Our very own @jhaemer52 is teaching a class on the business of jewelry. She asked the following, in the thread on etsy selling pros and cons, and I thought it should be covered in this new and “fresh” thread. Any thoughts?
Hi Jo! I was just discussing this topic with several “newish” jewelers in Tucson, there is a lot of opportunity for a class like this. Here are some topic points off the top of my head:
What do I want to make in profit/income?
Do I need to produce income?
Is that MY goal?
Pricing? How to calculate cost, track hours and set an hourly rate? Can I sell what I make using the pricing calculated? Is it sustainable?
Mistakes to avoid.
How to find your marketplace?
Growing or upgrading your Market
keeping track of your customers and asking for or attracting sales
Go Jo go!
Hello Seth and Jo, One should pieces as though they are important. No one respects cut rate work. Have fun. tom
Tax info. Varies from state to state. It sounds cliche, but you do need to set aside about 1/3 of your sales dollars for taxes. It may be a little overkill, but there is something about peace of mind. It is a bad day when your accountant tells you in March that you will need to pay several thousand dollars in taxes that you were not expecting. A very bad day indeed.
I sent this post with a new subject line, "topic for Jo’s ‘business of jewelry’ class, but it appeared with the old topic, ‘should you sell on etsy’ in the subject. So how does one start a new topic if one’s subject line change is ignored?
Seth, I see you subsequently started another topic for Jo’s class. Did someone revert my subject line manually to the old topic? Does the software ignore any new subject if one is replying to an old subject? Can the topic only be changed via the web interface?
Anyway, what I’d be interested in seeing in Jo’s class is: software packages that automatically calculate and track multiple US states’ sales taxes.
I’d be interested in hearing about software packages that automatically calculate and track multiple US states’ sales taxes.
You need to login and use the web interface to do so. [quote=“Lorraine_Johnston, post:5, topic:54140”]
Seth, I see you subsequently started another topic for Jo’s class. Did someone revert my subject line manually to the old topic? Does the software ignore any new subject if one is replying to an old subject?
No, we don’t moderate manually. Yes, it does ignore the subject line. if you reply to a thread via email it appends your response in that thread.
You aren’t changing the topic, you are simply replying to a pre-existing thread on a different topic. You just needed to reply to the new thread, and you replied to the old one.
I moved it for you to the correct thread.
Thanks Lorraine. That’s something I should cover that I hadn’t thought of. I live and work in Oregon which doesn’t have a sales tax. Sometimes folks from other states come to us for just that reason.
I’ve had that bad day. Just once. It was awful. I had to come up with an extra ten grand one April. Ow! Made my butt hurt.
Thank you for the explanation, Seth.
Thank you, Jo. We’re considering moving to Delaware for that reason. Even so, if one sells on the web, one can be held liable for sales tax due in other states. I took a class with SCORE a few years back hoping to learn about sales tax in the mix of small-business info, but they carefully avoided the topic (wink). SCORE classes are only as good as the volunteers.
I’m aiming to purchase software. I do IT all day long as a Day Job, and am not at all eager to write my own software, or to tangle with bad software, during my lapidary/smithing/jewelry hours.
A one-third set-aside would be income tax, yes? Surely not sales tax?
A one-third set-aside for sales tax is not overly farfetched. Consider the following, keeping in mind that a state creates their own sales tax law:
Some states say an internet seller located within their state owes sales tax on every item they sell, no matter where that item was shipped, because the transaction took place within the seller’s state.
Likewise, the state where the item was shipped will say sales tax is due to their state.
Therefore, an internet seller can be taxed by two states for sales tax. This situation alone could amount to 20%.
But that’s not the end of the seller’s sales tax liability. There are some localities (towns, cities) which collect additional sales tax. And don’t forget about the sales tax due to the seller’s state when materials are purchased wholesale.
Thank you for explaining the one-third set-aside, Betty2.
I agree with Gena about tax money, we screwed up with a company of ours and it became a mess also be careful of the CPA you hire as well
I’m not sure why I’m writing this as you know all this already Jo. Maybe it will be helpful to someone.
I think something to cover in your class is the pros and cons of retail vs wholesale. I’ve read a couple of respected orchidians say , never sell wholesale. But in my case I much prefer wholesale.
I can only speak for myself who chose the wholesale side of the biz. The biggest reason for me was that above all else I prefer doing the work of making. Lowest on my list of pleasures is selling. With wholesale, once your accounts are established, the work comes in with others doing the hard work of selling (with all that goes along with that aspect of the biz). You give up the additional income of the retail markup but that markup comes at the cost of time spent selling. You are saved from spending that time.
With wholesale work you still direct the course of the business and can do the designing, ordering of materials, execution, pricing and delivery. You just skip most of the selling. I prefer that.
Another message you might pass along is that the beauty of being self employed is that you can design your business any way you want, as long as it’s legal and profitable. You shouldn’t necessarily model your business on other existing businesses. If you do you may just repeat other people’s mistakes. Better to design your business around your own personality.
Have fun teaching.
Re: sales tax. You generally only owe sales tax to states your business has a physical presence in. So if you travel to do a retail market in another state, you owe them sales tax from the sales during the market. (Some states have a temp tax ID for just this purpose which is super helpful.) Online sales work the same way- I owe sales tax to NY state for all my online sales to customers in NY as well as from any in-person sales I make here. I don’t yet owe to any other state, though Congress has been arguing about this for well over a decade.
Since you are in a state with no sales tax, you wouldn’t really have to cover much for your class except letting people know that when they sell out of state, they will need to collect and remit at that jurisdiction’s rate. But online sales tax becomes much more complicated if you start selling with big stores like Amazon. If you participate in their FBA (Fulfillment by Amazon) program, you owe sales tax to every state that they are warehousing your product in!
As far as other topics to cover- lots of great suggestions already, but I’d add discovering your target customer is massively important, and learning how to market to them. Also social media best practices, importance of great photography with examples and guidance, an overview of selling venues and some basic bookkeeping skills, time management practices, intellectual property and copyright laws and resources, and maybe provide links to more resources for the students after the class. Like SCORE, your city’s small business development group, free Instagram video classes, maybe set up a facebook or google group for them all to stay connected etc. Let them know they aren’t on their own completely!
Have a great class!
I don’t agree that you need to set aside 1/3 of your sales for taxes. In certain brackets, you don’t owe any income taxes at all, so your initial sales don’t require any withholding by you. The sales are offset by deductions…itemized deductions or standard deductions as well as expenses and depreciation of equipment. At some point in the year, assuming a steady and good income stream, you are going to start being liable for taxes. If you have income from other sources, you have to figure that in, too, along with any withholding if you are getting a paycheck. As far as Federal Income Tax you are going to start at a 15% rate. What you DO have to watch is your FICA, because you are responsible for that at 15.4% on your adjusted gross income. Even there, if your expenses (including depreciation) exceed your income, there’s no FICA due. When you do have an AGI, you have to pay the FICA and it needs to be paid quarterly to completely avoid penalties, in most cases. As others mentioned, you may also have a State income tax liability when you have income exceeding your expenses and you may have sales tax to pay.
Rather than assume you have a tax liability, it would make more sense to check with the authorities about sales tax liability and with your accountant about your income tax and FICA liability. Although you might not owe any taxes in the first quarter, you might want to put some money away so that your monthly salary doesn’t all of a sudden take a 30% hit when you get to the point where you do owe taxes, but your accountant should be able to help you project your income and liabilities. Some folks are completely at sea with figures and need concrete guidance, but it you can learn something about taxes, it’s very helpful in planning.
Another issue is your expenses. I was self-employed for years and was terrible at keeping track of expenses. Your rule should be to save all receipts and go through them at least weekly. Circle items that are business expenditures on receipts if you don’t use a specific account or credit card only for the business. Deduct whatever you can…paper for the printer, pens, pencils, etc. Let someone explain your “marginal tax rate” if you don’t understand that concept. It is the percentage of tax you pay on the last dollar you earn. If it is 30%, then you are getting a 30% discount on your tax bill any time you can deduct something. Buy $10 worth of paper for the printer for your business and you pay $3 less in taxes.
Just a few thoughts. Yes, your tax is likely to be at least 30% on some of your income (hence the 1/3 guideline), but it doesn’t apply to everything, which is why you need to figure your expenses, etc. to know what to do. Hope this is coherent and somewhat helpful.
I don’t yet owe to any other state, though Congress has been arguing about this for well over a decade.
Sales tax is a case of each state having a certain amount of power over interstate commerce. Unless you understand the sales tax laws in the states where you ship merchandise, you would not know if those laws apply.
There are 50 different sets of sales tax laws and states have few ways to enforce out-of-state compliance. Thus it often operates like the honor system.
The system suffers from lots of abuse now, but when a state faces consistent revenue shortfalls, they will more actively pursue collection.
Yeah, you only let it happen once!
As far as categorizing business expenses and anticipating tax liability. You need to open a separate checking account for your business as well as use a separate credit card. Use one of the wonderful software programs like Qicken or Quickbooks to track your expenses and income. Use a CPA to set up your business account(s) on your new software as well.
Then it’s easy as pie. Just enter each expense or income into the appropriate category, breaking down you credit card expenses as well. Then have your accountant review your business accounts backup and file appropriate payroll or sales tax reports quarterly or as needed.
This way it’s organized, easy to create reports and easier to anticipate coming tax liability. Once you’ve got a couple of years under your belt the history of your business makes predictions even easier.