the freelancers tax post you have on your blog, does that apply to artists who sell at conventions only once or twice a year? and i mean like, its not their actual job, its just as a hobby. im trying to start selling at conventions but the whole seller's permit and taxes thing is really confusing to me, I'm just unsure what to do if I'm only selling once a year, when its not even my job.
Disclaimer: I’m not a tax expert and this isn’t legal advice!
I’m assuming you are referring to this post on how to file sales tax? The answer is maybe. There’s two things you need to do when you’re making money (even if it’s a hobby): 1) figure out whether you need to report your hobby income on a federal/state tax return (the one you file by April 15), and 2) figure out whether you need to file a sales tax return.
1) Do I need to report hobby income on my federal/state tax return?
The answer is: maybe! You’re not required to file a tax return if you earn less than a specific amount (google for “do I need to file a tax return?” to figure out what the current IRS minimum is). Do you have another source of income, such as a day job? If so, your total income for the year (including your day job income and your hobby income) is likely higher than that minimum, so you’ll have to file a return.
If you are filing a tax return, then yes, you do need to report income even if you receive it through a hobby. You should think about whether your income is truly hobby income or business income, and the IRS has some guidelines to help you think about which is which. Depending on how you consider this income, there are different tax requirements/advantages (for example, you can’t claim a loss on hobby income, but you can on business income; business income is reported on a Schedule C and hobby income isn’t; etc.)
Here’s a few links I found through some quick googling that might help point you in the right direction (and includes a summary of the guidelines to help you determine if you need to report this income as hobby or business):
https://www.1040.com/tax-guide/taxes-for-the-self-employed/hobby-or-business/
https://www.moneyunder30.com/side-income-hobby-or-a-business
2) Do I need to file a sales tax return?
Many (probably all?) states require you to report your sales and pay sales tax if you did business in that state, regardless of how little business you conduct. California (where I live and do most of my artist alley-ing) is one of these states. In California, I have to report a sales tax return, even if I don’t make any sales for the reporting period [source]. I learned this the hard way -- I registered for a sales tax ID in Texas, did one show several months later, failed to report $0 sales for the tax reporting quarters in between, and got hit with a bunch of late filing fees T_T Check with each state you do business in for their requirements so you don’t get surprised like I did!
Tax stuff is super confusing, I hope that helps! Thanks for your question!
If anyone out there has other advice (or corrections!), please let me know!