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.
Business Licenses
Sales Taxes
Income Taxes
Business Licenses
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.
Sales Taxes
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.
Income Taxes
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. 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. 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. The shop keeper's legal requirement is to report all income. $10, $20, $599, and $1000 are all reportable amounts of income. Whether you must file depends upon other factors and other amounts. You don't need a 1099 to report income. You just enter the amount you earned, and that would include any CafeCash you used.
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.
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Tutor Tanith
