Start-Up Help!

[Former_Member]

Hey everyone, I'm just barely starting and I already want to cry because of the Transaction Privilege Tax. I don't know how successful I'm going to be. I don't know how many of my products I'm going to be able to sell. I don't know if I'm even going to make a profit. But with the cost of the state application and the city application, I'm going to be paying $70 just for the "privilege" to sell my items? I really just want to do this as a hobby. Do I really have to throw $70 down for that? I really hope I'm missing something here. You are all selling out of Arizona too, so surely you all have been in this situation too, right? So please help a newbie out...

[MurrayBolesta]

This is called sales tax in most other states.

By the way, only the state applies to internet sales, not city. I don't recall having to pay so much, but it's been a while. And it was only because I started a brick-n-mortar gallery, up to that point it was wholesale sales only with no tax.

No you don't have to. As a hobby with modest occasional sales, I wouldn't bother. Best wishes

[Former_Member]

Interesting, I'll have to do some more research. Maybe I misunderstood, but it looked like it was $40 for state and $30 for city (I live in Mesa). I guess I'll have to go to one of these Small Business workshops and find out what hobbyists are supposed to do. I heard that people are supposed to acquire a TPT license if they intend to sell anything, even for yard sales and such. Maybe I misunderstood and it's that people are supposed to report income on taxes even if it's from a yard sale or hobby. I was browsing the discussions and found this thread:
http://www.etsy.com/teams/7249/team-arizona/discuss/6755100/page/1/
and read this:
"ArtistiekEndeavors says

So far, Arizona does not require a business license for most businesses here on Etsy because Arizona has not yet required us to charge taxes for online in state sales. Until that time, which I assume is not to far off in the distant future, you don't need a business license. And, unless you plan on making a ton of money, you might consider holding off on the expense of a business license. Consult with an accountant. Besides that, welcome to the Team Arizona. Here is wishing you much success in sales and your business endeavors:-) "

I would like to know their reference for Arizona not requiring taxes for online in state sales...

Anyway, thank you for the response!

[Former_Member]

I'm right there with you Divine. I am not entirely sure what to do with my sales tax situation either. I live in Chandler, and while the percentage of sales they take is fairly low, they charge quarterly fees to be a licensed business.

My current plan is to list items and see how sales go. If things really take off in the next couple of months I will go ahead and pay all the fees. If they don't then I probably won't bother with it. Is there anything wrong or illegal about this line of thinking?

[Former_Member]

When I spoke with the Arizona Department of Revenue back when I started doing craft shows, I was told that I had to have a state business license as well as a Transaction Privilege tax license. Even if I only ever sold $1.00 worth of goods I still had to file the paperwork and pay the taxes.

I charge the appropriate taxes for all in state sales and submit the paperwork (and funds) as required.

I've been at shows where people have been asked to leave and their names taken because they haven't had the correct paperwork in place. Etsy is still a business venture.

[Former_Member]

I was told from the city of Surprise for handmade goods they would let you sell without a business license if you sold under I 'think' $2000 a year. That was just for our city. The privilege license is required by anyone no matter how little you sell.

I have a business license, since I sell more then that and I asked about that 2 years ago, so might have changed.

But that would vary from city to city in Arizona. Each city also charges different fees for it, some are cheaper and I think I remember Mesa being expensive for their resale license (Transaction Privilege Tax) I had to get one last year just to sell at one show in Mesa!

Basically you need to get a Transaction Privilege Tax from the State of AZ, and when you do that depending on where you live you need to add each city you will do business in. In Surprise when I register with the state for my Transaction Privilege Tax I can also register my city. (I can do this all online on aztaxes.gov) If I recall Mesa is not part of that and you need to register separate.

So you might have to pay three things, 1. State of AZ for Transaction Privilege Tax license. 2. Your local City to be added to that license and any city you might sell it throughout the Valley. 3. Business License.

I would just call your local small business office, ours is super helpful and friendly!

Good luck!

I stopped doing shows for my jewelry so I hate that I have to file and do Transaction Privilege Taxes anyways for the one thing a year I might sell to someone in AZ online lol :)

[Former_Member]

AdorableElegance - technically yes it would most likely be illegal.

Now what will they do about it if caught? Next to nothing except ask you to comply unless you are skipping out on tons in taxes etc.. You might owe back taxes if they wanted to get it from you. But chances are you are not selling enough to make them care more then asking you to start to comply. A warning.

You might get a scary letter in the mailing telling you so lol but if that happens just call explain, and comply. Not that I condone this, but I when I started I wasn't all legit in AZ for over a year (in California I didn't need to be for the little I sold, different laws for my city and state) . So I moved here, wanted to sell at a local farmers market, they said I needed a resale license, so I got that but when I dated my business the state realized I was operating longer then I had my license for technically.

I got a letter, I called, worked it out, think I owed a few $$. Well then I got a nice letter from my city telling my I was wrongfully operating a business lol oops guess who reported my 'business' , the state and farmers market. So then I got my business license and the rest is history. :)

Learned a lot along the way! :)

[Former_Member]

Wow, thank you all so much for the information. It's a bit discouraging, but hopefully I can make it work and be worth it. I've found a Transaction Privilege Tax workshop Mesa has next month so I'll sign up for that to get some help. I guess with it all official, can't the licenses be part of business expenses on tax returns?

[Former_Member]

Right, I don't want to do things illegally, sorry if that's the impression I gave(I really need to go back and read before I post). The City of Chandler requires you to file for a licence/start paying tpt within 45 days of the business starting and then they charge you a 50% of license cost late fee. They charge license fees quarterly and it comes out to $125/year plus 1.5% of my gross income. It looks like AZ requires a $40 application fee and takes 6.3% of sales. Is that right?

Basically it looks like it will cost me $180 after app fees and such, plus7.8% of my sales(11.3% if I include Etsy's fee). It just seems like a lot when I have no idea how popular my items will be and that is a lot of money for a college student trying to pay down loans while still going to school. I guess I will just have to try things out for the first 45 days to see if it will be worth staying here or if I need to get another day job. =/

Wow that made me sound gloomy. In spite of the pain that is taxes and licensing, I am very excited to be able to sell on Etsy and I hope that everything works out and I am going to work my butt off to be successful!

[Former_Member]

I agree, AdorableElegance! You don't sound gloomy at all, it is a lot of money for the unknown. But it's just extra motivation to work hard and take it seriously to justify the costs. Maybe it's a good thing after all? I might end up making more money than if I was doing it more casually.

[Former_Member]

Hello everyone on team Arizona! I am not new to ETSY, but I have sold in the past. It does look gloomy for sellers here in AZ.

AdorableElegance, no you don't sound gloomy, just bewildered. I am too. I'm here to learn, because it's all new to me too. The business licenses etc, is not so bad. My real issue is calculating shipping costs. That's a whole new ballgame best took elsewhere.....

DivineHoneybee, you're very supportive :)