Talk with others about the cottage food industry in Florida
Paying income tax
- November 3, 2013 at 1:59 am #2249
If you operate under the cottage food law, how do you pay income tax or do you not have to pay because you’re not making much profit and it didn’t require sales tax? People have told me that under a certain amount of money, you’re considered too low of income to need to pay. Is that true? I can’t seem to find any information about it.November 3, 2013 at 1:30 pm #2254
I am not a legal or tax authority, but I have dealt with some of this myself.
*** First: sales tax, and federal income tax, are two different issues.
I am not sure what the exact amount is, it used to be $400 for the year, and your income would need to exceed the amount they have set, before you are required to file and pay federal income tax.
You would need to consult with a tax professional (like H&R Block), or the IRS, to learn more about Federal Income Tax.
As for sales tax, normally this has to do with sale and / or shipment of goods within your own state. This is handled through the Dept. of Revenue, and some times a local tax collector office. Please investigate, which will be applicable for your area.
Usually, you would need to collect, and then pay tax on all transactions that sell and/or ship in the state of FL. In cottage food businesses, I don’t believe we are allowed to sell through the mail, so you would not be worried about that, but you may need to charge sales tax for the items you sell locally. Also be mindful that different areas of FL, will have different tax rates. When I lived in Miami, I paid 7% but now I live in Cape Coral, and we have a 6% tax rate. Sales tax is usually paid quarterly, and you have to apply / file, to get an account. You should verify this sales tax information with the Dept. of Revenue.
Please also keep in mind that, Cottage Food Laws limit your sales to a certain amount, that is not your income, that is sales, and sales tax, if it is required, is charged and collected on each sale. You don’t include that money in your total, that cottage food law sets, because that money (sales tax) goes to the state, and in some areas, also the city.
Thinking about your sales, lets say for example, your sales for the year total, NOT WITH SALES TAX ADDED, was $1000 for the year, that is under the limit that cottage food law sets for sales, but then you will need to deduct any allowed business expenses, and what you are left with, is your income. If that amount is over what the IRS has set, you would need to file and pay your federal income tax.
Again, I am not an authority, I just happen to know some info, because I have had to deal with this too. I hope the info I have given will help you understand what you need to be aware of for your business. Please investigate and verify the details as they apply to you.November 4, 2013 at 12:04 am #2256
Lots of good info Julie. In addition to that, I think you will be considered a self-employed independent contractor when tax time rolls around. At least in CA, you need to pay estimated taxes every quarter for your business, and you can get penalized if you don’t. Aside from estimated taxes, I don’t think you have much you need to do now, other than make sure you retain your business documentation and sales info.March 3, 2015 at 3:14 pm #16851
Do you know if deducting kitchen space and part of utilities/internet is allowable? Generally, with home businesses, you can only deduct what is exclusively used for the business, but I wonder if this is different for cottage food operations? Where can I find out more about this?March 3, 2015 at 6:09 pm #16859
I don’t think it’s different for CFOs. If you also use your kitchen for personal use, it can’t be deducted. I’m pretty sure about that, but not 100% sure. To learn more, you need to contact whatever tax authority there is in your area — the depts that govern this are different for each state, so I don’t know what yours is called.
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