Definiton of buying wholesale

Jewelry Discussion
21

Hi

But if I am either a so-called "hobbyist" -- meaning I have another
job to support myself? -- or a student, why should I not have
access to the better materials?

It’s not as hard to get established as it sounds. I don’t work
full-time. Most weeks, I work probably 15-20 hours a week. I have a
resale license from Connecticut and I go into NYC and buy wholesale
all the time. When I go, I don’t spend much (compared to others),
probably about 1000 to 1200 at a time.

If you are intending to start selling your work and building up a
business, then you can do it too. Admittedly, I do not get the best
prices. For the best price, you sometimes have to pay thousands, but
I get good prices, low enough to make a bit of profit on what I sell.

You can go to the Department of Revenue Services for your state and
fill out the form, there may be a small fee. Going to your local
print shop and having business cards made up will cost may be 40
dollars to start out. Armed with your resale license and business
card, go to your next available show. Save all your invoices in a
file. Once you buy from a couple different wholesale vendors, you can
use those invoices to establish accounts.

Sometimes, it can be difficult to buy. You may be able to have
someone vouch for you. You mentioned that you are a student so,
possibly, one of your instructors can recommend you to one of their
suppliers. This is what I did when I wanted to buy gold.

From that point, I used two of my wholesale accounts as references
to obtain an account with Stuller. Now, I have access to all kinds of
materials. This fact upsets some who have brick and mortar locations
and they may have a very good point, but if I wasn’t meant to have
an account, they would not have given me one.

This process will work for anyone who wants to start and grow a
business. If a person is such that they would like to have a hobby
and get wholesale prices for the gifts they make for friends and
relatives, I cannot help. My feeling is, it’s not fair to those
working hard to make a living and provide for their families.

I am not trying to put anyone down. It’s just that I feel that all
things that are worthwhile in life require legwork. Building a
business is no exception. My husband would say “there’s no free
lunch” I think the most important thing to remember is to be
upstanding and honest. Build good relationships with customers,
suppliers, and instructors. There is nothing more valuable in
business than the support and reliability of those around you. With
that and a strong work ethic, you can do anything you set your mind
to.

22

Hi Janet,

So when you're filling out your schedule C and you put down your
gross income, you've already subtracted the sales tax you've
collected and paid to the states. Since it was never yours in the
first place. Or is there some other place you put it?

No. You had it right the first time: The gross income figure, for
income tax purposes, does not include the sales tax you collected.
That amount was never actually “income.”

Beth

23

I’ve read much of this thread. All of what I’ve read is good stuff,
but nobody’s said really the most important thing - it’s wholesale
because it is. There is a hierarchy in all things business. I spoke
last night with someone who buys financial instruments from a
wholesaler. You might think your car dealer buys from “The Factory”,
but they don’t, they buy from a jobber. Nuts and bolts, food,
clothing, all sorts of things. A screw manufacturer is pumping out
10,000 units/hour. They just aren’t going to talk to someone who
wants
to buy 1000 units, nor should they. It goes to one who buys
10,000,000 units, who sells in 100,000 unit lots, and on down the
line. It’s your proverbial distribution pipeline. Cobb findings (last
I looked) had, not a $100 minimum, but a 100 piece minimum. This
whole
system is largely invisible to the public at large, but it’s there.

http://www.donivanandmaggiora.com

24 
to be a wholesale purchaser you must have a certificate from the
Department of Revenue in your state,and in california a nd some
other states a certificate of resale intent as well, and a federal
EIN #( which if you go the site any individual that has a social
security number can get). according the the federal trade
commision, not the IRS, or dept. of revenue, one must make over
2500.00 in most States,

Federal Trade Commission is only concerned with deceptive business
practices and has absolutely nothing to do with resale, wholesale,
IRS, city, state, or federal taxes of any kind.

When a person has a resale license they buy items from a
manufacturer or a wholesaler and sell either to another wholesaler,
when they do not collect tax, or to the end user, when they do
collect tax. You can buy components and assemble them, and wholesale
them, not taxed, or sell them retail and collect tax.

With some companies quantity can mean price breaks, but not all
companies give price breaks for quantity. I used to have a wholesale
casting business, which I stopped doing, and retail store that I
still operate. I sold castings for $.85 a gram, no price breaks for
quantity, the people who I sold to had to have a resale license on
file. I had to report the amount of wholesale business I did each
month. This was not taxed.

In my retail store, I collect the sales tax and forward them to city
and state. In my city and state I do not collect sales tax for
repairs or appraisals.

Richard Hart

25

Hi

to be a wholesale purchaser you must have a certificate from the
Department of Revenue in your state,and in california a nd some
other states a certificate of resale intent as well, and a federal
EIN #( which if you go the site any individual that has a social
security number can get). according the the federal trade
commision, not the IRS, or dept. of revenue, one must make over
2500.00 in most States,

I have looked, but I can’t seem to find anything anywhere that says
an individual must have an EIN in order to buy wholesale. I don’t
have an EIN and I buy wholesale all the time.

Also, I cannot find the 2500 dollar figure anywhere. I thought at
first that you were possibly confusing it with the Federal standard
deduction and exemption amounts, but the figures don’t match to the
2500 figure.

Can you post a link to where you have read this

Thanks
Kim

26 
When a person has a resale license they buy items from a
manufacturer or a wholesaler and sell either to another
wholesaler, when they do not collect tax, or to the end user, when
they do collect tax.

Just a small addition. You can also sell to a retailer and not
collect tax–they collect it. If all your sales are to retailers,
e.g. galleries, and you buy all your supplies from a retailer, e.g.
Rio, you have no need for a resale license.

Lisa Orlando
Albion, CA, US

27 
according the the federal trade  commision, not the IRS, or dept.
of revenue, one must make over  2500.00 in most States,   I have
looked, but I can't seem to find anything anywhere that says an
individual must have an EIN in order to buy wholesale. I don't have
an EIN and I buy wholesale all the time.

just a quick answer kim, in the state of maine the limit is $3000

ken

28 
I have looked, but I can't seem to find anything anywhere that says
an individual must have an EIN in order to buy wholesale. I don't
have an EIN and I buy wholesale all the time.

This doesn’t answer your question really but “EIN” (short for
"employer identification number) is the same thing as a social
security number for an individual. If your business is not a separate
entity, such as an LLC or corporation, you probably don’t need one,
you can use your SSN.

29 
All of what I've read is good stuff, but nobody's said really the
most important thing - it's wholesale because it is. There is a
hierarchy in all things business.

Your point, I think, is that the wholesaler does what it does
because, in a very general way, the cost of doing otherwise is too
high. This probably varies a lot from industry to industry. The
internet has made it possible to do otherwise and some businesses
have apparently decided that direct sales work better for them – for
example, Dell computers.

I am curious: do those of you who sell your work through third
parties such as galleries and jewelry stores (other than your own
store) think the amount that the retailer charges you is fair, or is
it high?

30 
Just a small addition. You can also sell to a retailer and not
collect tax--they collect it. If all your sales are to retailers,
e.g. galleries, and you buy all your supplies from a retailer,
e.g. Rio, you have no need for a resale license.

Lisa - Although that is technically true, in my store you would
still be required to produce a state-issued resale number to be able
to purchase wholesale with no sales tax charged. And I know that many
other retailers also require the documentation. When we were audited
by the state last year, it was this full documentation that saved us
from having to pay sales tax on each transaction they picked to check
in detail. I recommend getting a resale license in any case - too
many places need the documentation on file and you don’t have to pay
sales tax to the state at the end of the year if the circumstances
don’t require it.

BBR - Sandi Graves, Beadin’ Up A Storm
Stormcloud Trading Co
“Beads, Leather and Metalworking Supplies”
St Paul, Minnesota (USA)
651-645-0343

31

Hi

according the the federal trade commision, not the IRS, or dept. of
revenue, one must make over 2500.00 in most States,

just a quick answer kim, in the state of maine the limit is $3000

Still confused. In the instructions for form 1040 for the state of
Maine (Line 21):

  " Low-Income Credit: If your taxable income (line 18) is 2000
  or less, neither you nor your spouse (if married) can be
  claimed as a dependent on someone else's return and you are not
  subject to Maine minimum tax, you are entitled to a credit
  equal to the income tax that would normally be due"

What this means, essentially, is that people who do not make over 2k
in income per in the year are not subject to income tax.

This thread, however, was about sales tax.

Above, in the first post, it would seem that the poster is implying
that a person can make up to 2500 in sales before being subject to
the requirements of collecting and paying sales tax (unless I am
misreading the post).

I do not believe this to be true and I do not want anyone to forgo
the collection of sales tax based on this assumption.

If I am incorrect, please post a link to where this info came from
as I am misinformed and really want to know if I am not correct on
this point.

I don’t mean to sound snippy, I’m just getting a little befuddled at
this point.

32 
do those of you who sell your work through third parties such as
galleries and jewelry stores (other than your own store) think the
amount that the retailer charges you is fair, or is it high?

I sell approx half my work through galleries all around this country
( Australia) and i have no problems with the commission rates - and
they do vary considerably. They have overheads to cover, and their
marketing and street presence reaches customers that I do not. In
short, I believe they work for their portion of my sale.

cheers, Christine in Sth Aust.

33 
I don't mean to sound snippy, I'm just getting a little befuddled
at this point.

Kim - and others - Yes, I’ve been reading this thread, too. I think
that some well-meaning people have misunderstood the question. We are
in California, but I doubt many states are any different. This has
actually been said before in this thread, just hard to find. It’s
actually pretty simple. By law, an item for sale can only be taxed
one time. Therefore, if you are a manufacturer making goods for
resale, you do not pay taxes on your raw materials. That requires a
resale number, Seller’s permit, or whatever your state calls it. It’s
still the same thing. Then, if you sell that item to an end-user (a
retail sale), you are supposed to collect state sales tax on it.
Then, either quarterly or annually, you disburse that money to the
state, and account for it. All you are is a tax collector on the
state’s behalf. As someone said, it’s not your money and never was. I
deal almost entirely with stores, so I don’t pay taxes on materials,
nor do I collect them from sales, all legal and legitimate. On your
income taxes, there is a provision for “State Taxes Collected” or
whatever they call it. All that is is an audit trail. It’s a way to
account for cash flow. The money is taken in, and paid out, and must
be shown to balance the books, but it’s only that. There is no
minimum or maximum. If you collect the tax, it’s the state’s money,
and they want it.

34

http://www.irs.gov/businesses/small/article/0,,id=99239,00.html

If you qualify as a hobby only, you cannot deduct expenses. I
suppose some states may have similar guidelines thus the confusion
about minimum income concept thats been mentioned.

35

Hi

http://www.irs.gov/businesses/small/article/0,,id=99239,00.html If
you qualify as a hobby only, you cannot deduct expenses. I suppose
some states may have similar guidelines thus the confusion about
minimum income concept thats been mentioned.

You can deduct expenses to the extent that you have profits. In
other words, you cannot have a loss on an activity that you are not
engaging in for profit. The IRS calls certain activities “hobbies” if
they are not engaged in for profit. I think this term, “hobby”, has a
certain negative connotation to it amongst those who are starting out
and not able to put in as many hours as they would like to. However,
it’s not meant to say that people who only make a little jewelry are
not serious. It’s just a classification between “profit” and “not for
profit”.

An example: An artist spends 8 hours a week making jewelry and
another 4 hours week keeping track of inventory, buying material,
taking classes etc. At the end of the year, the artist has recorded
2000 dollars in gross sales and 2500 dollars in expenses like
classes, inventory purchases, tools etc.

Is this person a hobby or a business?

Intent is a factor. Do you intend to pursue this activity as a
business in the future? The IRS will look at how many consecutive
years you have declared a loss and how you run your business. Do you
keep good records, do you log your hours, do you “act” like a
business? It used to be that the “home office” deduction was somewhat
of a red flag…

Time is a factor. At the time I was studying for the CPA exam, the
requirement was 400 hours per year to be a business. Keeping a log
of your hours spent is a good thing to start doing for tax purposes
(not to mention pricing your jewelry).

If the above artist meets the criteria of business, he/she can
deduct 2500 in expenses on Schedule “c” of the federal tax return. If
he/she does not, 2000 in expenses can be deducted. The important
point I wish to make here is that 2000 can still be deducted. Please
consult with your CPA for clarification. Even though you are
considered a “hobby” by the IRS, you can still deduct the 2000.

I am not a CPA and not working in this field in any way, but this
issue of taxes comes up in December. It also came up last year at
this time. There are so many questions for people. I was wondering
about the possibility of having a “business issue” section on Orchid
where articles can be listed and links to further info from
professionals on business/tax issues. I understand though, that those
who run this site already have a tremendous amount of work to do.

Happy Holidays everyone!
Kim

p.s. Less than 2% returns are actually selected for audit. Don’t
despair!