When is scroll sawing considered a business?

[agooday88]

I am making scroll saw projects as a hobby but I also sell a few here and there. ( unemployed at the moment so need $ )
 When does it go from a hobby to a business. I was told that I needed a business license in order to sell anything and also claim all my earnings.
 I was also told that if I make business cards and hand them out, then I am acknowledging the fact that it IS NOW A BUSINESS and no longer a hobby. I need clarification on this please. What are my Do's and Don'ts?  Thanks all.

[pddesertrat]

Unless there is a knowledgeable scroller here that knows the laws of your city, county and state, it might be impossible to get a correct answer.  Maybe so good guesses will turn up.

[dunk]

The IRS will only let you operate a failing business for 5 years max and then you can no longer file a tax return as a business.  Failing means claiming more expenses than sales in our case.  If you sell anything you are supposed to claim it as income.  This does not mean it is a business you can claim income and remain a hobby.  It is up to you to decide if it is a business or a hobby but either way they want their due.
If it is a hobby you cannot claim the expenses or so I was told.

[Rapid Roger]

If you are really concerned about it, I would check with a LOCAL CPA or tax lawyer.
As for me, I believe in KISS. I doubt that you are going to make enough money to call it a living wage selling scroll saw projects.
Unless you are out peddling product other than a flea market or craft show now and then, I wouldn't worry about it. If you are collecting sales tax on each sale and REPORTING it, or have a SEPARATE bank account for the business, then you may have a real concern. (paper trails are hard to shake)
I was in business for 20 years and had to jump through ALL of the hoops including paying both my half of SS (and being a one man business) I had to pay the employers half as well!
I had my phone number displayed on my tool truck and someone turned in that fact to the phone company and my home number became a BUSINESS number which of course is more expensive.
These days being a retired hobbyist I don't concern myself with all the hoops. Someone sees one of my projects and wants to buy it, I sell it at a reasonable price for CASH! (or personal check) No sales tax or business account for checks or credit cards. If someone wants me to make something special for them, I quote a price or ask the person to provide the materials and build it. (If  I'm so inclined)
Granted, I don't make much money other than pay for materials and maybe $5.00 an hour labor and go on down the road. I do have some business cards that I give people who ask for them but, that is the extent of any ADVERTIZING that I do. It is tough trying to get business and stay out of the limelight at the same time. 
Anytime you start making a lot of money or cutting in on someone else's business, you are subject to being reported to the IRS. I would think the if your making that much money or taking that much business away from others, you wouldn't mind jumping through all the hoops. 

Rog

[Judy Hunter]

I think it is a good idea to obtain a tax number from your state. That way you can buy your supplies tax free. Because they are for resale as in wood, stain, etc. In other words anything that is to be part of the item.  Remember if you hold a tax permit, you will be required to file whether you have any sales or not.  Dunk is right on about showing a profit.

Most craft shows are required to  list their exhibitors to the tax department.  I suppose that is so they can check to see if there is a tax report filed by those exhibitors.

Items such as patterns, sandpaper, saw blades etc. are items that are used to make the item but are not actually a part of it, are to be claimed as deductions. Larger items like your saw can be either depreciated or used as a one time deduction.

You can also claim office supplies and equipment used in your business, as well as a percentage of your home expense (lights, heat etc.) if your shop/work area is in the home.

If you travel to do a show, your mileage, hotel, etc. are also deductible. So are any show fees.

These are some of the things I have learned after being in the craft business for many, many years. Hope they give you some things to think about.  BUT it is always best to check with a qualified expert.

[Dan26]

When you do it but stop enjoying it, then it is a business.

[julief]

My scrollsaw got my 2 kids though college.  Now it is a hobby.  I had a tax ID and filed taxes on my earnings.  Many venues require a Tax ID to show there.  I had commissioned items in book stores, pharmacies, galleries and gift shops.  They all required a tax ID for them to sell my items.  Turbo Tax will walk you through filing your deductions, but yes, you will have to pay taxes and social security on what you earned.  There are people employed by the states that will go to street fairs and market days to randomly check to see if you have a Tax ID.  I no longer have my Tax ID.  (or the hassle that goes with it).  Do I still occasionally sell my pieces.  Yes, I do.  I don't declare my sales or my expenses.  I don't believe a business card constitutes a business.  When someone asks for one, I give one.  Selling your stuff "here and there" to friends will probably not raise any eyebrows.  I still do custom orders, donate items to charities etc and nobody has ever questioned me.  If you are not actively seeking places to sell your items, and you are not making substantial money at it, I would leave it alone.  Just my opinion.

[EIEIO]

To be safe you need to pay state (maybe local) sales tax and federal, state, local income tax. In most cases if you sell pieces to a reseller who sels them to the public, there is no sales tax for you to pay, but still income tax. Unfortunately, scrolling income comes on top of any other income so it is taxed at your highest income tax rate.   

To be sure, you'd have to talk to a local lawyer o small business guy. Maybe there's a club in your area with some members who could advise, or a Junior Chamber of Commerce. There are lots of tiny businesses in any town that might be helpful (but don't try any that you might be competing against   ).

[agooday88]

Thank you all for your comments and advice.   
 I was just wondering if I was to start selling them, what I should do.
 I appreciate all your help for the future.

[Kragax]

When you do it but stop enjoying it, then it is a business.

That's what happened to me and photography. Now I just do things on the down low.