Vendor's License & Taxes

[TexelGirl]

I'm originally from Ohio where I know all the in's and out's of small business stuff but I live in Virginia now and am a bit lost.  Do most of the artists here, who sell their work, have a vendor's license?  How did you get yours if you are also in VA and how much did it cost?  How do you deal with sales taxes if you do not have a VL?  The fed's are easy to deal with as I run as a sole proprietorship.  I've dug through VA's small business information but I've yet to find concrete answers.  I don't want to hire an accountant or an attorney for this since I've sold all of one piece of artwork (my 3D model sales are handled online by a 3rd party).  I am thinking of participating in artomatic this year so I want to make sure I have a good, solid handle on this before then.  Besides, I would really like to purchase wholesale again and the VL would kill two birds with one stone. 

I've returned to college recently and switched majors to art but my professors, advisers and classes are mostly useless on this subject.  Of those professors who have actually exhibited, they haven't done so in many years, didn't sell anything (or if they did it was outside of VA), and if they did sell in VA I got the solid impression that they ignored the tax issue.  I don't have that option so any hints/tips/advice would be much appreciated!

Thanks!

[Jesse]

I'm not a lawyer, so I can't give legal advice, but are you selling work on the street, or in galleries?  I thought vendor's licences for companies selling pretzels or t-shirts on the street?

I used to be a street musician when I was in school, and I had quite a few conversations with the city attourney of Alexandria about the legality of what I was doing.  You might consider doing the same?

If you're selling in art fairs, you could also contact the folks in charge of the art fair, and they might know specifics.

There are a few artdc.org artists who sell at art fairs, I look forward to reading their responses.

[TexelGirl]

My only sale has been at a coordinated show through a group that handles the tax issue.  However, if I read the documentation correctly for artomatic, artist's are responsible for their own sales.  I haven't looked into art fairs as those usually require an outlay of cash for tents and other display items that I just can't justify at this point.  Well, that and I hate sitting outside for long periods because of my allergies. 

The big bonus to a vendor's license is that you can purchase your supplies at wholesale prices.  I have been experimenting with using glass beads and gemstones in my work, if I had a vendor's license I could purchase at wholesale from the company I go through.  Those savings really add up.  It's also handy if at least one artist in a group has one as many wholesalers have a minimum purchase.  By ordering for multiple people under one license you can easily overcome any of the higher minimum amounts.  The only downside is that the license holder has to file regular sales tax reports.  I used to own a business in Ohio and that amounted to a simple piece of paper Ohio would mail to me monthly.  I would fill out the total sales for the month (if any), the sales tax owed and enclose a check if necessary. 

[Jesse]

Yeah.  For artomatic all sales are direct between the artist and the buyer.  So it would be up to you to report income and file taxes.  It might be worth a call to the IRS and your local Comptroller's office to gain some further insight into the issue.

It would be nice to get wholesale prices.  Licenses depend on your city rules.  I couldn't get one as a street musician in Alexandria, as they only allowed sales of perishable items and food outdoors.  I claimed improvisational music was perishable, but they denied my request..

[janthony]

You'll need to do set up two things:  an EIN (Employer Identification Number) and a Sales and Use Tax License.  The EIN you can generate directly from the IRS website, print two copies and keep those on file.  It is this number that lets the IRS get to know you as a business.  These are totally free.  You will also need to log onto the VA department of taxation:

http://www.tax.virginia.gov/site.cfm?alias=RegBus

Here you will find a link to fill out Form R-1 also known as the Combined Registration Application.  This will allow VA to know you as a business.  That will take a few weeks to get back to you once you fill out the form (which now you can fill it out online). 

Another nice thing to have in place as soon as the other two have been satisfied is to set up a business checking account.  This will help the IRS know that you are serious about your business.  You are allowed to stay in the red up to four years, but you should really be working to turn a profit by the 3rd year.  At the 5th year, the IRS declares that you are a hobby and not a business.

Finally, I would highly recommend attending a lecture series that I am offering starting in late February.  All of these issues along with how to successfully market yourself will be covered soup to nuts.  I am partnering with my father in law who is a licensed financial planner.  Together we are working with individuals to help get their businesses off on the right foot and to keep them soaring!

You can see more details about the lecture series here:

http://www.janthonyphoto.com/pressrelease.html

If you have any questions, please don't hesitate to contact me directly.  I would love to hear from you! 

James

[TexelGirl]

Thank you for the response!  I run as a sole proprietorship at the moment so the EIN was easy.  I realized my problem was a semantic one.  In Ohio, where I used to own a gift shop, the license is called a "Retail Vendors License" but here it is known as a business tax registration form.  I have it all taken care of now.  I'll look into your lecture series!  Thanks for the tips. 

[audustdix]

Your license is called a "Retail Vendors License" but it is commonly known as a business tax registration form.

________________
Irs problems

[Erin Antognoli]

i'm in MD, so maybe a little different than VA, but i have to pay sales tax monthly. i started out filing quarterly, but the IRS sent me a letter a few years back saying i now had to do it monthly. if you find a good accountant and have them set you up with the proper protocol of when to file, it will be worth it to know you are doing things right by the IRS.  i don't know about the rest of you, but i fear them, and want to be legal in every respect!

(and i did the EIN / tax ID# to get my sales tax license. as far as i know, there are no "retail vendor licenses" here for photographers, which is what i am)

[TexelGirl]

I do the monthly filing thing here in VA too.  Getting on the wrong side of the IRS is not pleasant so I wanted to do everything on the up and up too.  Glad to see I'm not the only paranoid one! Technically I think my business is registered as being an 'art dealer' as that was the closest thing that was applicable. 

[Erin Antognoli]

i also have to pay personal property taxes to my county, which is based on the gear i use to earn money. it kind of sucks as it's a yearly thing, but you will want to find out if you have to do anything like that and what the rate / schedule is (if you haven't already).

as much as taxes suck, i am constantly amazed by the photographers i know who simply do not pay taxes or declare their income in general, or those that do not have business insurance (gear and liability). the risk is so not worth it... you could lose so much more than you save by not doing things the right way in the first place.  not only is it bad for the photographer / small business owner, but it's bad for their clients as well. can you imagine hiring a photographer to shoot your wedding, only to find that a month before the wedding the IRS descended on them for tax evasion and that they have been forced to close shop?  yeah, i don't want to be that photographer!  i'm glad to see someone who is looking to go about things the right way - this makes the rest of us small business owners look good!