Business Licenses

aero-nut · April 18, 2005

dgrin'ers,

I have been considering trying to sell some prints for some time, but have been debating the best way to start. One of the questions that has come up is:

If I am just starting, and plan to sell prints to a few friends and family using a Pro smugmug account, do I need to file for an official business license with my local government entity? I'm assuming that if any profit is to be made, that the local and federal governments are going to want a business license filed for tax reasons. Is this a grey area, or just wishful thinking on my part?

I know at one point I'm probably going to try to expand and shoot some events, etc...and will have the business license and insurance, etc. by then.

I apologize if this has already been covered in this forum.

Comments?

Bodley · April 18, 2005

I'm in the same boat. In Alabama, we have to pay State, County and City sales tax (have a lic. for each). Get a business lic. for any municipality we make sales in. Also, I believe, the sales made through Smugmug are taxable locally (at least I'm turning them in).

One small town locally wants $105.00 for an annual BL based on sales of only $1000.00. THATS OVER 10% of gross plus SALES TAX!!!:cry Guess I'll keep my day job.

Nikolai · April 19, 2005

Aero-Nut,
Here's my take:
Don't bother with BL unless you got a lot to sell (I mean - A LOT).
File Schedule C with your next taxes. It's pretty painless.
Just my $.02.

HTH

Bodley · April 19, 2005

Nikolai wrote:

Here's my take:
Don't bother with BL unless you got a lot to sell (I mean - A LOT).
File Schedule C with your next taxes. It's pretty painless.
Just my $.02.

HTH

I would be careful - If you file a Schedule C showing sales and have not paid the sales tax to all State and Local Governments - you could be in for a surprise

Also if you pay the local taxes the city may want to know about the BL?

Just a thought
Greg

amangold · April 19, 2005

Bodley wrote:

I would be careful - If you file a Schedule C showing sales and have not paid the sales tax to all State and Local Governments - you could be in for a surprise Also if you pay the local taxes the city may want to know about the BL?

Just a thought
Greg

I was in the same boat in Feb...so I started my own small business (in the state of TX)...it was reletively quick and painless. If I didnt live waaay out in the country it would have been down right EASY!! Basically the cost was less than $40 when all was said and done...I got a Tax ID # and local tax info...etc. I have since been selling prints like mad! (that and I get to say I own my own business...te hee)

THE ONLY DOWNFALL...so far has been that I get all sorts of junk mail asking me to join this club or that...use this companies credit card or that...it's never ending. AND I've been getting those annoying phone calls at dinner time asking if I want the Wall Street Journal or a Knuckle Buster for cheep.

If you can handle that and think you'll be selling a lot of prints it's worth it. I get a tax break everytime I print or buy materials for my business and that helps!!

Hope this helps you to make a decision!
Take care!

aero-nut · April 19, 2005

amangold wrote:

I was in the same boat in Feb...so I started my own small business (in the state of TX)...it was reletively quick and painless. If I didnt live waaay out in the country it would have been down right EASY!! Basically the cost was less than $40 when all was said and done...I got a Tax ID # and local tax info...etc. I have since been selling prints like mad! (that and I get to say I own my own business...te hee)

THE ONLY DOWNFALL...so far has been that I get all sorts of junk mail asking me to join this club or that...use this companies credit card or that...it's never ending. AND I've been getting those annoying phone calls at dinner time asking if I want the Wall Street Journal or a Knuckle Buster for cheep.

If you can handle that and think you'll be selling a lot of prints it's worth it. I get a tax break everytime I print or buy materials for my business and that helps!!

Hope this helps you to make a decision!
Take care!

I imagine that California regulations are much different then other states. This is the information I have gathered so far:
- It costs upward of $120 in fees to register a sole propietorship in CA.
- It costs approx $800 in fees to register an LLC (Limited Liability Corp...if you have multiple employees) in CA.
- I live in an uncorporated area, so all local fees and registration are done through the county.
- In CA, for a sole proprietorship, the tax number used is the same as the individual's social security number.

I don't think it would be easy to get around at least registering for a sole prop. in CA if any taxable income is expected....but that's just my impression so far.

pspphotos · February 22, 2007

BL in CA
I've done some research in my area of Southern CA - So far all I really need to do is get a resale license for sales tax purposes. I don't need to get a business license if my sales are under a certain dollar amount. I can still do my taxes as self employed and write off business expenses without having to have the business license.

bham · February 24, 2007

aero-nut wrote:

dgrin'ers,

I have been considering trying to sell some prints for some time, but have been debating the best way to start. One of the questions that has come up is:

If I am just starting, and plan to sell prints to a few friends and family using a Pro smugmug account, do I need to file for an official business license with my local government entity? I'm assuming that if any profit is to be made, that the local and federal governments are going to want a business license filed for tax reasons. Is this a grey area, or just wishful thinking on my part?

I know at one point I'm probably going to try to expand and shoot some events, etc...and will have the business license and insurance, etc. by then.

I apologize if this has already been covered in this forum.

Comments?

If you sell are your prints through smugmug, you don't have to have any worries about sales tax, since buying thing via the internet is tax free unless you are in the same state as the company you are buying from (Smugmug is in California, so only people buying things via smugmug are charged sales tax and smugmug pays this, so you have no worries) In some states the fee you charge for shooting (a service) doesn't get a sales tax, but just a income tax.

But if your photography amounts to a part time gig for a little extra money (less than $2,500 annually), I don't think its much different than a kid who mows a few yards, or a someone picks a few freelance gigs here and there. Just because you get paid some money doesn't constitute it as a business in my mind.

ChatKat · February 27, 2007

bham wrote:

Just because you get paid some money doesn't constitute it as a business in my mind.

Wrong!!!!!

If you are getting paid to do work, it's taxable! The state and City/County governments share records. Some cities require a business license and others don't (that's for California). Check with your City government. In Los Angeles, for example, if you are making less than $100,000 in artistic endeavors, you need a license, but there is no fee/tax due.

The IRS says you have to file a Business (Schedule C) tax return if you collect more than $400.00 in a tax year. The good news is that you can write off expenses exceeding what you collect and legitimately pay for like your telephone, automobile, gas, insurance and photo supplies. Your state and local goverments may have different rules.

I am a licensed tax pro (30 years in the field of finance) as well as a pro photographer. I am happy to answer a question or two here.

bham · February 27, 2007

ChatKat wrote:

Wrong!!!!!

If you are getting paid to do work, it's taxable! The state and City/County governments share records. Some cities require a business license and others don't (that's for California). Check with your City government. In Los Angeles, for example, if you are making less than $100,000 in artistic endeavors, you need a license, but there is no fee/tax due.

The IRS says you have to file a Business (Schedule C) tax return if you collect more than $400.00 in a tax year. The good news is that you can write off expenses exceeding what you collect and legitimately pay for like your telephone, automobile, gas, insurance and photo supplies. Your state and local goverments may have different rules.

I am a licensed tax pro (30 years in the field of finance) as well as a pro photographer. I am happy to answer a question or two here.

I never said it wasn't taxable. All income is taxable. I just said that every time somebody earns money doing something doesn't make it a BUSINESS. And that the profit through smugmug doesn't have to pay a SALES tax. Someone who shoots and post the images on smugmug and there only income is from print sales via smugmug gets a 1099 at the end of the year and reports that as income, but that doesn't make them a business.

ChatKat · February 27, 2007

bham wrote:

I never said it wasn't taxable. All income is taxable. I just said that every time somebody earns money doing something doesn't make it a BUSINESS. And that the profit through smugmug doesn't have to pay a SALES tax. Someone who shoots and post the images on smugmug and there only income is from print sales via smugmug gets a 1099 at the end of the year and reports that as income, but that doesn't make them a business.

The IRS requires you to file a business tax return - Schedule C - if you earn more than $400.00

bham · February 28, 2007

ChatKat wrote:

The IRS requires you to file a business tax return - Schedule C - if you earn more than $400.00

So if you are basically saying that anybody that gets a 1099 for anything has to file a Schedule C?

CavalierPhoto · March 2, 2007

Do you plan on making money at photography?
If yes, do you plan on making more than $400.00 in annual sales? Many event photogs that I know make more than that in one setting.

If you do and you expect to file a Schedule C, it's in your best interest to get a business license for the year that you expected to do business. And do so before the end of the tax year you want to file for. Especially if you plan on writing off the Leica M7 you purchased and the trip to Antartica to use it and all of the expenses that go with it. Otherwise you're likely to get audited.

I'm not an event photographer and still set up a business just in case I sold any of my photos (or my wife's photos) through our site or generated any business as a result of selling our photos, i.e. digital conversion or photo restoration. We are selling photos, both through SmugMug and on our own, and want to document everything possible just in case. We didn't meet the threshold last year but expect to this year and want to make sure we have our ducks in a row.

Keep in mind, the main reason to go into business is to make money. If you are at the point where you think you are making enough money to get a business license and it's sustainable than do so. Municipalities can be different about this. I spent $20 on the business license but $50 on the Home Occupancy exception permit. By all means consult with a tax pro, one has even offered to answer questions in this thread.

And no, neither of us has a Leica M7 nor have we gone on a trip to Antartica to take pictures. Hell, neither of us has been on a Eurotrip with our cameras. From what I understand though, the chateaus will still be there...

pspphotos · July 23, 2007

Just to resay my part - yes you have to pay taxes for income and sales in California, but I don't necessarily have to get a business license. For instance, if I am hired at my husband's office to do some computer work and am paid as a consultant, I don't have to go get a business license - I just get a 1099 from his company and file the business portion on the tax return.

trishk · February 2, 2011

Bodley wrote: »

I'm in the same boat. In Alabama, we have to pay State, County and City sales tax (have a lic. for each). Get a business lic. for any municipality we make sales in. Also, I believe, the sales made through Smugmug are taxable locally (at least I'm turning them in).

One small town locally wants $105.00 for an annual BL based on sales of only $1000.00. THATS OVER 10% of gross plus SALES TAX!!!:cry Guess I'll keep my day job.

I am totally trying to figure this out! Do you charge sales tax on the session fee or just the prints that they order?????

entropysedge · February 2, 2011

ChatKat wrote: »

Wrong!!!!!

If you are getting paid to do work, it's taxable! The state and City/County governments share records. Some cities require a business license and others don't (that's for California). Check with your City government. In Los Angeles, for example, if you are making less than $100,000 in artistic endeavors, you need a license, but there is no fee/tax due.

The IRS says you have to file a Business (Schedule C) tax return if you collect more than $400.00 in a tax year. The good news is that you can write off expenses exceeding what you collect and legitimately pay for like your telephone, automobile, gas, insurance and photo supplies. Your state and local goverments may have different rules.

I am a licensed tax pro (30 years in the field of finance) as well as a pro photographer. I am happy to answer a question or two here.

bham wrote: »

I never said it wasn't taxable. All income is taxable. I just said that every time somebody earns money doing something doesn't make it a BUSINESS. And that the profit through smugmug doesn't have to pay a SALES tax. Someone who shoots and post the images on smugmug and there only income is from print sales via smugmug gets a 1099 at the end of the year and reports that as income, but that doesn't make them a business.

ChatKat wrote: »

The IRS requires you to file a business tax return - Schedule C - if you earn more than $400.00

and the IRS gets upset if you don't file that schedule when they feel you are supposed to ... and if you advertise that you photograph what ever for pay (which can just be your website), they will consider that as a business. ChatKat speaks wisdom; governments are short money and they will look for people trying to fly under the radar more and more and not filing the proper paperwork or collecting sales tax sets off alarm bells.

trishk wrote: »

I am totally trying to figure this out! Do you charge sales tax on the session fee or just the prints that they order?????

That depends on what state you are in, some states want you to collect sales tax on just the final product, some want tax on everything. Your best bet is to talk to an accountant or tax professional in your state, not a bunch of photographers .