DEAR SUN SPOTS: As others have said many times, thank you so much for your helpful advice!
My question is: I sell crafts during the year at craft fairs and make a few dollars. At what point do I, or should I, apply for a tax ID number from the state? How much do I need to sell before I should claim the income on my taxes?
So far it's been extremely modest (perhaps a few hundred dollars in a year), so I'm not sure at what point the sales become relevant for collecting sales tax and year-end tax filing. My expenses for my crafts far exceed the little bit of income I bring in. — No Name via email
ANSWER: Sun Spots got the following response from Sara Lewis, deputy director of Sales, Fuel and Special Taxes, Maine Revenue Service:
“A crafter making sales of tangible personal property should register to collect sales tax. No minimum income threshold is stated in the law. A sales tax registration application is available online at maine.gov/revenue/. Choose the Application for Tax Registration on the right-hand side of the Web page, under Related Links. Choosing the word online will bring you to an online version of the application. Choosing the PDF link will open a document that can be printed and either mailed or faxed to the Central Registration Unit. Their contact information is on the front of the document.”
Sun Spots went to the site, and it looks fairly simple to navigate and fill out the form. An employee in the Sales Tax department told Sun Spots that if you don’t have income for that period, then you just file showing zero in collections.
As for income taxes, that’s a bit trickier. At irs.gov, the following information is offered under the query “Is your hobby a for-profit endeavor?”
"The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:
* Does the time and effort put into the activity indicate an intention to make a profit?
* Do you depend on income from the activity?
* If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
* Have you changed methods of operation to improve profitability?
* Do you have the knowledge needed to carry on the activity as a successful business?
* Have you made a profit in similar activities in the past?
* Does the activity make a profit in some years?
* Do you expect to make a profit in the future from the appreciation of assets used in the activity?
"An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses).
"If an activity is not for profit, losses from that activity may not be used to offset other income. ... If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity."
Sun Spots had to edit this information for space. You can check out Publication 535, Business Expenses, for more information on deductions, such as a home office, if you decide to go that route.
DEAR SUN SPOTS: A.B. Ricker Memorial Library in Poland is seeking two trustees for a term of three years. If any Poland resident would be willing to give time and energy in support of our town’s library, we would love to have them.
The Poland Town Office has the necessary form. The signatures of 25 Poland voters is required. The form must be filed at the Town Office by 4 p.m. on Feb. 19.
Interested parties can call me at 998-2767 for information about the position and the Poland Town Office at 998-4601 regarding nomination papers. — Cathy Tetenman Poland
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