Business licenses, Taxes & Such

As one who is about to buy & sell on a full time basis - mainly to stay busy during my retirement, I have a couple of questions:

Do most/many of you who do this have business licenses/tax-exempt numbers?

How do you handle income taxes?

At what point (income amount) do you think I should become a "business"?

When I was "dabbling at it" several years ago, I didn't worry about these things as I was fully employed & considered auction buying as a hobby. Now, I still have my retirement income to sustain my family, but the extra income won't hurt a bit. 

Do most/many of you who do this have business licenses/tax-exempt numbers?

How do you handle income taxes?

At what point (income amount) do you think I should become a "business"?

What's that?

What's that?

Never, unless you want to give away 50% of your profits.

It's tough using a tax use permit in the storage auction business because you have to collect sales tax on everything. Can you imagine going to a garage sale and them charging you sales tax? You would look at them like they were crazy.

Sure, it's nice to get the tax break on your locker purchase but is it really worth the trouble of having to keep inventory?

One of the best things about the storage auction business is that it's an all cash business.

"At what point (income amount) do you think I should become a "business"?  Never, unless you open a resale shop.

Well, if you want to sell online, that will leave a paper trail, so you should probably be legitimate. So it depends on your avenue of income.

I do have a sales tax license number. I pay my sales tax every 3 months. I only have to pay sales tax to those people who purchased items in Texas, so it's a pretty small percentage of my sales.

I will claim the money I'm making on income taxes. I've had the government come at me before for non-reporting and had to pay back about 5k in tax money, so I don't want to go through that again.

I'll start with question #3. In my opinion there really is no income threshold to becoming a business, it's just a matter of what your long-term goals are.Theoretically, you are still supposed to claim all income, whether it is business related or not. With a business you do have the advantage of claiming expenses against your income for tax purposes; the disadvantage is the expenses of running a business are real and much higher then running an "under the table" re-sale operation. Starting a business early might be a good idea if your long-term plan is to open a store, this way you get a feel for the business with the extra expenses of licensing and collecting sales tax and paying business tax, etc. In my opinion, it would be difficult to run an "under the table" operation with all the potential ease of profit/income without experiencing all the related costs with running a legitimate business/store.

Question #1: yes & yes

Question #2: hire an accountant. Mine handles the income taxes, he just tells me what to document and what to report.

Thanks for the info, folks.........Cobia: I have no aspirations to open a store or even to consider what I do a business....I also am familiar with the income tax laws & generally comply with them - albeit grudgingly. I just don't like the prospect of drawing the attention of the bloodsuckers in government. I have never considered the money I made buying and selling as being income, but as you know, the IRS has a different definition. I like dealing in cash with no paper trail, but I also know there are those out there who don't share my pleasure & I would hate to draw attention to my activities any more than necessary.....the point of my original question was to get an idea of how you folks out there now are posturing yourselves and what to look out for/avoid. Thanks again!!

Butch

Also, keep in mind, every time you purchase a locker the auctioneer records of who your information. This could be used against you if the IRS ever got a hold of it.

Thanks, tclane.........I don't worry too much about the "buying" side, as I could (and do) buy from my retirement income which is certainly available for scrutiny by the IRS. The "selling" side is where the danger lies.

Thanks again........Butch

Yes on all accounts.  Some auctions require a reseller (sales tax id) if you don't want to pay sales tax.  We pay the sales tax.  Have our own reasons most of them have to do with less paperwork, etc. 

Keep it legit or it will come back to bite you.

If you are selling at a flea market each weekend you will need a license. In California at least, it is Calif State Board requires that info.

It is really going to depend on where you live, where you sell, etc.  I do this as a hobby and thus don't have a license, tax permit, etc.  I do keep up with how much I spend and sell just in case.  Since it is a hobby while I can't deduct my losses, I can offset any gains with my expenses.  I really don't make much money.  There is a cap on how much you can make before you have to report it.  I am not sure what the cap is.

Many of the auctions I attend will charge you sales tax unless you have a license.  So then I don't have to worry about the tax.  I still have an issue with the tax since it was already taxed in the manufacture and then again in the original sale of the item.  That is a different story.