Is there a dollar amount required before claiming income from selling handmade items on Amazon?

by Chad Schweighart, CPA | Jan 04, 2019
askacpaicon

If I wanted to sell handmade items (nonclothing) on an Amazon artisan marketplace, do I need to reach a certain dollar amount in a year before I have to claim it as income? Also, if I need to charge sales tax, what do I need to do to get started?

The threshold before you are required to pay Self Employment taxes is $400 of income. Once your gross $400 or more, the filing of a Schedule C is required. You will be able to reduce the gross sales amount by allowable business expenses, so it is possible to get the amount below the threshold of self-employment tax.

As for the sales tax portion of your question, it depends on the state you reside in. If you are a Pennsylvania resident, you will need to file a PA-100 to register for a sales tax license. You will be required to collect sales and use tax for sales to Pennsylvania residents and remit them. You should check with your tax preparer to determine if there are other jurisdictions you will be required to collect and remit sales tax in.

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

Answered by: Chad Schweighart, CPA, is an accounting manager with Gift & Associates in Mechanicsburg, Pa.

Disclaimer
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.
Ask a CPA

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.

Search