chickenscratch Posted January 16, 2008 Report Share Posted January 16, 2008 Is there anybody else on this board who is quilting as a business (full or part time) in Tennessee? The reason I ask is because I am having major issues, and after the big fight with my husband last night, may need to quit trying to quilt as a business. I got tax stuff in the mail for the 2007 year. The state says I have to pay $1600 in sales and use tax for the year. I have been reporting quarterly that I have made $0 on up to the $493 I made in the last quarter. My total earnings all year have only been $793. It is stupid that I have to pay more than I made. But, according to what the tax man on the phone told us, that is standard for a sewing and production business. I'm looking for a second opinion. Then last night, we got a thing for business tangible property tax that says I have to pay $2120. The only equipment I have for my business is my longarm, a half roll of batting, and 15 or 18 half used spools of thread. My longarm is only worth $2500. SO, because it is going to actually COST ME $2927.00, not to mention thread and batting costs, I'm going in the hole having my business. The guy my husband talked to recommended just turning in my state tax ID number and doing quilting as a hobby, not a business. ANY HELP WOULD BE GREATLY APPRECIATED. Link to comment Share on other sites More sharing options...
JenMcManus Posted January 16, 2008 Report Share Posted January 16, 2008 Wow Teresa, I hope that someone out there can help you. Not only does this not seem fair, how can it possibly be right???? I can\'t comment on Tennessee law, but I know if that were the case in other states, a lot of us just starting out would be in deep doodoo. Jen Link to comment Share on other sites More sharing options...
Guest Smile&nod Posted January 16, 2008 Report Share Posted January 16, 2008 Have you tried contacting your local economic development officer (or equivalent...not sure what they are called out there) and discuss micro business/home based business vs a full retail location? Like Jen said, I don\'t know anything about Tennessee law, but it sounds like they are presuming you are a full fledged manufacturing operation, when in reality you are running a home-based business. You could also try your local Chamber of Commerce for information. Try to find out if there are any special dispensations for home-based businesses. Best of luck. Link to comment Share on other sites More sharing options...
quiltmonkey Posted January 16, 2008 Report Share Posted January 16, 2008 I agree with Toady & Jen that somethin\' ain\'t right here... Do you have a CPA that does your taxes? The advice your got from Toady about your local Small Business Development Association (SCORE office) is excellent - the professional advice you get from that office and the references are free to you. I use them! Link to comment Share on other sites More sharing options...
RitaR Posted January 16, 2008 Report Share Posted January 16, 2008 I pray you find theres a lot of info given to you that is wrong. Do check them all out.. Tell them you are a cottage business, not a manufacturing company.. ask the cpa, Better Business and any tax office you can reach. I\'m next door in NC.. have to file tax info for the first time.. already filed a quarterly. Maybe you could turn in your tax no. and charge to keep your "hobby" going. Best of luck. I\'ll u2u you in a little while. RitaR Link to comment Share on other sites More sharing options...
jkerekes Posted January 17, 2008 Report Share Posted January 17, 2008 Teresa, That doesn\'t seem to make any sense! Good luck sorting this out! The federal and state governments WANT small home-based businesses to succeed because we make economic sense-especially if our businesses are the 2nd family income. Definitely check this out! Jill Kerekes Link to comment Share on other sites More sharing options...
chickenscratch Posted January 17, 2008 Author Report Share Posted January 17, 2008 I am going to end up having to take a day off work to try to go talk to somebody. We\'ve talked to 2 different people, one a CPA, the other from a local tax preparation office and they both say the same thing... because I didn\'t make a certain amount of money to figure taxes on, I have to pay the state minimum for this type of business. There evidently is no difference between whether it is a large retail business or a room in your home. I personally think it\'s a great big crock of @*$&, but I\'ll try to find out what I can. Maybe this is another way of telling me that this is just not the business for me. ..It seems like every time I get a little bit ahead and my confidence goes up a bit, I get knocked all the way back down. Link to comment Share on other sites More sharing options...
yeoldeforest Posted January 17, 2008 Report Share Posted January 17, 2008 Teresa, This doesn\'t seem to pass the "smell" test. Are you sure the documentation your received is legitimate and not a scam? A state sales tax is usually on items sold. I would guess that the $793 you earned, part of that was for services and not for actual products and not even applicable for a state sales tax. Good luck and I hope you find that a mistake has occurred. Let us know what happens. Here is the website for Tennessee\'s state and use tax. http://www.tennesseeanytime.org/tnanytime/apps/bizreg/demo/tax_loc.html If you click on Sales and Use Tax, you will see a couple of documents - Look at Frequently Asked Questions and the Tax Guide (PDF) Stay away from the local tax prep office. Find a CPA who may offer a free consultation. SCORE, like mentioned earlier, is a great resource. Also, see if there is an non-profit office near you that supports women/minority businesses and/or contact your local community college. The community college usually offers small business classes and should know all of the in and outs for a business in Tennessee. Call the person who teaches these classes and make an appointment to talk with him or her...conversation should be free and informative. Good luck... Link to comment Share on other sites More sharing options...
quiltmonkey Posted January 17, 2008 Report Share Posted January 17, 2008 Joanne, who is a CPA, and a great quilter, gave you great advice. Teresa, here is another idea, too... try talking with a Tax Attorney - one who specializes in tax. If I were really getting some weird info, such as you have, this might be a wise idea... More food for thought. Link to comment Share on other sites More sharing options...
Quiltsinmotion Posted January 17, 2008 Report Share Posted January 17, 2008 Good luck Teresa , we are all pulling for you Something smells bad Link to comment Share on other sites More sharing options...
chickenscratch Posted January 17, 2008 Author Report Share Posted January 17, 2008 I know the paperwork is legit, because it came from the State of Tennessee Department of Revenue; and that is the same address and phone number the state website lists. My husband is going to try to solve this problem today. Hopefully he\'ll get some answers. If not I will try to find someday to talk to on Monday, when I am off work. Link to comment Share on other sites More sharing options...
Mary Beth Posted January 17, 2008 Report Share Posted January 17, 2008 Try to find other in home businesses and ask them what they do. Good grief girl, I have never heard of such a thing. I bet there is a lot of "under the table" businesses in Tennessee!! Link to comment Share on other sites More sharing options...
Farmwife Darlene Posted January 17, 2008 Report Share Posted January 17, 2008 Are there any other quilters in TN that you could ask about this? Surely you\'re not the only one in TN. This is discouraging but you can\'t let them get you down. You are a super lady and a wonderful quilter! This may be a stumbling block for you but you can overcome this. Just keep the faith and know that you\'re not alone. God is with you and you have your friends here to give you moral support as well!! We\'ll keep you in our prayers. Link to comment Share on other sites More sharing options...
Guest Smile&nod Posted January 17, 2008 Report Share Posted January 17, 2008 As a dreaded gov bureaucrat I can tell you this much...its the responsibility of the government to collect as much tax $ as they can from Joe and Jane Public. Its the responsibility of Joe and Jane Public, to research and use every avenue to pay the minimal legal amount of taxes. Don\'t trust necessarily what the "taxman" tells you. He/she may be technically correct but depending what branch of the service they are in, they may not be so willing to share the "loopholes" with you That\'s what the business associations are for...to help folks like us who happen to run our own biz too. Hopefully all goes well for you and you can find out what pertains to your biz. Just be sure you\'ve had all your activities for 2007 documented...you may need to draw on that recorded information. Best of luck. Link to comment Share on other sites More sharing options...
Pam.Nagle Posted January 18, 2008 Report Share Posted January 18, 2008 Hi, Here\'s what I found out for Washington--I\'m in the midst of doing the Excise/B&O for three businesses. Any items that you purchased for use in the business and didn\'t pay sales tax on and the item is not for resale, you owe use tax (same as sales tax), so I now owe "use" tax on my Millie & CQ, pantos, CQ designs, etc. But, and I\'ll find out later, if I didn\'t meet the minimum sales for the year, i get a B&O credit, but still have to pay the sales tax. I only quilted five quilts that I got paid for. I feel your pain Teresa. I did download the how to file book and I\'m reading it. Link to comment Share on other sites More sharing options...
chickenscratch Posted January 18, 2008 Author Report Share Posted January 18, 2008 Pam, It\'s similar here, except I have to pay tax on what customers have paid me as sales tax on a service. It\'s still not looking good. There is evidently a $3200 expectation for businesses and if you didn\'t make enough to pay that you have to pay this minimum to the state. If you make under a certain $$$ you really don\'t make enough to have a business, according to our county tax agent. They will not be reissuing a tax ID or business license number to me for 2008, anyway. That was their decision, not mine. I\'m off work Monday, so I\'m going to try to find out more. I don\'t know if the small business admin office in Jackson will be open or not though, since it\'s a holiday. SO, I can do quilts and charge under the table (like so many others around here seem to do, with all kinds of businesses) or I can bust my tail to find a way to make a bunch of money. That\'s what I get for trying to do everything nice and legal like. It\'s just not fair. Link to comment Share on other sites More sharing options...
jkerekes Posted January 18, 2008 Report Share Posted January 18, 2008 Hi Teresa, Does this mean anyone in your state that has a small, home based business has to come up with these tax payments too? If so, do you have any people that sell Avon, Pampered Chef, Tupperware, etc. as a way to bring in a small income? How do they do it? This seems to be really, really strange......and very anti-small business. Best of luck to you. Jill Kerekes Link to comment Share on other sites More sharing options...
calicokat Posted January 18, 2008 Report Share Posted January 18, 2008 Oh Teresa, this is awful! I\'m sending hugs your way and keeping you in my prayers. I just got my tax ID up in Indiana this year and now I\'m nervous Keep us posted. kat in indiana Link to comment Share on other sites More sharing options...
RitaR Posted January 18, 2008 Report Share Posted January 18, 2008 Hi Teresa, that really does stink... and its not what I\'d call an encouragement to anyone to improve their situations, and allow job positions in bigger businesses open to others, thus a double barreled positive.. Having had a small business in Tx. and CA and now in NC, I\'ve found it\'s best to forget anything I learned in CA and TX and zero in on what is going on in NC. For instance in TX we could not charge tax on a service, that included Dry Cleaners, car washes, firing ceramics, etc.. In CA we had to charge for services.. In NC for now, no, but they are trying to get a law passed so we have to charge. Also in town, outside city limits the rules are diff.. also the county you are in may be diff than one two blocks away.. I\'d really hate to see you go out of business.. legally, but in siutations like this, I say do what you can. If you go down, take others in same situations with you. Sauce for the goose is sauce for the gander. It wouldn\'t bring good relations in the community, but you\'d be able to direct the local news reporters to the situation.. maybe change some situations. Hugs, and best of luck on a good solution. RitaR Link to comment Share on other sites More sharing options...
yeoldeforest Posted January 18, 2008 Report Share Posted January 18, 2008 For what it\'s worth...I starting looking more into this topic...a big difference exists between states...which has been mentioned a lot of times on this site...duh. NC collects an Income Tax so the state has a pretty steady revenue stream from its people. Possibly, because NC does collect an income tax, it is a more "business" friendly state. We get more "breaks" than those states that do not collect an income tax. Tennessee, I don\'t think, collects an income tax from its citizens, so that state\'s department of revenue is looking to businesses of all types to fund its activities. Of course, this may be why Teresa is having a hard time and why there may not be too many people admitting they do business in TN. Did I say that? In NC, if I run a longarm business as a sole proprietor with an APQS machine (like a Millennium) these are the possible taxes that I may need to pay. (My caveat --- this is not paid advice so see a tax advisor in your state about these questions and of course, as shown, each state is unique but this may give you some ideas on what to ask your tax advisor) 1. I have to pay a possible local priviledge license to my county. 2. I should think about getting a Merchants Certificate of Registration (from the state) so that I can buy thread, fabric, patterns, etc at a wholesale price and resale with accessing a state tax... so I have to file a quarterly sales tax report with NC and pay this tax to NC. 3. If I manufacture quilts (this is different from offering a quilting service) from start to finish, I need to fill out paperwork from the Dept of Environment and Natural.... and pay a $50 fee since I am home based. Making potholders for quilt/vendor shows does not count as making quilts. 4.I need to file a DBA registration i.e. register my business name with the county where I am in business. 5.I do have to pay a personal property tax on my business equipment which is around 1% of the value of the machine and depends on a county/city combined rate. It looked like TN had a 3% or high property tax assessment. 6. I do not have to pay a use tax on my Milli since I will be selling thread, batting and backing at retail and charging NC state tax to NC customers. (this ties back to the Merchant Certificate of Registration) 7. I may have to pay a 1% priviledge tax up to $80 to NC if my Milli is classified as a mill machine...this ties back to if I manufacture quilts vs. offering quilting services. If I do not manufacture quilts for resale then my machine is not classified as a mill machine and I don\'t have to register with the NC Dept of Environmental and Natural... However, I can still be a business that performs long arm quilting services and I can still sale thread, batting, backing, etc. at a retail price. See the difference. Of course, all I\'ve shown is that each state is very different!! Pam - you may not have to pay a "use" tax, if you charge tax on backing, batting or fabric and/or have a resale license. At least, when I talked to a NC state rep here, he said if thread is used in my longarm services which is performed on my Milli and I charge a state tax on the thread (not the services), then the Milli is associated with the production of additional state tax from my company and thus I don\'t owe a use tax. Basically, you will have to give your tax advisor as much information as possible and then some to analyze the appropriate applicable taxes. His/her answers may determine how you setup your business. On the flip side, if you buy a Milli and you are not going in business then you most likely do owe a state Use tax if applicable to your state. I remember APQS specifically asked me when I purchased the machine if I were planning on using my machine for business purposes or not. Since I said I was using my machine for business, APQS did not charge me a use tax. However, if I decided not to go into business when I got my machine, I would owe the state of NC a use tax at 6.75% on the value of the machine around $1,215. Teresa - you did say this was "long".... and you did give me some things to think about with tax season right around the corner. I do hope it works out. Link to comment Share on other sites More sharing options...
chickenscratch Posted January 18, 2008 Author Report Share Posted January 18, 2008 Okay, here\'s what DH found out today. I have to pay tax on $4800 personal propery associated with a business. That will be whatever it comes out to be, probably about $70- not so bad. But I have to pay sales and use tax on $1600.00, but it is only about $140.00. That is a lot better than what we thought it was going to be; but it still sucks. So, by having a business in Tennessee, earning $793.00 all year is costing me $210.00,which is over 1/4th of what I made. And they still way they will not issue a tax ID number for 2008,so no more wholesale prices on Superior thread or for batting. Link to comment Share on other sites More sharing options...
veg-girl Posted January 18, 2008 Report Share Posted January 18, 2008 Ouch . Here in the UK it is very different. Talking to my accountant I can write off the cost of buying the machine over the next 5 years thus reducing my profit by approx $2000 each year (I plan to sell or close my shop in 5 years time). Any stock (inventory) that I have is taxed at 23% as an asset . The work that I do is taxed at 23% (ish) after I have been allowed approximately $10,000 tax free (that is how much an individual can earn without tax whether working for an employer or self employed.) I always thought our tax laws were very bad and the US was more generous, but it obviously depends on which state you live in. Link to comment Share on other sites More sharing options...
chickenscratch Posted January 18, 2008 Author Report Share Posted January 18, 2008 Jill, Actually my DIL sells Mary Kay and her grandmother sells Tupperwar. As far as I know they don\'t do the tax themselves, the tax goes to the Tupperware or Mary Kay company, I guess. There is a place to add sales tax to the order, but I don\'t know how it is figured as far as paying the state. Joanne, You\'re right. We don\'t have a state income tax,just .0975 sales tax Link to comment Share on other sites More sharing options...
Corey Posted January 19, 2008 Report Share Posted January 19, 2008 This is getting to be very complicated. What does a girl who wants to quilt for a living got to do? I feel your pain although I am still a hobby quilter as we speak/write. Hope everything will turn out good for you. You are a very talented quilter and it is just not fair. Corey Link to comment Share on other sites More sharing options...
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