Doing Jobs for Money- Sales Tax and other California bureaucratic issues?

[Teenage_Machinist]

I am considering starting to do some machining for money. Expected income, is of course less than roughly 100$ per month, not even that. As i would be advertising this with flyers, I am concerned that it could count as a business and result in some kind of debacle. What sorts of considerations are there to make with this issue?

[Rustybolt]

They're really in desperate straits if they have to rely on your $1200. I wouldn't worry about the state too much. Just declare the money on your income taxes. Make sure you're not breaking any municipal ordinances.ie; noise, litter, etc.
Careful though. Capitalism can be addictive.

[uncrichie]

Insurance!

[rantbot]

They're really in desperate straits if they have to rely on your $1200.

CA is in desperate straits.

[Evan]

Here are the official rules that pertain.

From

State of California
BOARD OF EQUALIZATION
SALES AND USE TAX REGULATIONS
Regulation 1595.
OCCASIONAL SALES —
SALE OF A BUSINESS —
BUSINESS
REORGANIZATION.
Reference: Sections 6006, 6006.5, 6014, 6015, 6019, 6066, 6075, 6281, 6282, 6283, 6292, 6358(b), and 6367, Revenue and Taxation Code.

(B)Other businesses.
1.Tax applies to the sales of assets of a business which is not essentially a service enterprise.
Examples of this are sales of grocery stores and liquor stores making both exempt sales of food products for
human consumption and taxable sales of other tangible personal property, service stations which sell gasoline, oil
and similar items and which also perform automotive repairs and lubrication services, and computer stores which
also provide training in the use of computers and repairs for computer products.
2.Where a service enterprise and a sales business are operated together so as to constitute one
business, tax will apply to the sale of the assets of the business. For example, if a car wash and gasoline station
are operated at the same premises and the car wash is available only to persons who buy gasoline or if the price
of the car wash is reduced if gasoline is purchased, tax applies to the sale of the car wash.
3.A person purchases a hardware store with the intent of selling tangible personal property. The
person must hold a seller’s permit regardless of the number of sales of tangible personal property actually made.
For example, if the person makes only two sales, a sale of a hammer and a sale of the business, neither sale is an
occasional sale.
4.A person intends to create and sell custom furniture. The person must hold a seller’s permit for all
his or her sales of furniture. This is true even if, because of the time necessary to create each piece of furniture
and the profit resulting from each sale, the person averages one sale of furniture per year.

http://www.boe.ca.gov/pdf/reg1595.pdf

Custom Furniture is merely an example of a possible product you might make and sell. It applies to all and any real property. You need a seller's permit and you must file a return on a time basis as specified by the BOE even if you have no sales.

You might wish to call them and ask.

[Frank Ford]

You have some choices if you start a small business. You can run it underground an not report anything. OR you can be above board and declare everything, get a resale number, and all that.

I chose the latter approach. And, now I can legally and easily deduct a percentage of my household expenses from my income taxes - utilities, phone, the works, based on the square footage of my garage and office room. That's a fair bit of dough. I can also deduct expenses - tools, materials, etc. And I don't have to pay sales tax on raw materials that will be part of my products I sell.

I don't collect any sales tax these days because all my sales are at wholesale, and those folks collect the tax from their customers, who are the end users. When I do sell at retail I have to collect, report and pay the tax to the state. I have to file an annual sales tax return whether or not I have any tax to report.

IRS requires that I must make a profit at least some years, and so far (since 1991) each year my home business does show a bit of a profit.

Cities can be a bit strict on requiring business licenses, but for some reason Palo Alto has no business license, so I haven't had to confront that issue.

There's a LOT to be learned in the way of self-employment and running a small business, so I suggest you consider that potential growth experience as you make a decision how to proceed.

[dneufell]

Teenage....if you are just a kid goofing off in your parents garage..."I would
run it underground"

$100 or so a month......come on guys.....offical rules...leave that for when
you get older (20 or so

Dean

[Falcon67]

What Frankl said. We sometimes bring in less than that - sometimes a ton more. We have a Sales Tax Permit from the state (TX) and our revenue is small enough that we report and file our sales tax only once a year. Used to do it quarterly and yes we've sent checks for the likes of $12. We also report business personal property and pay tax on that. WHY? Because it IS a business and we treat it like one. We're legit - and if you file a Schedule C then you are farther along on the road to claiming your business expenses legitimately. WHY would you do that? Just one example - called a Section 179 deduction or immediate depreciation. You can write off depreciable equipment in the year purchased. You want your part of the stimulus? Start a business and get after it.

"The section 179 election allows you to deduct the cost of your
depreciable assets immediately. Under section 179 of the
Internal Revenue Code, you can elect to recover all or part of the
cost of certain qualifying property, up to a limit, by deducting it in the
year you place the property in service. You can elect the section
179 deduction instead of recovering the cost by taking
depreciation deductions.

Section 179 Dollar Limit
The total amount you can elect to deduct cannot be more than
$250,000 in 2008. The Section 179 deduction has been significantly
enhance by the Economic Stimulus Act of 2008. The previous dollar
limit was $125,000. If you acquire and place in service more than
one item of qualifying property during the year, you can allocate the
section 179 deduction among the items any way, as long as the
total deduction is not more than $250,000. If you make the election
for only part of the cost of the property, the amount that you elect to
deduct reduces the amount that you can depreciate, but you can
claim depreciation on what's left. "

I am NOT giving you tax advice, but if your startup needed a good lathe and mill to produce income, there you go - you'll get at least some of it back in April. Like Crapgame said in Kelly's Hereos - "Business is business". If you intend to run it as a business, do so. If you consider it a hobby, then you still have to report the income to the IRS and if the state finds out they might be on you about it.

[mechanicalmagic]

TM,
I had a CA business License for many years, I sold computers, hardware ans software from home. You will need to file quarterly statements to the BOE, a very simple process. I see several advantages;
you can buy materials without sales tax,
you can write off the cost of your machines,
you are a business when dealing with vendors (that don't like home shops).

I preferred NOT to write off any part of my residence as a business expense, the rules made me think I would need an accountant to file my returns, negating any gain.

I suggest you get a license, another notch in the resume.

Dave J.

[goose]

You can report income as hobby income on Schedule A and deduct expenses as well. (tooling, raw materials, etc.) The main gist of it being; Is it for profit, and do you rely on it as a source of day-to-day income? Answer for $100 a month is safely a "no"

I don't know nuttin about CA, but in most states, to get a business license you'll have to declare what kind of business you'll be running (out of your home, no doubt) And the county/municipality clerk will freak out when you tell them you're got a lathe, grinder, mill, big noisy thingy, big scary things, and receive UPS shipments once a week.

I had to set up a home business for my wife, and spent about a half an hour on the phone explaining all she uses is a computer and a pen and paper (professional writer/editor)


Gary

edit; btw, If a business, you'll have to estimate the value of your tools and tooling, etc., and pay an annual excise tax on them as well.