Fumbling in the dark

[Dragonsbreath]

Hello everyone! :D Im sitting here cross-eyed after searching all over the web for information and I am really none the wiser... So I turn to you in hopes that you can maybe help me out or at least point me in the right direction..

Here's the jist of it.

I am married to a very talented artist. Only recently has he been casting his carvings in resin and selling it through our ebay store.
http://stores.ebay.com/Goth-R-Us

Lately things and sales have been speeding up a little, and there has even been some interest in his work from other venues. And although we haven't been making the big bucks, it will start to add up in the long run. So this is where things gets a little bit fuzzy for me...I know that most people selling things they find in their garage on ebay don't report this for tax purposes, but where do you draw the line? What is the sum where you start thinking about reporting this as extra income? My husband has a regular day job, and for now his artwork is a hobby, made and sold out of our private kitchen. But do we need a business license to sell his work? And if so, how and what? Most of the information I could find on small businesses was on selling commercial items from other wholesellers and I could not find any relevant info on being an independent artist selling your own artwork.

Also, is there government grants for artists like my husband or is that just a myth?

I would appreciate any input and help you could give me on this, because I really don't know what I am doing or how to go about all of this... :confused:

Thanks folks! :)

~Annie~

[tonofelephant]

Annie,

Hard question about when to call it a business. In my wife's and my experience we were fear based. When we started out, we started a couple of businesses because we figured if we ever got caught by the IRS we had lost automatically. We figured since the IRS was part of the govt and they print money, that in court they could outlast us. That is fear.

Realistically, I am no tax lawyer or accountant, but I would assume that if you have made as much as $1,500 for the year you should consider setting up a small sole proprietership(sp). With an s-p you could have a vehicle to buy supplies through, take deductions on taxes for buying said supplies, and keep the business seperate from your personal finances. Uncle Sam I hear takes a dim view of mixing personal and business finances. We have operated a sole propertiership for 18 years. It has lasted us through several different art mediums, running two retail stores simulanteously, etc.

In addition, this would give you a small taste of whether you would like to continue being in business. My one word of advice. Start out with a sole propertiership and single entry book keeping. Try it for awhile and see how it works. Doing anything else in the begining will make you crazy - it did us. An accountant tried to order us to use double entry book keeping. Nearly went back to work at a 40 hour/week job to avoid that.

As to grants. Don't know of any. But I would check into your state arts commission. They may have a lot of leads for you. In the great state of WV they have a thing called Tamarack - www.tamarackWV.com It is great because it buys artwork from the artist and resells it. They also pay within 30 days. I hear other states also have that kind of arrangement.

The point my wife and I almost forgot in the begining is that you are in business to do art - not do accounting. Enjoy the art part and make the accounting as small and as insignificant as possible.

By the way - I love your business name - Goth-R-US. Short sweet and to the point. Love when a business name communicates.

Carl
wwwwsggallery.com

[EJB]

This is the million dollar question that needs to be addressed by any artist before they see their first million daollars. If you plan to continue this on any level you will be best served to figure it out now before you lose money later by paying back taxes or discivering you have not been charging enough for your creations. T.O.E. hit a number of good points especially the part about deducting business expenses. As I recall, any single source of income over 400 or 500 dollars is subject to federal income tax. The amount of which will vary depending on your total income. Additionally, state and local taxes may apply. The good news is that most states and cities give a break specifically to artists and often will not hold them to the same accounting standards. The key to not getting hassled is good record keeping. Save every receipt, track every transaction and be professional. If you are selling stuff, you are a business! Requirements for a business license will vary city by city. Check with your local taxation or license board. Often they will try to put you in another business category but stick to your guns and insist on being recorded as an artist, otherwise they might try to hold you to the same standards as the local WAL-MART or Chemical Plant. The cost of a business license varies according to income from the business, increasing beyond a base income of say, 50 or 60,000 dollars. Generally it is less than a hundred bucks a year and gives you more legitamacy when you start dedicting business expenses. (The cost of your license is deductible as well). Sales tax is a big thing to watch for. Governments live and die by this income source and will jump on you in a nanosecond if there is a nickel to be made. E-bay is a particularly large target right now as various agencies are trying to figure out ways to tax the whole E-bay operation. The info is out there. A couple of books I can think of off the top of my head are: THE BUSINESS OF ART by Lee Caplan, THE ARTIST"S TAX GUIDE AND FINANCIAL PLANNER by Carla Messman. Good luck, and just remember that if the local scotch tape store and hot dog vendor can figure this out, so can you.

[Landseer]

My view on the business license thing, if you are creating this art in your kitchen in your spare time and are not operating a neon-sign-out -front-with-customers-and-trucks-in-and-out-all-day why bother creating a potential headache for yourself with your city and county ZONING board and all that?

You may apply for a business license/permit and discover oops, the county says you CAN'T have a business in your home because it's in a residentially zoned area. Once you have applied for that and been rejected, then they have you on a list so to speak knowing you applied.

OTH if you intend to put signage out front -often a no-no in residential areas, having a store or display where people are coming in and out all hours of the day, or you are in the garage pounding and grinding on plate steel and welding till 3 AM and you have neighbors who might object, then you might want to rethink some of this.

As your items are priced about $18 each and you are selling these as a hobby, produced in your kitchen, I would do most of the worrying about all the nuances and business stuff at a point where you are ready to either quit the job or open a warehouse/production facility, or more especially HIRE anyone and have a payroll.
You aren't selling $50,000 tapestries or carvings, nor do you have heavy factory machinery running 9-5, or a metal smelting plant belching smoke out a chimney, or 12 employees, so at this point your best bet as far as your local stuff goes with running a business in your HOUSE is- the LESS your city/town/county knows about what you are doing in your house the better because the very worst things happen when you apply for permits and the like to "do the right thing" and then run afoul of some city ordinance or zoning code that considers you on par with the local Wal-Mart or supermarket, and tells you that you are not allowed to use your house for ANY business purposes whatsoever.

Then you are screwed because you know they will be monitoring you now that you are turned down.

I've had similar when I bought property in Oregon years ago and planned to keep more than the 4 dog limit in the county, so before I actually signed the deal to buy this 10 acres of forest land I applied for the county "kennel permit", well, the county planning board sent letters to EVERY adjacent property owner informing them of my intent and application to "build a DOG KENNEL" on the property.
Even though my application carefully explained these were show dogs and pets who lived primarily indoors and I had planned to keep UP TO 4 to 5 dogs maximum, one of the recipients of the letter actually had the gall to start a petition to prevent "a commercial dog kennel"

I offered to meet with these people and show them the dogs etc and not one responded, lesson learned there, don't make waves just be low-key.
Had I not applied for a permit I wouldn't have had any problem- the seller of the land was a dog lover and was ONE of the adjacent land owners, his house was the ONLY one even visible 600 feet away, but people had the idea that some huge commercial operation was going in next door and objected.

You can ALWAYS later if there's a problem or you expand beyond your wildest dreams and need to hire people to keep up- go find a space to work in if it came to that, for now your house is fine.

Added in: Remember, your city and county agencies do not exist to be your FRIEND, they are there to control property and glean as much cash out of you as they can get away with in permit, license fees, surcharges and anything else they can get away with, they are not there for you or your best interests they are for lack of a more PC term- your enemy, treat em as such and don't give the enemy anything voluntarily.

[sculptor]

Annie:

A goth stumbling/fumbling around in the dark..........haha.....how apropos..(still laughing)...

seriousy:
I've been in business (as an architect, designer, builder, artist,etc.) for myself for most of the last 30 years and never had a "business license" this license is primarily a local thing and most cities/towns seem to want this for retailers---with a storefront........

The I.R.S. however is a different beasty..good advice from above about keeping receipts for everything....e.v.e.r.y.t.h.i.n.g------from paper towes to gloves to ebay fees to..ad infinitum.....everything and anything associated with the creation and production and sale of the product.
.....and eschew use of the dreaded word "hobby"....the irs will want to tax your income from a "hobby" without alowing you access to the vast word of business deductions....if asked by the I.R.S. say you create the "art" with the intent of making money and your "hobby" is putting on black cothing and fumbling/stumbling around in the dark.
------------
there is no universal advice for this license thing--it all depends on where you live and work--------suggestion----read the local codes...then decide

good luck
rod
sculptor (http://sculpture.alturl.com)

[Dragonsbreath]

Thank you very much all of you, it gave us a lot to think about and more research to do. I appreciate your responses tremendously.
So....We don't have to have a business license since there is no storefront and all that, but still would want to have the artwork taxed... The thing right now is that a major store may be interested in buying the rights to copy and sell some of his work, and that could mean a not insignificant sum of money coming in to us...
But for right now we are selling the pieces for $18 bucks a pop, well mostly because my husband is being modest and don't think his work iw worth more, but which I think is ludacris. But the bottomline is I guess that we are selling.
Like tonofelephant said, we are basically on a level of fear right now, fear of not doing the right thing and in occardance with the law, for then there to be penalties down the line....
But we will go down to the county whatever here and ask around. Doing that won't put up any red flags will it? It's not like they will be banging on our door for asking about the regulations and rules when it comes to this?
Also, it's my husbands art, but he is selling it throug the ebay store that is in MY name..... do we both have to pay taxes on it.....confusing to say the least.....

Thanks guys!

[EJB]

Hope I didn't scare with the previous list of things to think about. The business license part is probably the least of your worries. If your business is not yet pulling in major cash, it's not worth anyone's time to track you down. LANDSEER has a good point about asking up front. Out of sight, out of mind in most cities. Sometimes it's best to start and let them find you so you can demonstrate the level of your business and be taxed accordingly (business license is a municiple tax). Often times there are breaks for start up businesses and first time applicants. What should concern you most is proper reporting of federal and state income taxes. These guys don't screw around. If you operate as a sole proprietorship (the easiest) you will start filing a Schedule C form with your federal return. This reports profit/loss of business income and is also where you report deductions. Equally important is the collection and payment of sales taxes. This can get you in a heap of hot water if you ignore it. The E-bay thing is tricky in this regard in that it has been traditionally been a way to legally avoid the sales tax issue. Need to check with your state and local tax boards (board of equilization) for resale number etc.

[Landseer]

Well today I received a pretty nice official wholesale purchase order for 9 sculpture, my first wholesale purchase order :) from a California store who found me on Ebay. I was happy when I went downstairs to see my stock and have 8 of the 9 right on the shelf.

So Ebay is a pretty good outlet to use but you have to have stuff up there all the time even if some things don't sell or you run into one of the periodic but temporary dead periods, and not let your presence lapse.

With this store owner, I spent some extra time personalizing my communications back to the lady and it does pay off.

Is your price too low at $18? or too high? who knows! if you factor in your costs and what you expect for your time and $18 works for you great, but keep in mind that wholesale outlets generally want about 50% off your retail price, so that would mean $9 (assuming you producing rather than licensing which is another ball of wx that is more like royalties- pennies on an item) and I'm guessing your materials would be pretty close to that alone.
I raised all my prices a number of months ago across the board about 20% after someone suggested they were too low, that helps in the wholesale price too now and I'm glad I did that.

You might be aware of it, or maybe not, but there is a free service available they might be of some help to you and have been around many years.
yes, we do sculpure art but this still involves marketing, sales, retail, bookeeping, records etc- why not check out the SCORE site; www.score.org

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