BAM! Permits. What? You mean I'm not legally allowed to just put the creations I love out there in the world. BAM BAM!! Taxes. Now the state has to get a cut too?
I bet many people who want to start small craft businesses quit here. I also bet many people (like me the first two years on Etsy) didn't realize you had to actually do any of this legal stuff. By the way, Ohio please don't hunt me down for the grand total of maybe $100 bucks I made in that two years. Tackling sales taxes and business registration can be daunting, but the bottom line is YOU CAN DO IT. Does it suck and totally piss you off? You bet. In the end though, doing things right and conquering the unknown has major pay off. I did just that recently after relocating to Pennsylvania.
Here are 10 Helpful Tips For Getting Legal (PA specific ones in italics):
- Contact you state's Internal Revenue Department. Calling by phone usually connected me to some smart and helpful people. Tell them what you want to do and they can lead you in the right direction.
- Register your business at the state level. Craft businesses will be applying for a Sales Tax License, to charge in state residents tax. If you live in Pennsylvania use PA Open For Business. It is free to register.
- You may need to get an EIN (Employee Identification Number) in order to register. You can do this through the IRS online.
- If your shop name is different from your real name,you may also need to file for a Fictitious Name, also known as a DBA (Doing Business As). This gives you rights to your shop name and allows you to make a separate bank account under your business name. In PA you will file for this as you register your business with the state. At the time of this post, it costs seventy dollars.
- Next contact your City's Department of Taxation and Finance. There may be separate city taxes and certificates you need to hold beyond the State's. For instance I needed to register the craft room in my apartment as a "home office" and file 1.5% of my earnings from Buenahelena on my yearly income taxes to the city. Folks in Philadelphia and Allegheny County specifically must charge and pay different taxes than the rest of the state as well.
- Read everything you can about your states rules AND read it slowly. I have always been a strong reader, but legal/tax language is not my native tongue. Most info is available online through your state's Department of Taxation and Finance.
- Jot down terms you don't understand and every question you have when you get confused. That way you have a list prepared when you call, email and sometimes cry for help.
- Connect with local sellers who have gone through the ropes before. For instance I was able to connect with the Lehigh Valley Love Etsy Team and the Lehigh Valley Handmade Alliance in my area.
- Take breaks. If you try to get all of this done in one day, or even one week you will get overwhelmed. Especially if you have no business background like myself.
- Continue to learn when you're done. Take a small business development class. Frequent small business websites. Don't feel bad that you don't know everything. Neither do some of the experts I called ;)
Always consult an accountant and lawyer for legal advice. I am not an expert. Also certain states do NOT require you to collect tax, including Alaska, Delaware, Montana, New Hampshire, and Oregon. Lucky them!