Last week I started a Wednesday series on the various topics related to getting into the craft show circuit. I’m not sure how many posts this will entail, but I assure you at the end of this series you will have the rudimentary knowledge you’ll need to get yourself out in front of the buying public as a professional crafter.
Before You Begin
So you have a crafty hobby that looks like it might make a worthwhile business. Or you’ve been making things as gifts and someone has mentioned you should start selling them. Or you’ve been selling online and feel like you’re ready to meet the buying public. Or any number of other thoughts that have somehow lead you down the path to craft shows.
But first things first – MONEY. It’s always about the money. Where do you put the money, how do you get the money, how do you keep the money. If you’ve already established the money side of your crafty business, I’m most likely repeating what you already know. And just maybe I’m sharing something you didn’t know…
I’m not going to talk about business models, or corporations, or any of that highbrow business stuff. You can pay an accountant and attorney for that information and I strongly suggest that you do at some point in your business affairs.
I’m going to get you set up as a sole proprietor running your own small crafty business. Because you need to have a separate accounting for crafty business money – EVEN IF YOU’RE USING THAT MONEY AS PERSONAL INCOME. Here’s why – supplies can be purchased tax-exempt, most expenses on behalf of the crafty business are deductible, and craft fair booth fees can add up quickly! Not to mention travel and meals. I’ll get to that in a minute. In fact, I’ll just be giving you the steps now and explaining the why’s and wherefore’s further on.
First things first – get yourself down to your local county courthouse (or sub-courthouse if you live in a larger metropolis) and file a DBA. AKA “Your Name DOING BUSINESS AS Your Business Name.” In Texas, it’s about $20 to file and you keep this name for ten years. As the court clerk who took my filing says, “And in ten years, I hope you’re rich and I’m retired!” CAVEAT: This only protects your name in the county you file. If you want to protect your name in multiple counties, you can either file DBA’s wherever you want OR you can file as a corporation and trademark your business name. If you’re going that route, I strongly suggest you see an attorney and an accountant who can explain the pros and cons of that mess. Not that it’s a mess, but it is an incredible headache if you choose to undertake it by yourself. If you’re going corporate, get professional advice and don’t go it alone.
Second – This one is iffy for most people, but it was the first thing I did. Get a post office box.
Third – hightail it to your local bank (sometimes your personal bank will give you breaks when you open a business account) and set up a small business checking and savings. Get one set of checks and a debit card. NOTHING ELSE. No merchant account, nothing. Just get basic business checking and savings. And use your new PO Box street address.
Fourth – In Texas, go here and apply for your Sales Tax and Use Permit. It’s easy, quick, and you’ll have your number issued at the end of the process. Print out the signature form, mail it in, and you’ll have your actual paper permit in two to three weeks. For non Texans, your State Comptroller’s office will have the information you’ll need to apply. Keep in mind, there are a few states that do not collect sales tax, so this may not apply to you.
Fifth – Set up a Square account (www.squareup.com). No, I am not a paid affiliate for Square. In my personal experience, Square is the easiest and quickest way to accept credit card payments in person. No contracts, no monthly obligations, even the card reader is FREE – just a straight fee based service that’s comparable to PayPal in costs. The only caveat here is that you will need a cell phone with smartphone capabilities. Square works on iOS and Android platforms. I talked about using Square in a past blog post.
Now you are set up to do business in the State of Texas. And why is this so important? Because for Texas, and any state that collects sales tax, you have to file an accounting of your sales for tax purposes. This is what makes your business legal. If you sell anything in the State of Texas, you are required to collect sales tax, PERIOD. You can be fined $500.00 PER DAY for operating a business without a Sales and Use Tax Permit in Texas. *NOTE: For y’all who don’t live ‘round here, this is an important issue to research in your state.
The other part of having the Sales and Use Tax Permit in Texas is that you can make tax exempt supply purchases at most, if not all, retail establishments. Once you get your permit, make several copies and take them to the various local businesses where you purchase supplies. Usually the businesses will have a form for you to fill out and attach a copy of your permit so you don’t have to present it every time you make a purchase.
One way or another, the State is going to get their sales tax, capisce?
Here’s why you should get a PO Box – if you’re online and don’t have a PO Box, anyone you purchase from or sell to now has your home address. Or work address. And given the economy and other factors, having large packages frequently shipped to your office isn’t always kosher. Having everyone know your home address isn’t safe, either. USPS now has a service that allows you to write your PO Box address as if it’s a street address and will accept deliveries up to 70 pounds from ANY shipper on your behalf. Not only that, but they will also email or text you when your box has mail. And this service is FREE. A small box is about $75.00 a year and a very small price to pay for peace of mind. Do you really want to risk a disgruntled customer showing up at your home or workplace? *NOTE: PO Box rental fees are tax deductible.
Your business checking account and debit card will allow you to make these purchases in a way that makes that accounting easy to calculate on whatever basis you are required to file. In Texas, small businesses such as ours typically file quarterly. I don’t know about you but I am not the most organized person in the world (this is a HUGE understatement) and having all of my receipts in one place with the bank statements to back them up (rather back up my faulty memory) makes it a snap to file those quarterly tax forms. The other thing your business account does is keep your business spending separate from your personal spending. THIS is a HUGE deal for Federal tax purposes. *NOTE: Bank fees are tax deductible.
I’m not really but sort of segueing into Craft Show Booth issues, which is an entirely different section of this series, but here it is: The fees you pay for your craft show booths are tax deductible. I repeat: the fees you pay for your craft show booths are tax deductible. Did you get that? I only emphasize it because I have talked to craft show vendors more seasoned than I who DIDN’T know this. Use your business account for all transactions related to your business. Please. I am doing you a huge favor by stressing this one point. When you start your tax process next December/January/February/March (please don’t start in April), separating personal from business will be your largest headache ever.
Other things that are deductible that you might not know about: service fees (PO Box rental, postage meter, annual domain renewal, web hosting, etc.) Just about any money you pay for a service for your business is deductible. So is mileage travelling to and from shows, even local ones. As well as meals purchased the day of the show and during travel to and from shows. From here on out, in future sections, I will add a note that the suggestion is also tax deductible. Eventually, you’ll see why keeping the monies separate is such a big deal, if you haven’t already come to that realization.
Square. Credit card processing. Another big deal when it comes to selling at craft shows. Sure, you could sign up for a merchant account and get locked into multi-year contract with monthly fees on top of processing fees on top of the cost of the equipment…but why do that kind of damage to your cash flow? While I’m sure there are other companies out there that do the same thing that Square does, this is who I chose to go with and they have been good to me and for me. Accepting credit cards is a benefit to you AND to your customers. I don’t know if you’ve noticed lately, most people don’t carry cash anymore. I know I don’t. And having the ability to accept credit cards takes away the old excuse of ‘I don’t have any cash’ and sometimes spurs the customer to purchase more. I know for Book-Inz, there was a noticeable uptick in quantity sales when I started using Square. So do your research and set yourself up with an account. Your customers will appreciate you and your bank account will thank you. *Note: Credit card processing fees are tax deductible.
Next week, we’ll talk about finding your shows. Until then, Keep Calm and Read On!