Taxes on sold knives?

B

beading

Joined
Aug 1, 2018
Messages
3
Hey! I've been reading around this forum and others like it and have settled with here - I'm a workshop engineer and work mainly with wood but metal occasionally too. I want to do something like this guy (video below) sure you've seen it before but for anyone who hasn't it's super cool) and sell on what I make - I can imagine I wouldn't make much profit but that's not a huge concern of mine, it'd just be cool if other people bought stuff that I had made myself! I've had a poke around this salary calculator which has told me what tax my job is on - would any money from this store go on top of that? That's the only way that makes sense to me, unless secondary income will go on its own tax band scale?

I'm a little confused what way to go on this - definitely need more research into options. What do you think I should really be doing with this?

Cheers!

EDIT: Moved the video down here as it's embedded it itself - fancy! ;)
 
You’d be best off getting at least preliminary tax advice from a qualified professional. IMO you should have a conversation with an accountant. Just a guess, but I doubt your situation will be complex enough (or “big money” enough) to require ongoing CPA consulting. Nonetheless, I do think you’d be well-advised to do a beginners “rules of the road” conversation with a tax accountant. It might save you a major dose of DIY beginner tax grief. Tax advice from unqualified amateurs can be very costly advice. Good luck with your business.
 
As a small side business owner I must file taxes as a sole proprietor and my profits (sales minus all expenses) gets added to my regular income. I must file quarterly taxes both fed and state as well as social security taxes on my business income. You soon discover a good chunk of your sales price goes into someone elses pocket.
I often here people say "I could make them and sell them for less"......I could too if 35% was not paid out in various taxes.
 
and don't forget now you will have to collect taxes for all 50 states if internet sales are a goal and make sure it gets to the appropriate always depleted coffers .
 
Thanks for all the replies! I'll look into having a chat with an accountant. Thanks again! ;)
 
Your question didn't really make any sense to me until I looked at the salary calculator you linked and figured out that you are in the UK. I expect your tax laws are pretty different from the USA, so I'm of little to no help.

Generally, in the USA, you pay income tax on all the net income you receive from various jobs or occupations. However, things get more complicated and are different when you form various business structures such as corporations (S and C type), LLC, Nonprofits, etc., etc., etc. In fact our tax law is so complicated that no one person could know or understand it all. I expect the UK is about the same but different.
 
I don't know the tax laws in the UK, but where I live, private sales are considered income (even bartered items are supposed to be valued and reported to the IRS). There are also business registration fees and annual reports if you decide to actually declare a business.

In the US, if you want to separate your business income from your personal, you can make a C corporation (corporations are considered individuals by the tax man). However, you will be double taxed on the profit if you are the owner/CEO, as the Corp has it's own income tax, then if you take a salary you are taxed as a separate individual again. It really depends on what tax strategy and bracket you are trying to stay within. Remember that income is revenue, not profit. So if you make $100,000 from the business and you only make $1 profit, you are taxed on the $100,000 revenue.

We also have to charge the corresponding sales tax for city/county/state when selling as a business. Many people in my county drive to the next for shopping because of the lower sales tax there.
 
Last edited:
what. of course you don't want a C Corp. and of course you don't pay income tax on your revenue. at least we in the states subtract our cost of goods sold and operating expenses before we pay taxes. probably true anywhere money is made tho.

edit: yes it's likely your business income is added to your normal income for tax purposes. but i don't know the UK.
 
I think you are referring to tax deductions. You list your operating expenses because it is a tax deduction from the gross income (revenue). You pay income tax on your revenue, which also dictates your tax bracket, and list your costs for the associated tax deduction. If you make a knife for $1k cost, sell it for $1001, your revenue is $1001, your profit is $1, your tax is based on the $1001 figure, which you report the $1000 cost to deduct from the income tax. If you don't list the cost, the IRS and/or state tax department will come after you for the $250-$350 you owe in income tax. Your tax bracket will also be on the $1001 figure, even if it cost you $2000, and you took a loss.

I'm assuming from the OP's link, that he is worried about income brackets. A corp would separate the income from his personal income tax, which could maintain the personal income tax bracket of the owner(s)... at least in the states.
 
Last edited:
You must log in or register to reply here.
Back
Top