Jump to content
  • Checkout
  • Login
  • Get in touch

osCommerce

The e-commerce.

Self-employed business - taxes?


Guest

Recommended Posts

I really have no clue where to start looking for info like this - the web is tricky because all I seem to find is classes and books and videos that aren't what I want.

 

Here's my situation:

 

I am starting a "business" online where I will be selling handcrafted items. They are my own design. I probably will not be selling many of them - not sure though, I suppose it depends on the market and how high I get on Google :P I'm almost positive I will be making no more than $1000 a year off this. It's not going to be a main source of income, in other words, just kind of a side project in addition to my "real life" job.

 

What do I need to do about taxes? Do I need to pay or charge taxes at all for something like this? Do I need to register as a business?

 

Also, I know this is sort of competition, but what about eBay? Do people who sell many items as sort of a business on eBay have to pay taxes or charge taxes on them?

 

Thanks for any info you can give me :)

Becky

Link to comment
Share on other sites

You need to talk to an accountant in your area that is familiar with local business laws. If you are in the United States, many accountants give free half-hour to hour consultations to prospective customers.

Link to comment
Share on other sites

Yes, but see, I'm kind of hoping to avoid that if I can because if I don't know anything about it when I go in, then they can pretty much tell me anything they want and I'll just have to go along with it.

 

So if anyone has any clue about whether I have to call myself a "business", lemme know :D

 

I'm in California, btw.

Link to comment
Share on other sites

If you are in California and you sell anything you are supposed to collect sales taxes and return them to the state. You would probably be able to fly under the radar though. Go to the Board of Equalization website (http://www.boe.ca.gov/) and read up there.

 

Still think seeing an accountant would be worth your while. Surely there is a friend of a friend in the business that can get trustworthy references before you go.

Link to comment
Share on other sites

Yes, but see, I'm kind of hoping to avoid that if I can because if I don't know anything about it when I go in, then they can pretty much tell me anything they want and I'll just have to go along with it.

 

I think you will find that they cant tell you anything they want as they are governed by a set of government guidelines and regualtions that if they break are likely to end up in prison :P

Mark Evans

osCommerce Monkey & Lead Guitarist for "Sparky + the Monkeys" (Album on sale in all good record shops)

 

---------------------------------------

Software is like sex: It's better when it's free. (Linus Torvalds)

Link to comment
Share on other sites

I know that :P I just don't want to be talked into doing things a certain way just so that I'll be their customer. "Oh sure, you can do it this way if you REALLY WANT TO, but if you hire me as your accountant, it'll be SO MUCH BETTER (and I'll get your money)." :D

 

Anyone know about the ebay thing though?

Link to comment
Share on other sites

I know that :P I just don't want to be talked into doing things a certain way just so that I'll be their customer. "Oh sure, you can do it this way if you REALLY WANT TO, but if you hire me as your accountant, it'll be SO MUCH BETTER (and I'll get your money)." :D

 

Anyone know about the ebay thing though?

 

Technically if you are selling something for a profit you should be paying taxes on it. Now is the Govt going to come after you if you sell $1k worth of stuff or even if you make that much in profit? Probably not as it would not pay them to go after you as there it does not have much of a ROI for them. Generally speaking the Govt goes where they will get the money.

 

What I would do is keep track of all your expenses and income for the year and then take a look at what you have when you get ready to do your taxes and make a decision then. Just remember to keep good records of everything going out and everything coming in, that way no matter what you decide to do you will have the info you need.

The Knowledge Base is a wonderful thing.

Do you have a problem? Have you checked out Common Problems?

There are many very useful osC Contributions

Are you having trouble with a installed contribution? Have you checked out the support thread found Here

BACKUP BACKUP BACKUP!!! You did backup, right??

Link to comment
Share on other sites

Metallichica, I'm pretty sure you only have to charge sales tax to customers who purchase your product that are in the same state as you. I'm pretty sure it's paid quarterly and if you you make under a set amount, then you pay it annually.

 

However, I could be misinformed. ;)

Link to comment
Share on other sites

I heard you only change california sales tax... like 8.**%, but I could be wrong... I been looking on a listing of who to charge sales tax too, and almost all the sites I go to they only mention charging californians sales tax... But I could be wrong since i'm in the same boat you are :D

Link to comment
Share on other sites

And don't forget that if you do decide to register the business as a sole proprietorship, that you will also need to report for Federal income tax. I don't think as a sole proprietorship you'll need a EIC number... I believe they just use your social security number.

 

Another thing that you'll have to do if you go "legal" is pay into social security which I think is something like 15% of your reported net income.

Link to comment
Share on other sites

I heard you only change california sales tax... like 8.**%, but I could be wrong... I been looking on a listing of who to charge sales tax too, and almost all the sites I go to they only mention charging californians sales tax... But I could be wrong since i'm in the same boat you are :D

 

 

You charge the tax of your county if you go the simple route. The other way is to charge tax based on the county the customer lives in. Currently the default zone structure of OSC doesn't handle per county taxes well because you can't create zones based on postal code and you are only allowed two levels in the zone creation. There are some contributions that try and fix this but they are all clunky addons and many of them don't add correctly so make sure to test them thoroughly if you go that route.

Link to comment
Share on other sites

Alright... well thanks for all your answers everyone, but I've decided to instead just go with auctioning my items off on eBay. I really don't want to go through all the tax crap just to sell like 20 crafts I've made :P lol

Link to comment
Share on other sites

Just because you are only selling on ebay doesn't get away from the tax issues. It still needs to be considered for tax purposes as an additional income.

 

If your items turn out really popular and you end up selling 100 a month etc, you can't use the excuse, "I was only selling on ebay so I didnt think I had to declare".

Link to comment
Share on other sites

I won't be selling 100 a month... not even 100 in a year. I won't be making 100 of them. I will literally only be making like 20 of these, and they'll probably be selling at $10 apiece.

Link to comment
Share on other sites

As someone who has investigated this myself. Most states require that you charge sales tax to anyone purchasing from you if they live in the same state. That goes for owning a website or even selling your neighbor a can of soda. And if you are going to be doing more than the very rare item then it is required that you obtain a business license, which is really cheap, usually under thirty dollars which allows you to collect and pay the sales tax. It is not an expensive to do, and you only pay sales tax on what you sell in the state so if you don't sell to anyone in your state you report that you have not and you don't have to pay. It is worth it to make sure the base is covered just to be on the safe side, especially since it is so inexpensive to do so.

Link to comment
Share on other sites

  • 3 months later...

I am also having the same problem :( . The only other thing is that i am in NY and i waited on hold for7hours 37minuts and 7 seconds befor I was connedcted to talk to somebody and they dident know anything.

Link to comment
Share on other sites

NYS:

go to a shop that sells document forms. buy yourself a $.75cent piece of paper

called "certificate of conducting business under an assumed name"

(that's what mine was called) ask at your local county clerks office where you can get one. Then bring that form back to them.(yup. they don't have them there- you must buy one somewhere) have them do search for your business name to see if its taken.

fill it out, without ansking any questions you may have about this form (another law- you can't have ANY help filling it out from them) argh huh?

then you give it to them, they will keep that and give you a xerox copy of your original.

You need them to stamp that with an official seal. in 1998 this cost me $25.00 to hand them my "DBA" form and $4.00 for a stamped copy.

keep this stamped copy--your bank will want to see it, they can xerox that themselves but make sure you keep your official copy.

go to your bank and open up a Business checking account with your new DBA name on it (dba= doing business as) this looks good to clients and customers. helps improve trust. keeps your monies separate from your grocery/rent etc.

 

go to nys business taxpayer page

and start reading the thousands of forms there :( thousands? :'( its a huge mess

 

find and download form DTF-17 (Required registration form for those who will be selling items, usually at retail, that are subject to New York State sales tax.)

this will be your tax id number that allows you tax exempt purchases for items used in reselling AND to legally collect sales tax.

NYS will send you all the documents you ever wanted (in triplicate no doubt) and most are on the web.

 

read up about all the business taxes you might have to deal with. have asprin (or other sedative of choice) on hand.

 

$100 started my business in 1998.

$29 for the dba

$50 opens checking account

$21 bought me a tie dye kit and 12 t-shirts. <--old hippy needing a job after leaving a job with a grateful dead merchandiser.

Link to comment
Share on other sites

You should just keep an excel sheet of when your product was sold, how much it sold for, how much it cost you (material, shipping & handling, etc.) and if it was sold in the same state. I pretty sure that unless you exceed $5 million a year, you can use this method to keep track of your accounting.

 

At the end of the year, you just add up all the profit (selling price minus costs and other expenses) and you get your profit for the year.

 

Because you are a sole proprietorship, you add the profit to your income. If you have an accountant, you should ask him.

 

Unless you have a LLC, C corp, or S corp, it shouldn't be complicated. Sole proprietorship is suppose to be simple. A quick call to H&R Block can probably answer your questions.

 

Like someone else said, it doesn't matter whether you sell on a website or on ebay, you should report it on your taxes because it is required by law.

 

You do not have to report quarterly since you are a sole proprietorship.

 

Disclaimer: I am not a CPA or certified accountant.

Link to comment
Share on other sites

I'm not sure about your local tax laws, but I do know that ebay keeps and submits tax records to the IRS and revenue canada. In other words if you're a business operating on ebay, no matter how much you sell, it's a good idea to declair what you make.

Link to comment
Share on other sites

The laws are different for each state. For instance ... some states do not collect state sales tax nor are you allowed to charge state sales tax to customers if you are selling products on a website to out of state customers. If you are selling products on the web to in state customers, you have to charge state sales tax ... well you don't have to but you do have to pay the sales tax to the state department of revenue.

 

As for doing your end of year taxes ... if you use TurboTax you can just follow the directions for entering the information for sole proprietor businesses.

 

Just remember, anything you use to run your business, keep a record of because you can deduct them. If you run it out of your apartment, the apartment rent is a expense. If you use your cell phone, that is a expense, if you buy a computer that is an expense (you can deduct the full amount for that year or you can depreciate it), you can deduct your electricity bill, etc. etc.

Link to comment
Share on other sites

Actually to tell the truth, the IRS has NO CLUE for the most part what goes on the tax forms. Think about all the sources of income that come in - if the tax computer thinks you're more or less right, it's happy, it wants the big fish, not the guy who forgot to report a $20 clock-radio sold on ebay. They check the easy stuff like the W2 math and make sure you're not taking $200,000 in deductions. That's about it.

 

So here's the bottom line - if your ebay sales start to become a significant percentage of your living income, go talk to a CPA and let them tell you what to do. By signficant, I'd say 10% of your yearly net/gross (assuming you have some other full-time job). Less than that, just enjoy the money, since the odds are you'd write it off anyway.

 

And for those of you that are worried if this would be "fraud," you know what, the government doesn't really care. It's not worth their time (or yours) to count every last penny, if there's only pennies to count. Should you get "caught", you can go figure it all out later, no big deal, you're not going to be thrown in jail over a few ebay items - at worst, you have to pay interest on the money owed (like 6%, big whoop).

 

I'm not a lawyer either, but you can trust me, since I'm "smart" :P

 

Scott

Link to comment
Share on other sites

Hi I Own A Company I Make Websites and edit vidoes for people thing is i live in nevada therefore i have no state income tax so do i not charge tax and we are just opening do we need to get a licences to do buiness over the web or can we sneak by for a couple months then get a license when we have the money i will use excel and keep track of what i sell and how much i sell it for.

Link to comment
Share on other sites

  • 5 weeks later...

yelrad, I have my own Production company as well, the way that I see things, as long as you are paying taxes, there's no reason to register your company that soon.

 

Unless you are making a crap-load of money in the first few months of operation, you have nothing to worry about.

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

×
×
  • Create New...