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Tax Obligations and Business Operations
- The frequency of paying taxes depends on amount owed.
- Have sales tax permit to buy inventory without sales tax.
- Pay self-employment tax as sole proprietor. Rates are 12.4% Social Security, 2.9% Medicare. Use IRS Form 1040 SE.
- Etsy sales require Schedule C for self-employment income and expenses.
- Keep accurate sales records. Document expenses and deductions for taxes. Report income even if hobby. May qualify for home office deduction.
Sales Tax Regulations and Compliance
- Crafts are taxable goods. Teaching craft classes is non-taxable service. Some states tax goods and services. Check your state.
- Collect sales tax from online sales if business has physical presence in state. No collection generally required without physical presence.
- Keep accurate sales records. Document expenses and deductions for taxes. Report income even if hobby. May qualify for home office deduction.
Hobby Income and Taxation
- How much can you make selling crafts before paying taxes?
- You can deduct up to $3,040 in hobby expenses if you had at least $4,000 in hobby income. Pay self-employment tax if your total Etsy income is $400 or more. Rates are 12.4% Social Security and 2.9% Medicare.
- If you earn less than $9,325, you likely won’t pay federal income tax. More income means more taxes depending on bracket. State and local taxes may also apply. Keep records of hobby expenses to potentially deduct.
Handmade Items Sales Tax
- The frequency depends on amount owed. Pay annually if business is small. Pay sales tax if goods are taxable. Services like teaching crafts are not taxable. Check your state’s rules. Have permit to buy inventory without sales tax. Document expenses and deductions for potential tax filing.
- Pay self-employment tax as sole proprietor if over $400 net income. Rates are 12.4% Social Security and 2.9% Medicare. Use Form 1040 Schedule C for income and expenses. Keep records even if hobby for deductions.
- Sellers determine sales tax collection rules. Etsy, Amazon facilitate based on seller’s state nexus. Can deduct up to $3,040 in hobby expenses if earn at least $4,000 from hobby. More income means more taxes depending on bracket. Report hobby income if not your business.
