Order & Payments

[JRB]

For those that are selling holsters on the side from their work as a hobby, how do you handle "orders" and paymments? I don't really have a demand and am not really looking to "grow a business" at this point. However, I would like to make a web page to share with and thought it would be cool to have a way for people to order & make payment.

Am I making a mistake by not registering a business? I thought as long as you did not make over a certain dollar amount of profit you did not need to report the income (is that just wishful thinking?).

[Randy Cornelius]

Not sure what you mean my registering a business. But it would be to your advantage to get a state sales tax license from your state. That way you can buy wholesale from companies like Weaver Leather and get a makers / Sellers account from Tandy which is a great savings over retail. But in having a tax ID number you will have to file quarterly sales reports and collect sales tax from who you sell to and pay that sales tax back to the state. It's not too big a deal here in Kansas and most is done on line now except for writing the check. You may want to check with your local city or county about business licenses etc. Where I am I am not required to have one as my business is home based.

As far as payment from a web site the most convient is to use a Paypal account so that your customers can pay by credit card and you can accept credit cards without signing up with a bank. The banks will take a lot more than paypal will.

I personaly like to do business face to face and do not get many orders from my web site. All my work is custom and I do not offer stock items for sale. Others that do may have some other ideas for you.

Randy

[JRB]

When I say register a business I guess I mean setting up a business, reporting income/loss, paying taxes, etc. I guess I'm not sure where you cross the line from a hobby making minimal profit to a business making minimal profit.

I'll have to do some investigating on the city, county, state issues.

Thanks for the input.

[rdb]

You have the State sales tax license, and the Federal Income No.

More than likely , all you need is the state lic. All they want you to do is file your quarterlies. Pay the state tax on your sales. If no sales, just write 0. Not a very expensive cost here. Some states, maybe cheap ($25), others might be more. For the money you will save on leather and tool purchases, it's worth more than you pay.

For the feds, If you actually make an income, all you have to is fill out their forms, and report it.

[ABC3]

Here, anyway you have to have a Business Lic if you sell anything within the state. Internet & out of state is a different situation, as far as I know. The Fed Tax ID # is to reqort qtr'y sales - they want their share within the state. No sales - 0 tax.

Alot of Wholesalers will not sell you with a Business Lic (I have found that you do not have to have a Tax # to buy Wholesale). The Business Lic, here is $100 & takes about 5 minutes. The Tax #, I think is also a $100, but I could be wrong on that one. I opt'ed not to do the Tax # at my stage of the game. I'm not selling anything at this point.

Different states may have different laws so check with you state/county for more accurate information.

Good luck.

[Shorts]

The line between hobby and business is ambiguous. I haven't figured it out myself either.

Start at your state level. Check the AG site and the state business site for more details. They require a tax number for state sales tax (TX). From there you'll be lead to the IRS site.

[Lobo]

Wishful thinking indeed! Any income that you do not report could make you liable to criminal penalties (tax evasion).

By all means, get a FEIN (federal employer identification number), file a corporation or LLC in your state of residence, file a trade-name affidavit, get a sales tax license, keep good records of all expenses and sales revenue, file quarterly estimated tax returns, complete all necessary forms to report your income and pay taxes annually. Otherwise you are a sitting duck! Any income traceable to you that is not reported could result in serious criminal charges, and what you might have paid in taxes will look like nothing compared to what you will be paying to a lawyer to keep you out of jail.

You might, just might, be lucky enough to be permitted to pay back taxes, penalties, and interest the FIRST time. After that, you might be making little rocks out of big rocks for a while.

[Hilly]

It's getting to the point that the state wants you to have a tax # just to have a yard/garage sale these days! If you find a penny on the sidewalk, they want to know about it!

If I were you (just a hobbiest), I'd just leave a phone number on your web page where interested parties can contact you, and leave it at that.

[TwinOaks]

Well, there is something to be said for the old way of doing things. Word of mouth advertising and CASH....preferably in small unmarked bills.

To the OP: So far, Shorts' advice has been the best. We're all in different areas, and the local laws differ slightly. No offense to anyone, but this is LEGAL territory, so a lawyer's advice is needed here. You'll need to talk to the local government in YOUR area to find out what is right for you. If you have a local chamber of commerce (COC) they can be an invaluable asset.

Here's a link to the IRS site with info to determine if you need an F.E.I.N.: http://www.irs.gov/businesses/small/articl...d=97872,00.html

Another thing to check on in lieu of being a business entity is "Doing Business As", or DBA. Incorportating as Lobo suggested is costly, but it does offer protections- corporations are legal entities, and this can save your bacon...and house...if somebody sues the corporation for anything like a holster failure that results in injury (reference the thread here about a knife holster failing and somebody dying because of it). So in a nutshell, Lobo's advice, while far more expensive, does cover all the bases. If you were making wallets, purses, and key fobs, you might not need it.

In closing, keep in mind that I'm just an amatuer/hobby leatherworker, and NOT a lawyer, and my little bit of advice is only my opinions on the subject. Check with the proper people, and good luck.

Edited June 13, 2009 by TwinOaks

[electrathon]

You are allowed to make a few dollars at a hobby. I no longer remember the amount, but it seems like it was around a coupe thousand gross per year. I find it hard to believe anyone would really set up a tax id, lisences and all for a few sales a year. You may quickly find that you are paying thousands a year (depending on your location) to sell something for $45. If you really want to be anal about it, running a business out of a house is against most cities zoning laws. It nulifies your homeowners insurance and it goes on and on. Selling a handfull of craft items is not a business. This is totally differant than selling all you can and going into production, this is learning a hobby and selling the finished work.

And yes, I am not a lawyer, I am a mechanic. I had it explained to me a few years ago from the CPA doing my taxes why I did not have to report "income" for helping people fix their cars on the side.