Flea markets and crafts shows have become a cultural phenomena. Increasingly small businesses are mastering the quality of the artisanal goods that they make and sell. While these types of businesses usually start out as a hobby there are some steps that you should take to ensure that your business is selling goods legally.
Is this a business or a hobby?
First things first, find out if you are operating a taxable business. This is important because if you are in fact operating a business you will need an Employer Identification Number (EIN). Applying is simple and in many states you can complete the application online.
Should I register with the government?
After you obtain a tax ID number no further action is required with the Federal government. In some cases you may have to register with the state in which you are selling your goods. To find out more information you will have to check the individual state rules to apply online or by mail. Regardless you will need the EIN number to register.
What about permits?
You may need a permit on the local level. Many states require permits so that you can collect sales tax. To determine if you need a permit, visit your state government's business portal on Business.USA.gov. Additionally, use the flea market organizers as a resource. Most likely they will be able to answer questions about state permits.
Do I need to pay taxes?
In short, yes you do. You will need to report profits and expenses on your Federal taxes. State taxes can be more difficult because laws may vary. Some states require you to pay taxes on all your sales while others have levels that must be met first. For more information, check with the event manager and the state tax agency.
Where do I pay taxes?
Sales and Use Tax law follows the rates and procedures of where you are selling the goods. If your business is located in Washington, D.C., and you sell your goods at a flea market in Connecticut; you will need to follow the Connecticut rates and procedures.
How do I pay taxes?
If you are selling in the state where you live, paying taxes is much simpler. If you made out of state sales make sure that you ask about taxes when you apply for state permits. In some cases taxes are collected at the event. Some states consider this the best way to make sure the taxes are paid and at the correct rate. If taxes are not paid at the event it is still your responsibility to pay. Contact the state's Special Event Coordinator to find out more information.