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  #11 (permalink)  
Old 09-18-2010, 11:36
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Default Re: For those who sell on Etsy, do you have a tax ID and legit set up?

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Originally Posted by laydewlf View Post
y'all are talking about 2 different forms of tax here -- sales tax and income tax. you do need to collect and pay all sales tax, therefore you need a tax id. at the end of the year when you are doing your income tax for your job, your business etc, here is where the 599 comes in. if you have earned less than 600, you don't have to include this as income and therefore be taxed on it, but if it is over that amount, total profit must be included.

i am not a tax accountant nor do i play one on tv. i am happy to be corrected, but this is my best understanding of the issue.
thanks that what i was trying to say, but it didn't come out as well
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Old 09-18-2010, 12:25
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Default Re: For those who sell on Etsy, do you have a tax ID and legit set up?

I'm currently working on setting up my business as a legal business. So far I have only sold a few items to friends and family so this topic is foremost on my mind.

While I haven't heard of the $599 rule I do know from the IRS website that if you make over $400 you have to pay self employment tax. To add fun into the mix each state is different. For example, my understanding is that in Nebraska you must have a DBA to start a business if you're not selling in your name and that it should be filed before you start selling or you can be hit with fines. That's if you sell even one item. Sales tax is required to be held on any items sold within the state you need to have a tax id number to collect.

Some states DO NOT allow you to add the sales tax cost into the price of the item. (I'm still researching Nebraska's law on this.) What I mean is that if you list your item at $3.00 you can not then say I sold it for $2.50 and the other $.50 is for sales tax. Some states require that you calculate the sales tax on the total the purchaser is buying the item for. So $3.00 + sales tax would be the correct way to collect. I mention this because one thing I have read more than once on here is that, particularly at craft shows, people like to just include the sales tax in the price of their item. Please make sure that this is legal where you are. I don't want anyone on here getting slammed because of something like this.

Just remember the time you take now to do things legally may save you a lot of stress, heartache and work later on.

Some resources:
http://www.irs.gov/businesses/small/...=99336,00.html
http://www.etsy.com/forums_thread.php?thread_id=5423306

I know I have more links saved around here somewhere but that should get you started if you haven't done any research yet. Good luck ladies!
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Old 09-18-2010, 12:25
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Default Re: For those who sell on Etsy, do you have a tax ID and legit set up?

Yes from what I have understood/been told the $500 or less is considered hobby income, so the government isn't worried about it as much as when it hits over that...then you are doing business to make a profit. Before $500, they look at this as a small side income (like selling bows to friends), but once you are in it to make money it changes and they want their cut!
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Old 09-18-2010, 12:31
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Default Re: For those who sell on Etsy, do you have a tax ID and legit set up?

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Originally Posted by SweetCheek View Post
but once you are in it to make money it changes and they want their cut!
God Bless the Government for that!!! (Wanting their share, that is) Maybe they need to learn how to spend the money before taking the money!!! LOL...
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Old 09-18-2010, 12:53
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Default Re: For those who sell on Etsy, do you have a tax ID and legit set up?

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Originally Posted by SweetCheek View Post
Yes from what I have understood/been told the $500 or less is considered hobby income, so the government isn't worried about it as much as when it hits over that...then you are doing business to make a profit. Before $500, they look at this as a small side income (like selling bows to friends), but once you are in it to make money it changes and they want their cut!
I've read/heard the $500 thing as well but I can't seem to find reference to it on the IRS website. Does anyone happen to have a link?

Everything I can find seems to state that it depends on your intent. From what I have found it appears that if you're operating hoping to make money then you are not a hobbyist and must pay taxes.
http://www.irs.gov/newsroom/article/...169490,00.html
http://www.irs.gov/irs/article/0,,id=186056,00.html
http://www.irs.gov/publications/p535/ch01.html

ARGH! I'm about ready to hire someone to do this for me... but even if I did hire someone I would still want to understand it though so back to the grind.
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Old 09-18-2010, 12:55
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Default Re: For those who sell on Etsy, do you have a tax ID and legit set up?

An accountant would help you understand it. My uncle and I are going to have a dit down so he can translate the late to english for me....
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Old 09-18-2010, 06:12
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Default Re: For those who sell on Etsy, do you have a tax ID and legit set up?

Quote:
Originally Posted by ComingUnraveled View Post
I've read/heard the $500 thing as well but I can't seem to find reference to it on the IRS website. Does anyone happen to have a link?

Everything I can find seems to state that it depends on your intent. From what I have found it appears that if you're operating hoping to make money then you are not a hobbyist and must pay taxes.
http://www.irs.gov/newsroom/article/...169490,00.html
http://www.irs.gov/irs/article/0,,id=186056,00.html
http://www.irs.gov/publications/p535/ch01.html

ARGH! I'm about ready to hire someone to do this for me... but even if I did hire someone I would still want to understand it though so back to the grind.
The part I put in bold is how I understood it from my accountant. I'd asked once how much in sales before it was considered more than a hobbyist, and he said that there was no number. It is what you intend to do with what you make. If you make it to sell it and you have a website or do any advertising or promoting then it is a business whether or not you have a profit or loss and it all needs to be reported. My first year we reported as hobbyist, and he said there was no need for a tax ID yet. The next year when I showed him my numbers that's when we started discussing the tax ID and all that. I don't think he thought I'd get anywhere with my little business LOL!
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Old 09-19-2010, 08:48
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Default Re: For those who sell on Etsy, do you have a tax ID and legit set up?

Thank you for your responses. All of this is making my head spin. I guess I need to figure out how much I'm making this year and figure it out from there.

Sandy
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