When does selling frags become a business?

[pdxmonkeyboy]

So if its a profit or 400, 600 or whatever, isnt that only after you ahve recouped the tank setup costs? So like basically never for most of us. But if your taking in 2g/yr w cards maybe the irs might come after you? But then you just tell them the tank costed you 8g? Its gotta be total cost inlcuding setup not just ongoing right cost right?

If you are receiving income, technically the IRS wants to know about it, as stated above, even a garage sale. Get a scratch off ticket for your birthday and win $1k ..guess what, they are sending that info to the IRS.

 

[HB AL]

I would just keep doing it like your doing don’t accept cc cards. As long as it doesn’t get to the point of a lot of money say thousands a month you will fly under the radar. Cash is king. Unless you are going big last thing I would do Is report it to the government, they get enough of my money as it is. And like people mentioned you can only claim a loss for 3 years. When I was fishing tournaments I would get a 1099 and had to claim it as a business and was only able to claim a loss for 3 years then they started getting a cut even though in reality I wasn’t making that much profit.

 

[Reefs and Geeks]

So if its a profit or 400, 600 or whatever, isn't that only after you have recouped the tank setup costs? So like basically never for most of us. But if your taking in 2g/yr w cards maybe the irs might come after you? But then you just tell them the tank costed you 8g? Its gotta be total cost including setup not just ongoing right cost right?

I imagine that would be on a year to year basis? Like if you spent $8k on your tank setup in 2019 and solde $7k of frags, the cost of the tank should be able to be deducted as an expense and no taxed income. If the tank is 3 years old, then in 2019 you started selling $7k of frags, that might be a different story. Would be very interesting to know that answer though. I imagine there may be some burden of proof at least to show how much you paid for the tank.

 

[sharpimage]

All of the equipment, tank, skimmers etc should be able to be written off based on a depreciation schedule. It has a life expectancy and would not be written off in one year. I think. The IRS would want to know about every dollar that is made.

Even if you had a personal 3 year old tank, and started a business in 2020 using that tank, some of the cost of that could be deducted. Business person bought a tank from a private person.

 

[Reefs and Geeks]

I would just keep doing it like your doing don’t accept cc cards. As long as it doesn’t get to the point of a lot of money say thousands a month you will fly under the radar. Cash is king. Unless you are going big last thing I would do Is report it to the government, they get enough of my money as it is. And like people mentioned you can only claim a loss for 3 years. When I was fishing tournaments I would get a 1099 and had to claim it as a business and was only able to claim a loss for 3 years then they started getting a cut even though in reality I wasn’t making that much profit.

Makes sense. I'm thinking just keep treating it as a hobby unless I was planning on investing alot into it in order to grow and expected losses. Otherwise, Just track the income vs expenses and if the net profit is over $600 I should report it as income technically. I'm sure the IRS has ways of seeing extra income coming in from paypal or credit card swipes with those square card readers or whatever so may not be able to ignore it if I start making many CC sales or through paypal. At that point I think I'd just have to enter in the income from frag sales and the expenses and if it evens out no taxes would be due, but would explain on my tax papers where the extra money came from in case of an audit.

 

[Jim8o]

If it’s done for profit I’m guessing.

 

[Reefs and Geeks]

How about in regards to sales tax? For me this would specifically be in Pennsylvania or possibly Ohio, and I'm sure is state specific. Do you guys worry about charging sales tax for your sales?

 

[Lasse]

27 posts in this thread - no one have mentioned CITES legislation (A CITES permit is needed for trading with reef building corals ) . Is there no regulation how to handle CITES listed animals inside the US ? Between the states as an example. Here in Europe you need to be able to show the origin and that the mother colony have been imported with valid CITES documentation into the EU in order to trade with them. All corals from Scleractinia is on the CITES II list.

Sincerely Lasse

 

[radiata]

It becomes a business when you find it necessary to quit your day job...

 

[ether]

I'm curious at what point would selling frags turn from a hobby to a business that would require you to collect and pay taxes on your sales. At the moment ive sold maybe a dozen shipments of a few frags and had a few people over to pick frags up. I'm going to be selling as a hobbyist at my first frag swap in May, and am curious if I need to worry about any tax or legal issues with potentially selling a few hundred dollars worth of frags. Ideally I'd like to be going to 3-4 frag swaps in driving distance a year to sell at.

I'm an attorney. When I saw this question the first thing I thought was that you were going to get a ton of uninformed and incorrect answers. Briefly browsing the responses, I think I nailed it. This is a legal question and you are in the wrong spot to be asking it. You need to go talk to an attorney or CPA.

 

[pdxmonkeyboy]

^ Typical attorney answer. As I suspected, you have been getting the wrong information.

(I'm not going to give you the right information either).

Duh she could talk to a CPA or attorney, but she wanted to ask here first.

 

[Rich Klein]

When you can pay all of your bills, not just use the money to buy more corals.

 

[Brian W]

As a business you could get corals much cheaper from wholesalers or importing and sell for a higher profit. As well as you can get reduced shipping. I've got a few friends locally who started off as hobbyists and now they sale corals out of their garage as a full time business. They makes a pretty penny, but also have people coming and going all day.

However the brick and mortar basically hate them, I assume because they do not have some of the expenses they do and they take money out of their pockets by basically selling corals for cheaper. Some have even sent "buyers" to drop copper in their tanks, report their fb pages and spread gossip about them that aren't true. Its a shady game. I've probably already said too much.

 

[Jeeperz]

I trade them for store credit if possible. Where I'm at now I give them to Petco as there are no saltwater stores. Although I was promised a discount but still ended up paying full price for a blue knuckle crab at $10. I don't want to toss them in the garbage but hate giving money away to a big corporation.

 

[Jeeperz]

There are 2 ways to take deductions that I am aware of. 1 is lump sum 2. Is depreciation. However, if it is a business, and you are in Oregon, all tooling you use to make a profit has to have taxes paid on it yearly. The shop I worked at had to pay taxes yearly on frame racks, welders, large equipment like compressors, etc... Best bet, contact a reputable CPA, not all of them are very good, kinda like lawyers, doctors, etc..

 

[SeaJay]

According to the irs, it’s a matter of intent. If you intend to generate profit you are, in their eyes, a business.

They don’t care if you register or not, that’s between you, your state and your local governments. However Most of them want their piece of your pie, so they can hit you for operating a business without a license, not paying sales tax, etc. at any point.

Just remember, taxation is theft...

 

[SeaJay]

^ Typical attorney answer. As I suspected, you have been getting the wrong information.

(I'm not going to give you the right information either).

Duh she could talk to a CPA or attorney, but she wanted to ask here first.

Attorney answer to everything: Hire an attorney...

As a business owner and divorced father with sole custody of 3 kids, I've hired a lot of attorneys over the years. You know what I've learned? The majority of them pretty much suck. Most can read over a lease for you, but when the stakes are high, you better be REAL choosy about who you have in your corner.

 

[Fishingandreefing]

You’re over think of this. Just give them away for free then you got no headache

 

[RandyC]

How is hobby income taxed?

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[Bnichols124]

I remember about 5 years ago, FWC would ticket people with the sale of corals. At that point I'd consider getting a llc, agriculture license, state resale license etc. In the grand scheme of things as a hobbyist selling and trading corals is fine. Anything over 600 dollars should be recorded to the IRS. either way with out a business license or pushing massive amounts of coral that someone will turn you uncle sam probably will never notice or say anything with an audit. Granted nothing on your tank was written off.