Selling Photo's on Sites like Smug Mug

OK, I think I am getting caught up in my shorts and overthinking this whole thing.

Scenario:

I take sports pictures, upload to Smugmug for parents to view. These are small shots with logo. I have a parent that wants to order full size pictures without the logo so I modified my site to sell and control the price list. My lack of knowledge has me hanging up on the whole tax issues.

- Do you setup a business first or should you figure out of if what you have will sell?
- What type of business is appropriate for selling photo's? (sole proprietor, LLC ( which LLC ))
- Can you file this type of activity with your current personal taxes?



My plan is to eventually create a business and keep it separate from my personal stuff, but there is only a few months left in the year and not sure the profits would be there to make any significant write offs. I know I can make up to 600.00 without reporting.

I have the price list setup to make a little profit on the print sales and digital downloads, so I would like to see if this approach is good enough to test the waters so to speak.

As far as the business my goal is order prints on the side through Nations, but Smugmug doesn't allow that and I need something quick before I loose the sale. I have thought about just putting them on a CD/Flash Drive and selling for one price, but that creates some overhead and will require a little more time.


Thoughts on this would be appreciated, I want to stay small for now due to my hectic job for now, but want to really push it next year.

Registering the business (DBA) is pretty cheap. I think it's $35 for 10 years, but I did mine through Dallas Co instead of Collin (since I'm living in Dallas Co now). With that, I was able to get a federal tax ID number for the business (cost nothing), and set up a business banking account (again, cost nothing).

This is all done as a sole proprietor, so taxes/income are all filed on our personal taxes.

Most of the advise we've gotten is to start small and just do the sole proprietor thing for now. If either business gets going to scale, then we can reevaluate and do the LLC option if needed. I would still invest in general liability insurance regardless, in case the business side of things gets sued for any reason.

First question. Are you going to break thru the $600 threshold?

If so, you don't need to do anything. File your taxes as a Sole Proprietor...<-- your personal 1040 will do this with a Schedule 'C'...

You can download and read thru a Schedule 'C' from the IRS' site...

Filing one for 2014 will give you insight into what you need to do next year...

Keep it simple... until you know you're gonna make serious money... don't quit your day job!!!

RocketCowboy said:

Registering the business (DBA) is pretty cheap. I think it's $35 for 10 years, but I did mine through Dallas Co instead of Collin (since I'm living in Dallas Co now). With that, I was able to get a federal tax ID number for the business (cost nothing), and set up a business banking account (again, cost nothing).

This is all done as a sole proprietor, so taxes/income are all filed on our personal taxes.

Most of the advise we've gotten is to start small and just do the sole proprietor thing for now. If either business gets going to scale, then we can reevaluate and do the LLC option if needed. I would still invest in general liability insurance regardless, in case the business side of things gets sued for any reason.

Click to expand...

So the sole proprietor/dba is what keeps throwing me.

So if I understand, you setup a DBA with your county office, need to do. For taxes you are using the Federal ID #, need to do. The banking acct, no biggie.

So you file your business taxes, collected taxes that is with your personal taxes even though you are collecting under a DBA Tax ID. This is what I need to explore more, tax guys make me nervous.

Insurance is a must, which is why need to setup a DBA. Is this a DBA with a sole proprietor, is that right?, meaning you are the only owner.

FredKingston said:

First question. Are you going to break thru the $600 threshold?

If so, you don't need to do anything. File your taxes as a Sole Proprietor...<-- your personal 1040 will do this with a Schedule 'C'...

You can download and read thru a Schedule 'C' from the IRS' site...

Filing one for 2014 will give you insight into what you need to do next year...

Keep it simple... until you know you're gonna make serious money... don't quit your day job!!!

Click to expand...

Well Fred, thats why I want to keep it simple for now and give it a trial run so to speak. I know I can break 600.00, but I am keeping it under control till I get a better hold on this business stuff. I have turned down a few clients recently, which I hate doing but I also want to make sure I maintain a good reputation as well and not make a bad name for myself.

I still dont have a clear business model, but I am trying to figure out the direction. I will be taking on clients for portraits, which I will order prints from Nations. What gets ordered on Smugmug will be mainly the sports pictures, using their labs or by digital download. Its the smugmug thing that gets me and how it works, if others have had issues with sites like this.

When you say "File your taxes as a Sole Proprietor", you mean add Schedule C with my personal taxes. I assume this based on what you said, I would have my normal taxes prepared, add the Schedule C to my taxes to show the taxes collected under the photography business.

I was looking at the Schedule C stuff last night and I know Smugmug will send a 1099, so things are starting to click, just a little nervous about it.

I tend to overthink

No....

First things first...

The DBA is strictly a way for your local county to track who you are, and where to collect their fees... It has nothing to do with your income taxes....

You file a personal tax return 1040... You use your personal Social Security number. You attach/file a Schedule 'C' to/with your personal tax return...

You don't need a Federal Tax ID... you use your social security number...

You can check your stat's Treasurer... if you have a State Sales Tax, then you may have to file with your state and collect sales tax on the items you sell... <-- this is different than your Federal Income taxes...

Relax.... It is all rather simple...

Although, it can seem daunting at first...

SmugMug sending you a 1099...

If Smugmug (or naybody else for that matter) pays someone more than $600, they're obligated to send you & the IRS a 1099.... <--think of a 1099 as a W2... It's a record of what they paid you... It gets reconciled as Income on your Schedule 'C'... As you work for different people thru-out the year, you may receive several(many) 1099s...

The total Income on your tax return (W2s, 10992, etc) should all be equal to or greater than the total of all your W2s and 1099s... otherwise the IRS will send you nice letters...

FredKingston said:

SmugMug sending you a 1099...

If Smugmug (or naybody else for that matter) pays someone more than $600, they're obligated to send you & the IRS a 1099.... <--think of a 1099 as a W2... It's a record of what they paid you... It gets reconciled as Income on your Schedule 'C'... As you work for different people thru-out the year, you may receive several(many) 1099s...

The total Income on your tax return (W2s, 10992, etc) should all be equal to or greater than the total of all your W2s and 1099s... otherwise the IRS will send you nice letters...

Click to expand...

OK, I was overthinking it.

Thanks Fred, that really clears up the mess between these ears. And Texas doesn't have a state tax, just sales tax so I am good there.


OK, time to activate and move forward too see if this amounts to anything. At the least I am hoping for the extra funds to feed my NAS, as well as make my boss happy. We all know a happy wife leads to a happy life.

Thanks Fred and Charlie

You shouldn't have to even collect Sales tax if SmugMug is handling the money, they're the one obligated to do the collection and payments to Texas if any of your sales are shipped to Texas...

You can put this in pipe for future reference too....

You're only taxed on moneys you receive during the calendar year... If you do a job in December, and your client doesn't pay (or you don't bill them) until after Jan.1, that money isn't taxable until filing your taxes in 2016...

Starting out the best way can affect things down the line. My advice would be to make an appointment with an accountant in your local area.

FredKingston said:

You shouldn't have to even collect Sales tax if SmugMug is handling the money, they're the one obligated to do the collection and payments to Texas if any of your sales are shipped to Texas...

You can put this in pipe for future reference too....

You're only taxed on moneys you receive during the calendar year... If you do a job in December, and your client doesn't pay (or you don't bill them) until after Jan.1, that money isn't taxable until filing your taxes in 2016...

Click to expand...

Fred, seems there was a change for Texas taxes on digital downloads.


Our sales tax tool allows you to choose a state, a tax rate, and specify whether digital content and shipping should be taxed. When you use this tool, any orders shipped to the state you specify will have the applicable sales tax included in the shopping cart.
Note: The states listed below are not included in the drop-down list because we already collect sales tax for you. Click here to see why.
SmugMug will remit the collected tax to you via direct deposit to your bank account a few times during the year, separate from your profit payment. See below for more details.
Please note that SmugMug does not assume responsibility for the management of sales tax that you collect. For our full disclaimer and terms, see below. You must accept these terms in your Account Settings in order to use this feature.

Here is the part about Texas
[FONT=inherit !important][FONT=inherit !important]Texas - Tax was collected from [/FONT][/FONT][FONT=inherit !important]September 1st, 2012, until [FONT=inherit !important]March 31st, 2014. After April 1st, 2014, Texas Pros are responsible for collecting sales tax and paying it to the state.

So if I read this right, they will send me the taxes and I will be responsible for paying them. I get the tax on digital download but not sure about the tax on shipping[/FONT][/FONT]

Well there you go... A lot of states are in flux over the internet, and they're all looking for ways to get their cut...

They do the collection process... and you'll have to file the sales tax return for Texas... the way that reads, all you do is tell them "yes, collect the tax for Tx"... and they send you the collected taxes " a few times a year" (whatever that means)... Most states have a specific time frame/amount collected within which a return must be filed, and collected monies remitted... Maybe double check with Tx's Department of Revenue to see reporting requirements you have just to make sure they don't conflict with SmugMug's time frames...

FredKingston said:

Well there you go... A lot of states are in flux over the internet, and they're all looking for ways to get their cut...

They do the collection process... and you'll have to file the sales tax return for Texas... the way that reads, all you do is tell them "yes, collect the tax for Tx"... and they send you the collected taxes " a few times a year" (whatever that means)... Most states have a specific time frame/amount collected within which a return must be filed, and collected monies remitted... Maybe double check with Tx's Department of Revenue to see reporting requirements you have just to make sure they don't conflict with SmugMug's time frames...

Click to expand...

Good point, I'll see if I can find a schedule. Does make things a little more interesting as far as the collection process and paying the taxes. Might be wise to look up an accountant to find out a little more about this. Still have a hard time with the fact that they require tax on a digital download, but its another revenue stream for them so I need to comply.

Krs_2007 said:

Good point, I'll see if I can find a schedule. Does make things a little more interesting as far as the collection process and paying the taxes. Might be wise to look up an accountant to find out a little more about this. Still have a hard time with the fact that they require tax on a digital download, but its another revenue stream for them so I need to comply.

Click to expand...

The wedding photography class I'm taking mentioned checking in with the local PPA branch for names of accountants/lawyers/etc that are local in the area and familiar with the photography industry. I haven't tried to join yet so no experience there, but may be worth a shot. My primary concern is that our CPA lives in Louisiana, so I might need to find someone closer when I turn this to a legit business with income and stuff.

RocketCowboy said:

The wedding photography class I'm taking mentioned checking in with the local PPA branch for names of accountants/lawyers/etc that are local in the area and familiar with the photography industry. I haven't tried to join yet so no experience there, but may be worth a shot. My primary concern is that our CPA lives in Louisiana, so I might need to find someone closer when I turn this to a legit business with income and stuff.

Click to expand...

Yea, I thought about PPA earlier. I need to join and hold off on this. I really dont want to rush, so I backed off of what I was doing till I get some more research. The whole tax payment concerns me. I was thinking yearly, but found that there is a schedule and I just wasn't sure which category I would fit into.

So on hold for now, but plan on looking at PPA tonight again.