So, etsy

[feuervogel]

I'm thinking of starting an etsy shop to sell crocheted things and quilted things and whatnot, but I have no idea about the tax implications of it. If I sell to people *in* NC, I have to collect sales tax (or take it out of the sale price); if I sell to people *outside* NC, I don't.

Do I have to register as a business so I can send the state what meager sales taxes I collect? (I'm assuming I won't sell more than $100/mo.) What's the cutoff for hobby vs business, anyway? The IRS says it has to do with the intent to make a profit. Well, sonny, I wouldn't be selling shit if I didn't want to make money off it. Here is a more plain-English discussion of that.

I don't know, y'all. I just want to make some stuff and sell it to people at more than it cost me to make it.

Does anyone have experience with this sort of thing?

Comments

[beth_leonard]

I realized that I may not have made it clear that federally you don't need to do anything to register as a business, you are a "sole proprietor" and you just report the income on your regular 1040 schedule-C and it gets taxed like regular personal income. That's why people are always screaming about how increasing the marginal personal income tax rates hurts small businesses.

--Beth

[beth_leonard]

P.P.S. This is totally not relevant, but an interesting discussion of tax policy -- if your business starts making a ton of money, it may become worth it to incorporate. There's two styles but from this perspective they're basically the same. Once incorporated, you pay an annual incorporation fee/tax to your state of incorporation (in CA it's like $800, I think it's near $0 in Delaware) and your business now pays the business marginal tax rate of 35% to the feds instead of the personal marginal tax rate of 39.6% to the feds. However, if you pay yourself any salary, that is taxed at your personal rate and it gets deducted as an expense from the business.

This is why large businesses incorporate and small ones don't. This is also why there's an interesting graph somewhere about "personal income" over time. Back when the marginal tax rate was 90% instead of much closer to the business tax rate, it made sense to incorporate at a much smaller business size. Change the tax rates, and people change their business structures, but it also changes the pie graphs as to what percentage of federal tax revenue comes from "business" vs. "personal" sources.