Legality And Permits Required For Selling Baits...questions For Small Bus Owners

[Matt Moreau]

Sup Guys,

 

Please let me stress that I don't make and paint baits for a living nor do I want to. I do however make baits and paint for friends and i ask them to cover the costs. I recently made a big glide bait that has taken about a year R+D and a lot of money. I was thinking about selling some of these to offset the costs I have put in thus far. I have only so many friends that will buy a big expensive bait.   Also I have people asking me on another website if I want to sell them because I posted pics and vids of them.

 

That brings me to my questions;

 

1. Do I need any permits or business license to do this legally?

2. Are there loop holes like just asking for a donation?

 

Also I read on the CA BOE page that you need a sellers permit for any sale of 3+ items a year. This can be on ebay and like methods for selling items. Also if you have 2+ garage sales a year you are required to get a sellers permit. I think that is just crazy! There are soooo many people that do not follow this. I hope that is just a basic guideline and not something that is really enforced!

 

I was told that the IRS and state doesn't really care unless you are doing a lot of sales like over $10k a year. That is from another small bait maker and would make a little more sense. I wouldn't even come close to that or even 1k for that matter but I don't need to be hauled off to jail or have the IRS pop me for selling a bait. I am not against getting a permit if i have to it just is more trouble and time that I would have to put in. For something zoo small like i am trying to do i hope i don't have to go that route.

 

Thanks

Matt

[Nathan]

Matt,

I don't want to be the bearer of bad news but if your selling baits or taking " donations".. you need to pay your taxes.There is a lot of bad advice that gets passed around by guys who don't want to pay up.When have you ever heard of the State or Federal government not wanting their cut of the pie.. no matter how small.File our form 637 with the Feds and pay your 10%.. And contact the State so you can collect your sales tax.

I can't believe the number of guys who put their financial well being at risk for a lousy 10%..I for one who doesn't want the IRS crawling up my butt... As for what permits you need to start your business...you will need to contact your City or County municipality for that info...Nathan

[Matt Moreau]

I should have probably just pmed you Nathan....lol didn't think about that! 

 

I figured as much but i thought there would be a thresh hold. I will probably only sell a handful of baits so I didn't want to go through the hassle of doing the forms. I have a regular job and this is a hobby and i want it to stay a hobby! 

[bassrecord]

In order to keep your bait making a hobby, why don't you set up your bait making affairs as a hobby. Go to a CPA that is qualified and he/she will help you organize your life as  a hobby, no business letter heads, no bank account, no business phone, no office, no licenses and whatever the CPA helps you set up.For a few hundred bucks, you become audit free and can sleep easy at night. Plus if the laws change, and they do, your CPA can advise you of any necessary changes to make to continue to stay out of audit.

 

By having your bait making affairs set up as a hobby by a CPA, it will help you in at least three ways.

1. In the event you get an offer to sell your hobby.

2. In the event you choose to convert your hobby into a business.

3. In the event you choose to include your hobby in documents you pass on to your heirs.

 

Hope it works out.

Bass

[backwoods1975]

Why not sell a few baits through someone who already has everything set up?  Taxes will be paid, and you wouldn't have to deal with the paperwork,  just a thought.

[rhahn427]

Why not sell a few baits through someone who already has everything set up?  Taxes will be paid, and you wouldn't have to deal with the paperwork,  just a thought.

I would check that out very carefully ........... I think you would still have taxes and licenses etc

[Nathan]

Guys....There is no way around this...IF YOUR SELLING BAITS THE GOVERMENT WANTS THEIR TAXES...PERIOD!!!!!..Nathan

[Jdeee]

The way I raised some money on ebay to persue my Hobby was to sell some of my used tackle. If you have anything that belongs to you, that you have used before that is no longer needed you are allowed to sell it in any manner (Garage sale, Craigslist, fleaBay ect ) without paying taxes or needing business licences. Of course this is within reason. Don't try and sell many thousands of dollars of stuff like this or you would probably raise alarm bells.

Garages sales might need a local city permit depending how hungry for money your town might be.

Edited March 12, 2015 by Jdeee

[Matt Moreau]

The way I raised some money on ebay to persue my Hobby was to sell some of my used tackle. If you have anything that belongs to you, that you have used before that is no longer needed you are allowed to sell it in any manner (Garage sale, Craigslist, fleaBay ect ) without paying taxes or needing business licences. Of course this is within reason. Don't try and sell many thousands of dollars of stuff like this or you would probably raise alarm bells.

Garages sales might need a local city permit depending how hungry for money your town might be.

 

Per the CA BOE internet page I read this is not true. You are allowed to have 2 garage sales a year and sell 3 items per year. That is using sites like ebay and such. If you go over that you need to get a sellers permit and probably a bunch of other crud.

[Matt Moreau]

In order to keep your bait making a hobby, why don't you set up your bait making affairs as a hobby. Go to a CPA that is qualified and he/she will help you organize your life as  a hobby, no business letter heads, no bank account, no business phone, no office, no licenses and whatever the CPA helps you set up.For a few hundred bucks, you become audit free and can sleep easy at night. Plus if the laws change, and they do, your CPA can advise you of any necessary changes to make to continue to stay out of audit.

 

By having your bait making affairs set up as a hobby by a CPA, it will help you in at least three ways.

1. In the event you get an offer to sell your hobby.

2. In the event you choose to convert your hobby into a business.

3. In the event you choose to include your hobby in documents you pass on to your heirs.

 

Hope it works out.

Bass

 This is basically what i was told by another person that has down well in the bait making and painting industry. Like Nathan said tho the government probably wants its money and I just don't know how legal this is or if its worth risking it to sell a few baits.

[Jdeee]

No offence to anyone,

LOL That would take 1000 years to sell my old tackle alone, not to mention my personal effects that I collected over the years that would make me 4000 to 5000 years old before I get it all my personal stuff sold at 3 pieces per year? HAHAHAHA. Ok i admit I am a bit of a hoarder. ; )

Who ever these BOE BOE's are I think dey be smoking de Crack. Get real people your personal effects are yours to sell whenever and were you please and you have already paid the taxes on them.

If someone is afraid to sell their personal used stuff for fear of getting busted by the tax man, I highly suggest that they not ever try being a business person, because they would not have what it takes to endure all the decisions one needs to make to be successful. Deer in the headlights syndrome.

I am by no means telling anyone to cheat on taxes, pay what you need to. But don't get ridiculous giving away your hard earned money or property to some bean counter who writes some manual.

Best of luck

[Salty's]

Very well said Nathan. 

 

 

Matt,
I don't want to be the bearer of bad news but if your selling baits or taking " donations".. you need to pay your taxes.There is a lot of bad advice that gets passed around by guys who don't want to pay up.When have you ever heard of the State or Federal government not wanting their cut of the pie.. no matter how small.File our form 637 with the Feds and pay your 10%.. And contact the State so you can collect your sales tax.
I can't believe the number of guys who put their financial well being at risk for a lousy 10%..I for one who doesn't want the IRS crawling up my butt... As for what permits you need to start your business...you will need to contact your City or County municipality for that info...Nathan

[Jaw]

So let me get this right. If you don't have a form 637 and but your material you will be charged 10% on your material then another 10% on your finished product if you decided to sell it. If you have a form 637 you can buy you material tax free but will owe 10% on the finished product. Does the excise tax work like regular business tax exemptions where a business owner can present their tax number at any retail stores and purchase a product at a reduced or exempt tax rate. For example if I was short on hooks to fulfill an order could I run to the local tackle shop, present my tax number and purchase said hooks excise tax free? Just wondering I don't sell but if I did I would want to do it right if for nothing else but a clear conscience.

[dlaery]

So let me get this right. If you don't have a form 637 and but your material you will be charged 10% on your material then another 10% on your finished product if you decided to sell it. If you have a form 637 you can buy you material tax free but will owe 10% on the finished product. Does the excise tax work like regular business tax exemptions where a business owner can present their tax number at any retail stores and purchase a product at a reduced or exempt tax rate. For example if I was short on hooks to fulfill an order could I run to the local tackle shop, present my tax number and purchase said hooks excise tax free? Just wondering I don't sell but if I did I would want to do it right if for nothing else but a clear conscience.

No

[Jaw]

No what? It doesn't work like a regular tax number? Or it doesn't work like the first part of my statement.

[mark poulson]

Jaw,

You really should talk to an accountant who understands tax law and small businesses/hobbies.

[dlaery]

So let me get this right. If you don't have a form 637 and but your material you will be charged 10% on your material then another 10% on your finished product if you decided to sell it. If you have a form 637 you can buy you material tax free but will owe 10% on the finished product. Does the excise tax work like regular business tax exemptions where a business owner can present their tax number at any retail stores and purchase a product at a reduced or exempt tax rate. For example if I was short on hooks to fulfill an order could I run to the local tackle shop, present my tax number and purchase said hooks excise tax free? Just wondering I don't sell but if I did I would want to do it right if for nothing else but a clear conscience.

 

If you don't have a Form 637 nobody is going to charge you 10% on the sale of your product. 

 

If you don't have a Form 637, you will have to pay 10% when you buy your components if you buy from a supplier that collects Federal Excise tax.

 

Yes and No , the Form 637 allows you to buy components tax free IF the store has a Form 637, most likely a retail store does not because the tax is paid at the manufacturer level, that is where is supposed to be paid. If you adding to the component like painting or assembling, then you are a manufacturer. then If you sell at retail, you have to pay 10% of your selling price.

If you have established wholesale pricing, and regularly sell your product at this wholesale price, then when you sell at retail you only have to pay 10% of  you wholesale price , not retail.

[Jaw]

Thanks I'm not planning on doing it but just curious in case my plans change. I understand what the original excise tax was developed for but I would like to see proof of the money being spent correctly. I know here they are limiting lock access base on deteriation of the nations lock system and lack of maintenance funds. So we pay a tax that is supposed to benefit sportsman but we still get penalized for lack of funds. That's par for course these days though

[dlaery]

but I would like to see proof of the money being spent correctly. 

 

Open this link or copy and paste in your browser. Read the 2nd page, 3rd or 4th paragraph down

 

http://extra.mdc.mo.gov/documents/area_brochures/8930.pdf

 

this is a fish hatchery 5 miles from me that 75% of the money came from Federal excise tax to build this.

they stock the lakes in Missouri with fish raised here. I know they raise hybrids.

the rate at which the money is given to the states is based on how many permits they sell and how many acres of fishable waters.

[Mbirdsley]

this is a dumb question but, how does one go about getting a form 637? By getting a DBA is that considered your tax # through the state?

[dlaery]

go to the irs website and fill out the Form 637 application. http://www.irs.gov/pub/irs-pdf/f637.pdf You will need a FEIN number first, you do that at the irs website.

That is how you get a form 637. Once you do those 2 things the irs will contact you for the rest, which is a questionnaire that you have to fill out which is a lot of questions about your fishing tackle manufacturing business and then a visit from the irs agent. It is not a big deal, maybe intimidating, but not difficult.  

 

I don't understand the 2nd question. Form 637 has nothing to do with state tax of any kind. Form 637 has nothing to do with Federal income tax. 

[smallmouthaholic]

In most cases, you cannot deduct any expenses from a hobby. The feds aren't stupid-10% tax off of components but 10% tax on gross sales.You don't have to be a mathematical genius to realize why the feds will  investigate and pursue the small,under the table manufacturer for their 10%.

 

Some CPA's are not knowledgeable concerning excise tax and form #637. Call you local I.R.S. office and request a form for your E.I.N.( employer identification #) and your application form  for your # 637. The I.R.S. will gladly help those trying to operate a  legitimate business.

 

If you are talking about the lures you make & sell on TU,you are most likely  already on the radar screen of the I.R.S. It's very easy to get caught. The penalties and interest will surpass any taxes you may have avoided. Be advised!!

 

Edited for spelling

Edited March 16, 2015 by smallmouthaholic

[Mbirdsley]

go to the irs website and fill out the Form 637 application. http://www.irs.gov/pub/irs-pdf/f637.pdf You will need a FEIN number first, you do that at the irs website.

That is how you get a form 637. Once you do those 2 things the irs will contact you for the rest, which is a questionnaire that you have to fill out which is a lot of questions about your fishing tackle manufacturing business and then a visit from the irs agent. It is not a big deal, maybe intimidating, but not difficult.  

 

I don't understand the 2nd question. Form 637 has nothing to do with state tax of any kind. Form 637 has nothing to do with Federal income tax. 

 I guess i dont realyknow what a form 637 im going to go google it and pobally have more questions