask when inquiring about tiny house living.
Yes, there are some builders that will include a real-life flush toilet in your tiny house upon request identical to the one you’d find in a normal-sized house. In some areas that have legalized tiny-house living or allowed tiny houses to be considered “accessory dwelling units” on properties with an existing house, one of the main requirements is connecting to sewage. In a scenario where you’ve planned to settle down and build on a foundation, having a flush toilet makes sense and would help to make the transition from living in a standard-sized house down to a tiny house easier.
However, many people who decide to live tiny do choose to compost their poo, which converts it back into soil. Why? Frugality, freedom and convenience. Firstly, it’s difficult to find a place that will allow you to piggyback into an existing sewage/septic tank. Secondly, the alternative is to buy a piece of property with which you purchase all of the necessary permits to run water and install septic, which is very expensive and contradicts the reason why most people choose to live tiny in the first place. The last alternative would be to install portable black/greywater storage tanks under your house (very much like an RV-setup), but having to haul those off to pay-dump stations to be emptied would be a hassle. Having a compost toilet just makes sense!
If you’re curious and want to learn more about it, I’d recommend checking out the Humanure Handbook. In it’s covers, you’ll find information about how to build a simple and safe system and why composting is such a better alternative – it’s quite an interesting read!