Hello crafty vendors! It is time to start thinking about filing your retail taxes for quarter 2 of this year, if you file quarterly.
“File quarterly? Taxes? Quarter 2? MATH IS HARD AND TAXES ARE SCARY I AM SO CONFUSED AND AFRAID, AMY. PLEASE HELP!”
Please don’t worry. I will show you exactly what you need to do.
Let’s start from the beginning. You have a tax license for your business, which means when you sell things within that taxing area (i.e. within your state or city or both), you must collect sales tax from the customer. You save this money, and then you must send it in to the state or city (or both) when they say so.
For me, the state says so every three months (quarterly!). It’s mid-June right now, so I am starting to think about this and getting my act together to file them. “Getting my act together,” means, “Checking to make sure I have saved enough money,” usually. Okay, always.
Aaaaanyway, money aside, filing is not difficult to do. Once you’ve done it for a year (i.e. 4 times), you will have it down, no problem. To file your taxes, you need to know several bits of information:
That’s pretty much it, and those are adding and subtracting. You have a calculator, right? I mean, really—you can do this. If you didn’t total up your sales for the last quarter, then that’s your current challenge—you have to keep track of these things to have a legit business. C’mon now.
Go get those totals. We are doing your taxes right meow. RIGHT MEOW COME ON PEOPLE JUST DO IT. You think this is hard because you have been taught that math is hard and taxes are scary. Neither of these sentiments is true. I will wait while you get those totals.
::waits patiently. Sips coffee::
Okay, here we go. Have a look at this image of my blank retail tax return from 2012. Most returns are very similar, and I would wager the process is near the same no matter what state in the U.S. you are in. (If you are reading this from outside the U.S., then I apologize—I have no idea of the tax laws in different countries.) Have a look at the ovals, and I will walk you through this.
1. Look at the yellow ovals, in the top-right space. The first thing you list is your gross sales total.
2. The next yellow oval beneath it says, “deductions,” and goes on to clarify, “Sales to other licensed vendors, for resale.” This is where you list your items sold as a wholesale deal, for the other person to sell. Put that total in the second yellow oval.
3. For the third oval, you copy the second oval. (We skipped “other deductions” because we don’t have any.)
4. Now find the yellow ovals on the left. The top one is for your “net sales.” This means you SUBTRACT the wholesale number from your gross sales. You do this because you don’t collect tax on items sold for wholesale.
5. One more subtraction! You now fill in any sales “out of the taxing area.” If you sell online a lot, this number may be large. That’s okay.
6. SUBTRACT those out-of-state sales from the net sales. This number will be your “net taxable sales.”
Still with me? Not difficult, and once you get the hang of this, you will figure out how to keep track of all of this in your personal record keeping, to make this even easier next time. Now we will move on to the blue and purple ovals.
7. COPY your net taxable sales (bottom-left yellow) into the top blue and purple oval sections. (Again, please note—your tax return may look very different from mine, which is from Colorado. Just find the place you need to be—you can handle this part. I'm certain the words they use are similar.)
8. Now, MULTIPLY your top blue by the tax rate listed below it. In my example. you can see that I multiply it by 0.011. WRITE that number below the tax rate, in the next blue oval. This is the tax you have collected for the state and must send in. Do the same for the top purples, with that different tax rate (Colorado with all of its differing tax rates! Gah!)
9. Now, your state may differ here. We get a little bonus back (::koffkoff very littlekoff::) if we file on time. That’s the next rate you see there. If you get that, too, then MULTIPLY your tax times that rate, and then you will SUBTRACT that from the tax you owe. If the result is less than 50 cents, don’t even list it—just ignore it.
10. COPY the tax you owe into the area of the bottom blue oval. Do the same for the bottom purple oval.
11. ADD the bottom blue and purple oval totals, then WRITE that number in the bottom red oval.
12. WHIP OUT your checkbook, and write a check to the state for the bottom-red total. Mail it off. Make sure to include the paperwork you just filled out, and remember to make a copy of it for yourself.
PHEW! You did it! Now, what have you learned? Do you keep records that are detailed enough to make this process easy? Do you need to change your finance system to make this easier? If so, do it! Create a spreadsheet, or set up Quickbooks (if you use them—I do not, but it might make my life easier—that’s one of those things I Should Look Into but never have time for), or create an inventory sheet for your sales. Whatever you need to do, making your tax time easier is WORTH IT.
What questions do you have? I will attempt to answer them in the comments!
(A version of this post was previously published on the Horseshoe Craft and Flea Market blog in 2012. You can read that version by clicking here.)
to sign up for my newsletter!
Who writes this?
Hi, I'm Amy Kalinchuk. I am an author, publisher, crafter, entrepreneur, roller derby skater, wife, mom, and friend. I try to be organized and maintain an air of enviable breezy elegance. I do not always succeed. But crafting? I can do that. And small business. I can do that, too. So can you! No, seriously, you can do this! I'll show you.