Is having an LLC the best way to sell tickets through an online service?

by Ryan Raffensperger, CPA | Jul 30, 2018

I recently used an online service to sell tickets to a party, and they sent me an email stating that they need a tax identification number (TIN) because I am close to having sold 200 orders. Is an LLC as a sole proprietorship the best way to do this? If I list my Social Security number, then I will have to claim all of this as income, correct? 

You are correct in stating that if you provide your Social Security number for the online ticket vendor, then you will have to report the sales as income on your personal tax return. However, that fact isn't changed by the fact that you received the information statement showing the gross receipts. The IRS and Pennsylvania Department of Revenue state that all income, unless received as a gift, is subject to taxation and is to be reported on your tax return. Your suggestion of an LLC treated as a sole proprietorship does little to change the reporting of the income. The IRS deems a single-member LLC (an LLC as a sole proprietorship) as a disregarded entity, and the income and expenses of the entity are to be reported on the single member’s 1040 on the respective schedules, which in this case would likely be Schedule C. Creating a separate entity -- a corporation or an LLC to be taxed as a corporation -- may allow you to have the net income on transactions of the entity taxed at the corporate level. However, many small-business entities elect subchapter S status for better tax treatment, and the net income flows back to your personal return in the end as a result. You should seek professional advice for the best option in your particular case.

Assuming that you are operating this activity as if it is a business and not a hobby, the other item to consider is making certain that you track all of your usual and necessary expenses. There are obvious expenses involved in the acquisition of the tickets for resale, and there are likely other deductible expenses. All of that will need to be calculated before determining the amount subject to tax on your personal tax returns.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Ryan Raffensperger, CPA, is with Raffensperger, Martin & Finkenbiner LLC in Gettysburg, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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