To be honest, I must confess that I am a FREAK of nature. I ENJOY doing my taxes. Well, I should say I enjoy organizing my finances, figuring my earnings, working on financial strategies. It's like raking the yard or cleaning the bathroom or painting the kitchen. Not exactly fun, but rewarding and satisfying. Spending time with your financial reality is a very good idea, especially when you are operating on a shoe-string budget. I'm no expert- I'm trying to learn what I can as the need arises, and I thought I would try to share some of the things I learn with you.
This year I learned about Sales Tax. It's the first year I have ever collected it because I officially became a business this year. These are different than your income taxes, which are due in April. In California, where I live, you report your earnings and pay your sales taxes based on a schedule provided to you by the state Board of Equalization (http://www.boe.ca.gov/). For me this is yearly, and happens to be due in January, so I filed already and got a head start on my BIG tax day stuff.
I found a blog post from last year that covers the basics of sales tax and a little bit about how it applies to Etsy sellers. Take a look: http://www.etsy.com/blog/en/2010/tax-tips-everything-you-need-to-know-about-sales-tax/
Etsy has a great feature that makes adding sales tax to your items pretty simple, but they can't tell you what tax rate you should be using based on where you live, so you'll have to do some research on your own. Remember that each state is different! To set the tax options on your shop go to Shop Settings>Sales Tax Settings.
In CALIFORNIA, my BIGGEST TIP is to keep track of all your sales made within the state of California, and look up the COUNTY right away. Store this info with the record of your sale. You will have to report how much money was sent to you from each California county when you file (because of varying sales tax rates, I suppose) and it is a PAIN to look up each county when you have a huge list of sales in front of you (ok, it wasn't as huge as I would have liked).
The other great TIP, which they mention in the blog above, is try to be as accurate as you can in your tax collection because you cannot keep any extra money and if you come up short it will come out of your own pocket. No fair. Life (and taxes) are not fair.
I hope this will help to get you motivated about tax time. Now is a good time to at least begin organizing your books and figuring out what you will need to do to square things with Uncle Sam.
I'll try to post helpful things as I advance in my own tax adventures. Good luck everyone, and HAPPY NEW YEAR!
Laurel http://www.etsy.com/shop/LaurelBushman
