new business owner!!

[kusmaulk]

As of today, I am the proud new owner of a longarm quilting business!! I am intimidated and overwhelmed by all the legalese and tax stuff, but so excited at the same time.

My newest question is about dealing with sales tax. I am told that we have to charge for services as well as supplies. Is there an easy way to keep track and charge customers whole number totals? Or should I just start with whole numbers, and let the totals be whatever, after figuring the 6 percent? I'm also wondering how to charge for thread, not knowing how much it will take, and how much will be left over. These may seem like ridiculous questions, but I feel like I'm "playing store", and am confused about a lot of things mathematical. I've looked online at many machine quilters' price lists, but most of them do not mention sales tax.

Any guidance from those of you in the know would be appreciated and welcome.

Thanks,

Karol

Inverness, FL

[The Crafty Unicorn]

Karol,

Welcome to the wonderful world of the small business owner.

Sales tax is a pain in the backside, yes. But everytime I have to pay mine I think "O.K. this means you had sales" and it helps. Check with your dear friends in Tallahassee for the specifics on sales tax vs. use/service tax.

If you can swing it, I wholeheartedly recommend the Machine Quilters Business Manager software.

http://www.eurekadocumentation.com/

It does so much of the icky stuff for you. It will help you keep track of things you didn't even think of. The program costs about $150, but you will probably save that in accountants fees (or valium if you do your own taxes) at the end of the year.

[ffq-lar]

Congratulations Karol on your new adventure!

Where I live (Washington state) our combined state and local sales tax is 8.4%. This is added after all charges and fees (quilting, batting, thread, extra services, etc.) are totaled.

Once a year I received a form from the state which is filled out and totaled and one check is issued for all sales tax charges.

My state has a use tax where you are reimbursed for any items that you have paid tax on and use in your business--for example-- thread, batting, fabric, etc. that you have paid retail and sales tax on when purchased. If you buy batting from Joanns and pay sales tax on it, the amount will be rebated or deducted after you resell the batting.

This requires you to keep meticulous records and the software mentioned above is invaluable for tracking these items and costs.

FYI--my business is part-time and small so I do not claim use taxes each year. The record keeping eats up too much of my time and the amount owed back is negligible. If you plan on using an accountant or CPA, thay can guide you as to the best plan for your business in your state.

Again, welcome and happy stitching!!

Linda Rech

Olympia Wa

[ffq-lar]

Hello again Karol--

I recently upped my thread charges from 50 cents per bobbin to $1 per bobbin--I usually use pre-wound BottomLine bobbins which cost me about 65 cents each.

Also, I always tell my customers that sales tax will be collected on the total of all charges--either verbally on the phone or they read it at the bottom of the intake form when they sign it. Most people in my state are used to paying sales tax so it's not a shock. I have had customers tell me that "XYZ longarmer doesn't charge sales tax" and I just nod and say "hmmmm" since someone elses business practices are not my problem.

If you want to get your charges to an even amount, do the math for your services and supply charges, round it to an even number and add 10% to that--that will cover tax and thread charges probably. I can't think that fast so I give a complete breakdown of charges so they know exactly what to expect. Sometimes if the total is ugly--say, $202.43-- I have them write a check for $200 and they are happy and so am I.

The fun part of this new adventure is that YOU decide how much, when, where, and even sometimes who you will do your work for. Whooohoo! Have a blast and good luck!!

Linda R again

[CucumberQuilting]

You could move to Oregon where we have no state sales tax.

Just a suggestion. Congratulations!

~~ Eva H.

[Johnmach]

Yes, but there is a reason that your college teams are the DUCKS and BEAVERS! a LOT OF RAIN

Johnmach

[BethDurand]

We only tell the tourists about the rain so that they think it's like that all the time. Besides, rain makes for great weather to stay inside and quilt!

Beth

[Susanri]

invest in an accountant

[chickenscratch]

How does one find a good accountant for this type of business. I tried talking to my sister's sig. other, who is an accountant and does the paperwork on all three of their businesses; and he told me he had no idea since I was doing a manufacturing business and not a resale business.

[oregoncarol]

you can try quick books that is what i use. however i also

am in oregon. but i think it can help you calc ulate all your taxes

and they always have online help someone you can talk to anyway

quick books can make invoices , statements. and at the end of

the year just down load it and take it to an accountant to do the

year end stuff. . carol from oregon

[JudyL]

Teresa, our regular accountants have always been able to take care of everything I needed and they didn't seem to have any problems with it. We just had a regular CPA in KY and now we have a regular CPA here. I would think most anyone who does business taxes of any type should be able to help you with any questions you might have.

[Susanri]

Ours had no problem either they can really save you money. also look up s.c.o.r.e they can provide amazing help for iether low cost or free.

[quiltmonkey]

I agree with Susan (ToManyQuilts) about checking with your local Small Business office or (SCORE) - it is non profit and provides great resourcess and advice (free or very low cost). This organization knows your local community trends and can point you in the right direction with professional advice, etc.

First starting out with a business, I strongly recommend utilizing the professional services of a CPA. It's way worth the money (I consider this as an investment) to use professionals, especially in the beginning, so you are starting out right, and don't have to do damage control or fix things later. Stay in good graces with the IRS, especially if the business could be considered a hobby, like quilting. I have Quickbooks software so I can document my revenues and expenses through the year so it is all prepared for the CPA when tax season comes around.

I found my CPA by looking in my local phone book. We talked on the phone about the business and when we met, we reviewed my business plan. Would you believe that she's a quilter, too? So, it looks like we will be eachother's customers. LOL!

[juliagraves]

Check with your state sales tax department to see what is and isn't taxable. In Maryland, I have to charge sales tax on goods and services, but not classes!

As far as charging for thread, Superior Threads has an estimate of how much thread it takes to do various size quilts, based on the density of quilting: http://superiorthreads.com/index.php?option=com_content&task=view&id=269&Itemid=100

Here's from the website:

"Everyone's technique is different so the following are only averages. Of course it is possible to use much more or much less thread. These numbers are for the top thread only. Double them if you use the same thread for the bobbin. The three sets of numbers following the size represent Light Quilting/Medium Quilting/Heavy Quilting.

Laptop/Crib size quilt 200 yds./400 yds./600 yds.

Twin size 400 yds./800 yds./1,200 yds.

Queen size 600 yds./1,000 yds./1,600 yds.

King size 700 yds./1,500 yds./2,000 yds."

I've used this estimate for charging for thread, and it's pretty close. They also have published how much thread fits on a bobbin, so you can count your bobbins also. 185 yards of Bottom Line fits on 1 bobbin for the smaller size bobbins (like APQS takes).

I'm a firm believer of doing everything required for a business, including taxes. Why risk paying penalties, etc? Besides, it's the right (though unpleasant) thing to do.

Julia

[CucumberQuilting]

Oh, but Johnmach, I live in the High Dry Desert of Central Oregon. Don't follow the college teams much, but we have 300 beautiful days to golf! Uh, I mean, hang quilts to air...:cool:

Happy US Open, Father's Day !!!

http://www.usopen.com/webcast/

[yeoldeforest]

I am a CPA in NC and just bought a Millennium. I am starting a night time business "specializing in long arm quilting" but I am also a CPA since 2002 and work at the University of North Carolina at Greensboro full time in the Accounting Services. I don't mind answering accounting questions one-on-one. I can also perform CPA services and tax services for your company. Since I am new at my quilting business and trying to make money, my CPA rates will be very reasonable for the new business owners especially during the start-up stage. As I get more customers in quilting and as a CPA for quilting businesses, my rates will go up. So take advantage on my quilting "newbie" status and my real experience as a CPA. Send me an email at joanne@yeoldeforest.com or call me at (336) 638-5076.

As a CPA, my understanding is that you do not charge tax on services. Long arm quilting "services" are not taxable but selling products are taxable. As a CPA, when I prepare personal taxes, I do not charge sales tax since this is considered a service.

However, this is where it gets a little trickier. If you sale batting to your customers in addition to your quilting services, then you would charge tax on the batting. But the "price per inch" or your hourly rate you charge for quilting the quilt top is not taxable.

Another example, if you do not allow your customers to bring their own batting and you provide the batting as part of your services and pricing structure for quilting, then you would not charge sale tax as this is part of the services you provide. See the difference?

[mrsbishwit]

Just to make it clear on this topic so no one is confused, EVERY STATE IS DIFFERENT, when it comes to state taxes the only way to know for sure is to check with an in state or local CPA or your local tax office. Also some places requires you to pay city/ county taxes as well. So you really can not get any accurate info for your individual situation from someone that is not from your area when it comes to tax questions.

Please do not take short cuts when starting up your business because you may end up paying more in the end.

Joann

[oregoncarol]

joann is absolutely right. start out on the right foot

saves money and time in the long run. and each state is

different and each situation is different. good luck. carol

[ffq-lar]

My business, in Washington, is registered as "manufacturing" not "services" so I collect sales tax on everything. I took classes at Longarm University and a CPA did a one-day class on the business aspects of longarming. She advised us all to register that way. Again, every state has its own laws. Good luck.

Linda Rech

[Penpal83]

Hello karol i to am a new business owner. I did some research on the net and found a company that has long arm quilting software like quick books for quilting. You can make invoices and there is a place for tax. here is the link take a look.

http://www.eurekadocumentation.com

[countrystitcher]

My CPA gave me these neat forms to help him next year calculate taxes. A good CPA is invaluable!!! I'm not a record-keeper so these forms which are "simple" will keep me straight. I'd rather be quilting than keeping books!

[Mary Beth]

sooo, what are the forms...this question comes from one who hates numbers...

[ramona-quilter]

Karol in Florida,

Congrats on you new business.

This post gives some good tips for small business owners just getting started.

I use QuickBooks....well, my DH uses QuickBooks.

In California, your tax id (business license) requires that you indicate what your business will be selling. Quilting is called fabrication labor and it is taxable. I use (and collect tax on) batting that I sell for quilts and the thread charge that I assess for each quilt (flat fee $5.00). That license is what vendors want to see when selling me thread and rolls of batting at wholesale prices. As I had to point out to a friend, that license does not give me the right to buy snow tires at wholesale prices .

My invoice to the customer itemizes the quilting service, batting, thread and finally the tax. So the bill can easily be $142.12. And if I get audited, I have an invoice and a QuickBooks program that tells the story.

[Mary Beth]

I also use QuickBooks.

Along with what Shana said, check with your local county extension office. Ours is thru the University of Missouri, and we have a "Small Business Development Specialist" on site to answer questions from people in the community. They also offer classes at a very reasonable price and will work with you one-on-one at no charge. They work very closely with SCORE - which is a group of retired business people who work with new or small businesses to answer question or just assist in gettng you and your new business off the ground.

Good luck,

Mary Beth