**Remember, nothing on this page is legal advice to you.It is general information and may not apply to your circumstances. It also may not be up-to-date. Use it to learn the issues involved, not to make important decisions.**
Print on Demand - and Taxes
In the various POD forums questions arise regarding taxes and licenses in three areas (1) Do I need to have a business license? (2) do I need to collect and send in sales taxes? (3) do I have to report income, and if so, how do I handle it?
Almost everyone does their best to a provide what they honestly believe is the right answer. Well let me say that I've seen many very wrong answers. They are wrong enough to cost you a lot of money, even if you didn't make very much money. Usually those wrong answers are because the person does not know that their situation is different from yours. Often the answers are wrong because the person answering has been incomplete or used a poor choice of words. It doesn't matter why they are wrong. The problem is that usually there isn't enough there to give you a hint that it isn't accurate for you. So stay out of trouble and stick with tax professionals. I learned the hard way, take advantage of my experience.
Whether you need a business license is going to vary from one location to another. In the United States business taxes are typically a matter for local government such as a city, town, county, township, or province. In a growing number of locations they do indeed expect a person with no traffic, no deliveries, no storage, no extra burden whatsoever and working out of a normal home to pay business taxes. They may levy these taxes on artists, authors, musicians, and yes you the designer of t-shirts, mugs and bumper stickers. Be careful about assuming you will stay under the radar. The local governments can get tax records from the IRS and determine who has a nifty little side business. So if you want to stay safe from fines then check with your local government about whether a business license or business tax is required.
If you let the POD do all the collecting of money, creating the product and shipping it, then probably you aren't going to have to worry about sales taxes. Usually the required taxes are collected and paid by the POD. However, keep your ear to the ground. Governments are getting hungry for the taxes they miss through internet sales and are looking at ways to get them back. Also your situation is going to be different if you take delivery of the product and then sell it at, say, a street fair. And if you are collecting the money, ordering the product yourself, and then shipping it, better check if you are required to collect and remit sales tax. The rules that apply to the POD may not be the same as those that apply to you. Location matters.
In the USA whether you must file taxes depends upon your total income and other factors. All income from all sources must be considered in learning whether you are required to file an income tax return. You can be required to file an income tax return even if you will not owe any tax. A failure to file can also deprive you of certain low income benefits. $10, $20, $599, and $1000 are all reportable amounts of income. You are responsible for reporting all POD income - that would be the combination of checks you receive and credits used - on your taxes. Whether you can take deductions is between you and your tax preparer. You may also be required to make quarterly payments of anticipated tax.
USA Residents, USA business
For USA residents , ordinarily a 1099 tax form should be issued to you by a business who pays you more than $600 in one year for other than employee wages, salaries and tips. A USA based business is required under law to attempt to collect tax payer identification information from you for that 1099 form.
Do not confuse that $600 with an income reporting requirement. When and whether you receive a 1099 form is not related to your obligation to report and pay taxes on income. If the business does not ask for the information or fails to provide the 1099 you still need to report the income. As long as you accurately report your income a missing 1099 is not a tax problem for you. The shopkeeper's legal requirement is to report all income.You don't need a 1099 to report income. You just enter the amount you earned, and that would include any CafeCash you used.
Non-USA Residents, USA business
Non-USA residents should be aware of the Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding (W-8BEN). A properly completed W-8 form is evidence that the payee has certified that they are not subject to the U.S. tax withholding rules. Failure to provide a Form W-8BEN when requested may lead to withholding at a 30% rate.
These are commonly used IRS resources. Check for similar information from your state and local government as you may have reporting or payment requirements there as well.
Raising Money for Charity
It is very common for POD shop owners to include supporting charitable causes as at least some part of their motivation. So the question arises from time to time whether amounts donated to the charity must be included as reported income. The best person to provide that answer will be your cpa or tax advisor. In general, any money that is under your control will be considered your income. So you will probably need to report all income and then contributions are treated just as any other you might make. If you want ALL the income to go the a charity it is best to involve the charity, open for them, and make them the owner. This is not a step to be taken lightly as any diversion of income to yourself could then be treated as embezzlement. For more see the Marketing Tips page.