taxes and beekeeping

[tbrinck]

So I'm starting this year with two hives. I'm keeping all recipts for everything bought. i was wondering if anybit of what i bought could be written off on taxes? Also at what point would i start recording sales from honey, creams etc.. on taxes? I read somewhere you only record if the profit is higher than expenses. Also would i need a buisness license to sell at farmers markets and such?

Thanks
tyler

[AllenF]

Are you running it as a business or a hobby?   I can tell you that I do not make any money in all my farming activities.  It is so hard to keep up with cash sales anyways.   

[Moots]

Tyler,
No doubt, this is going to be state specific, if not local government specific.  I'm in Louisiana and already have an LLC set up for a rental property.  I'm expensing everything through my LLC for the tax advantage.  Needless to say, I'll have to claim all sales because of that.  That's a trade off I was comfortable with knowing my expenses would outweigh my income for the foreseeable future, if not for ever.  My rental property will keep my bottom line in positive territory, so I don't have to worry about Uncle Sam freaking out because I'm always showing a loss.

I also assumed this meant I would have to collect sales tax.  However, after talking to the local tax office, they said that I would be considered a farmer and therefore was exempt from having to collect sales tax.  

[tbrinck]

I was just planning on selling honey and body creams made from propolis,wax etc.. primarly at local events such as a farmers market. was not sure if that would automatically make it a buisness or not.

[Moots]

I was just planning on selling honey and body creams made from propolis,wax etc.. primarly at local events such as a farmers market. was not sure if that would automatically make it a buisness or not.

"Technically" I would think any sales are suppose to be claimed.  In reality, I'm sure there are many that handle it on a cash basis and don't report it.

I think the real problem is if you try to have the best of both worlds, if you're not planning on claiming the income, I'd forget any idea of writing off expenses.

I can't see much chance of a problem if you doing it out your house.  Setting up at a farmers market may or may not complicate the issue.  I'd check with someone else that sells at the market or inquire with who ever runs it as to how most folks handle this.

[Joe D]

Check with IRS FEDs and State, some will classify it as a hobby until you make so much money.  So can't claim losses while getting started.  I used to raise, train and sell registered Coonhounds. That's what they told me the first years when I was getting started.  With kennels, runs, dogs and vet bills, so I figured if I can't claim loss to start with why should I claim a profit latter.
When I sell the little amount of honey that I do sell the money goes back into upkeep anyway.



Joe

[Michael Bush]

If you sell anything it's income.  If you have expenses to put against those sales you will decrease your income... if you take a loss to many times the IRS starts insisting it's a hobby...

[bluegrass]

With the IRS you have to declare income even if it is only a single jar of honey. You can declare as a business or a hobby, but you better be able to prove intent to turn a profit if you declare as a business.

For example: if you spend $600.00 on two hives and sell 4.00 worth of honey and declare as a business you can deduct the cost of the hives and show a net loss. On the other hand if you declare as a hobby you pay taxes on the $4.00 and the $600.00 doesn't change that liability.

If you declare as a business with the same hives and don't have advertising expenses, separate checking accounts etc... they can accuse you of wrongfully filing as a business and then there are penalties. With two hives it is doubtful that they would see you as a business. So to be safe I would declare as a hobby, in which case the hives usually are not deductible.

[johng]

You are supposed to  claim the money as hobby income you can claim the expenses to lower the income back down to $0. So there is no taxable income but, you can't claim a loss on hobby income. If its a business you can claim a loss for the first few years. That's the way I understand it.

[AliciaH]

First, talk to your accountant.  If you don't have one, ask around and find one that you can pay a small consultation fee to for advice.  You need specifics not only for your state, but maybe for your city if you live within city boundaries.  Your accountant may recommend sole propriatorship, LLC, or maybe even just using a Form-F.

Keep all the expenses and income for this activity separate from your household stuff.  Any muddling will nullify your ability to provide proof that you're trying to build a business.

As for farmer's markets, be sure to check into that very carefully.  I know our markets here charge a high fee for booth space, making it too costly for the small beekeeper.  Also, some markets even have expanded requirements for the facilities you should be using to make your products, regardless of local farm produce regulations.  This, too, may add to your costs.  Word of mouth is great...and free!

[RC]

If you make enough honey to sell, sell it to individuals for CASH, put it in your pocket and keep your tater trap shut.
The less you involve the Government in anything, the better you'll be in the long run.

[Ray Bayless]

If you make enough honey to sell, sell it to individuals for CASH, put it in your pocket and keep your tater trap shut.
The less you involve the Government in anything, the better you'll be in the long run.

+1, I like the way this guy thinks.

[greg755]

Technically, whether state or local you can only deduct expenses if you are a business.  With that being said, you dont HAVE to make a profit to deduct your expenses, but eventually the IRS will audit you if you continue to deduct expenses and you dont show a profit.  At that time they will tell you that this is in fact a hobby and you do not qualify for deductions...  I found this out one day in an audit.   Doing all cash sales and not reporting income is all well and good until you get caught.  Keep in mind that if they decide to audit you, they can request up to seven years of records...  What ever you do NEVER collect sales tax unless you file with the state.

Best advice is be above board.  Get a DBA, get a federal EIN number and open up an account strictly for the business.