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SALES TAX COMPLIANCE TIPS FOR ARTISTS

Sales Tax Compliance Tips for Artists

As artists, we are not always aware of the importance of being Tax Compliant, so I thought that these tips would be of help to you.

One of the most bewildering aspects of having your own arts and crafts small business is trying to decipher what to do about taxes.

However, the sales tax filing service shouldn’t be so perplexing one you’ve broken it down into three categories.

Federal taxes

Income tax is a well-known concept for most people since this is something that most people have been paying since they started earning an income.

Typically, your net income from arts and craft sales is calculated together with all other sources of income and completed on your tax return.

This income is then reduced by all allowable deductions and you are taxed for whatever is left.

State taxes

If you are residing in a state which is collecting state income tax, you’ll be required to pay income tax for this level as well. If you reside in Nevada, Florida, South Dakota, Alaska, Nevada or Wyoming, this is not a requirement since these six states do not have a state income tax.

For individuals who live in Washington, state income tax is not a requirement, however, they have business and occupation tax. If you are unsure, you can check the state Department of Revenue’s website for more information on tax obligations.

Sales tax – have to be collected on all sales of an ultimate consumer.

For instance, if you’ve been selling a craft item to a customer at a craft show, the transaction is subject to sales tax.

However, if you’ve sold craft items in volume to a retail store, you don’t collect sales tax since the store is not the ultimate consumer. The onus of collecting the sales tax will then fall on the store and not yourself.

Internet sales tax – as long as the items you’ve sold is being shipped to another state (where you don’t have a physical location) you won’t be held responsible for collecting sales tax on such a transaction.

Craft vendors sales tax – this is a bit trickier.

Despite you not living in the state, you are however physically present as a vendor at the craft show, therefore sales tax must be collected and remitted to the particular state.

Many states will issue you with a transient sales tax certificate.

County Tax

Many counties necessitate all businesses to pay county tax on assets which is owned by the business. The good news, however, is that the tax rate is usually relatively low. Your customary taxable business assets include:

  • Office furniture
  • Computers
  • Inventory

Once you apply for a business license, the licensing office will be helpful in checking if you are liable for paying this tax.

Just bear in mind that just because there are various types of taxes, it doesn’t necessarily mean you’ll be liable to pay all of them.

The best advice we can give you is to take a step back and take a deep breath.

Consider the specifics of your business and think about where you are operating your business.

This will then give you a good indication of what taxes you’re going to have to deal with. You can always liaise with a company that specializes in sales tax support to assist you with being tax compliant.

Well now, I do hope that cleared up some of the worries you may have been having about taxes. Sadly, we all have to pay taxes.

We can’t be so wrapped up in being creative that we don’t do our due diligence as far as paying taxes is concerned.

Now that is all sorted, you can go back to your painting.

Jill du Preez

Creative Entrepreneur ● Seamstress | Quilter | Artist | Published Author | Creative Promoter of Emerging Artists

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