Crafty Business

[raebies]

I LOVE making crafts. I'm thinking about starting up an Esty account (or something of the like) and get buyers for my handmade items. My hook is going to be that I use recycled materials (old jeans, clothing, sheets, table clothes) and reclaimed and unwanted fabric to make these items.

I also made my sister a patchwork saddlepad for Christmas which she LOVES and it looks awesome. I could probably sell those things for upwards of $150 a piece because of the work involved AND no one else makes pads quite like this (that I've seen).

My main question is, what are the tax implications for a hobby business like this? Can I just start selling a few things here and a few things there and wait until I get a client base to start worring about the tax implications? Do I need an actual business license? I would like to get an industrial sewing machine, but I would like to be able to deduct the cost because they are rather expensive.

If it makes a difference, I live in Maryland.

Thanks,
~Rae

[Joan.of.the.Arch]

Yes, it does make a difference where you live, as local governments have their own regulations about businesses. In my city, we get an inexpensive license. But if one does not live on a block zoned commercial, there must be public notice that I will be opening a home business followed by a public hearing. Their are a few businesses that are exempt by law, and if you read the law, you will get the feeling that they are the ones that had big influence 100+ years ago. I keep records for city and state income tax, as well as federal. Have to pay quarterly on federal. With a craft product, you might not be able to depend on a client base (repeat customers) but might make each new dollar from a new customer.

I think you could hold up on any licenses until you get your first sale. Before then, it is your hobby, right?

[raebies]

I think you could hold up on any licenses until you get your first sale. Before then, it is your hobby, right?

True, I guess I could also put off getting an industrial machine until then as well. I don't need it for the purses I make, only for the saddle pads.

I'll do some research into the local laws partaining to businesses. I have a co-worker who has a "hobby business" maybe I'll talk to her.

[pretty cheap jewelry]

I have been on Etsy for about 5 years and have plenty of advice. Very very simplified:

1. If you build it (open an online shop) they will not (necessarily) come. Do not rely on people to just find you. You are going to have to bring people in from off site. Believe it. Etsy is really competitive and prices reflect that. Do a search of the closest thing to yours and really study. Etsy, and other craft selling sites, are best used as a supplement to in person venues.

2. Sell in person. Yes, here is where the biz license comes in. I have one where I sell, as well as a wholesale license. The latter is free in California, the catch is that I have to collect and pay sales tax. Even for years that I make no sales I must file a return until I rescind my wholesale license. It is worth the hassle.

3. Join local groups. I am a member of the local art association and it is the best thing I did in the last 5 years. Not only do I make 10 times as many sales as on-line, the network of possible selling venues has increased 100 fold. There are quilting groups, jewelry groups, you name it. Seriously network.

The link below is my on-line shop, feel free to contact me there instead of here on SA (I check my Etsy shop daily and not so much here).

Good luck! Nina, the Frugal Artisan