# Questions about starting clothing line site



## Jmanindie93 (Apr 12, 2011)

Hey everyone. I have been strongly considering try to get a small site started for a clothing line. I already have a couple designs, and me and my brother are going to continue working on more. But I think were almost good to get started with what we have. I was wondering about legal things, such as licenses, taxes, etc. I live in Oregon, there is no sales tax here, so I wouldn't charge sales tax to anyone no matter what state they're in correct? And since its a website and not necessarily a business do I need to register the name still? And if I do register a business name, will it work for doing both local custom printing and whatever I do on the site? Also, taxes. I do not currently pay income taxes. I'm still living with my parents and going to school. Since I am starting a business will I have to start paying them, or only if I make a certain amount? And how do I know how much to pay? And how can the IRS know if I even actually made anything? Thanks, I hope someone is willing to take the time to help me.


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## ishredbanez (May 14, 2011)

I work a part-time job, so my situation is a little different than yours and I'm not exactly sure on the whole situation either.


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## Jmanindie93 (Apr 12, 2011)

Someone here has to know these answers. Anyone?


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## kimura-mma (Jul 26, 2008)

Jmanindie93 said:


> I live in Oregon, there is no sales tax here, so I wouldn't charge sales tax to anyone no matter what state they're in correct?


Correct.



Jmanindie93 said:


> And since its a website and not necessarily a business do I need to register the name still?


If you are creating a product and selling it for profit, you are operating a business. The fact that it is an online business is irrelevant. You are required to register your business, apply for the proper licenses and pay the appropriate taxes.



Jmanindie93 said:


> And if I do register a business name, will it work for doing both local custom printing and whatever I do on the site?


Yes. But you may need separate licenses or permits for the two types of businesses.



Jmanindie93 said:


> Since I am starting a business will I have to start paying them, or only if I make a certain amount?


Yes, you will definitely have to start paying taxes. How you pay them will depend on your business structure. If you set up a sole proprietorship and have profits under a certain amount, you can file on your personal tax return. If you set up an LLC or Corporation, the business is a separate entity and will file it's own tax return. Since your parents are claiming you as a dependent, you should discuss this with them and should probably also consult with a local accountant.



Jmanindie93 said:


> And how do I know how much to pay?


Depends on how much you make, what your expenses are, etc. Keep receipts for EVERYTHING. Track all sales. Have your parents or an accountant file your first few returns until you learn how to do it yourself.



Jmanindie93 said:


> And how can the IRS know if I even actually made anything?


If you register your business, you will be on file with the IRS and will be required to file a return whether you make money or lose money.

If you don't register a business, the IRS won't know you exist. But good luck opening a bank account, wholesale account, etc without the legal paperwork. The penalties of operating an illegal business are greater than the fees to start a legal business. Do yourself a favor and set up a legit business. It's not that hard.


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## Jmanindie93 (Apr 12, 2011)

Can I include the cost of my press kit and everything on my return as expenses? Do I need receipts for it?


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## Sport T (Nov 10, 2010)

Keep receipts for everything you purchase for your business and your press and all supplies are expenses that you can deduct.


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## Jmanindie93 (Apr 12, 2011)

I can see that making it difficult to show profit on the first return. Lol.


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## kimura-mma (Jul 26, 2008)

You're expecting to show profit on your first return? LOL!


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## Sport T (Nov 10, 2010)

It's good to have high expectations.


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## Jmanindie93 (Apr 12, 2011)

Of course not. So if I dont buy supplies by the second return other than shirts, I will most likely show an actual profit that time?


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## kimura-mma (Jul 26, 2008)

Expenses are going to be a necessity of operating a business. You will show an actual profit on your tax return when your revenue exceeds your expenses. I have no idea how long that will take... could be 1 year, could be 5 years.


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## Jmanindie93 (Apr 12, 2011)

Oh. So its the expenses as a total, just adding up with each return along with what I make? Not the expenses vs what I make between each return?


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## kimura-mma (Jul 26, 2008)

Sorry, not following your questions.

Hopefully this will clarify...
Each year, you need to report your business revenue and expenses. So you will record all revenue and expenses from January 1, 2011 - December 31, 2011. This is due April 15, 2012.

And then you will start all over again and record revenue and expenses from January 1, 2012 - December 31, 2012. This return will be due April 15, 2013.

Make sense?


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## Jmanindie93 (Apr 12, 2011)

Makes a lot of sense, thank you. is it a percentage of profit that you pay and is it usually fairly small?


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## Sport T (Nov 10, 2010)

Sales and expenses are accumulated each year. Take your total sales each year and deduct your expenses and if anything is left over you made a profit for that year. Expenses are anything used in the everyday operation of your business from pencils to T-Shirts, screen printing and even your gas going to the screen printer. Keep all receipts as it is the only way you have of proving your expenses even if you write a check for it. Make a copy of any receipts that are printed on thermal paper as the image will fade out in a few months and you will just have a blank piece of paper.


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## Jmanindie93 (Apr 12, 2011)

I can probably log back in on sites and print receipts out in order history.


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## kimura-mma (Jul 26, 2008)

Jmanindie93 said:


> is it a percentage of profit that you pay and is it usually fairly small?


It really depends on a few variables. But yes, it's based on how much you make. The more you make, the more you pay.


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## Jmanindie93 (Apr 12, 2011)

Just to be clear. The IRS trusts people to be honest about what they make?


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## Sport T (Nov 10, 2010)

They trust you to be honest until they have reason to believe you are not reporting true figures. Then they audit and trust me they will require you to document every penny. You do not want to be caught not reporting income.


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## kimura-mma (Jul 26, 2008)

Not really sure where you're going with that question. But let's put it this way... unless you are only doing cash transactions, there will always be a paper trail for every dollar you spend and receive. Don't think you can hide money from the government. If you get audited, you will pay big time.


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## Sport T (Nov 10, 2010)

Tim, it sounds like you have been through one of those special meetings with uncle sam like I have.


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## Jmanindie93 (Apr 12, 2011)

And say I remain open for years and only report the small amount I make each year, but am honest. I can be audited, but since I have been honest I dont need to worry right?


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## Sport T (Nov 10, 2010)

I don't want to scare you. Just be honest and keep good records and you don't have to worry.


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## kimura-mma (Jul 26, 2008)

If you do your taxes honestly and properly, you shouldn't get audited. But I suppose it's possible it could happen anyway. But you wouldn't have much to worry about since you have done them honestly and properly.

Out of curiosity, is there a reason you are so concerned about this? Why not just have an accountant help you out?


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## Jmanindie93 (Apr 12, 2011)

I'm not concerned. Just curious. It won't hurt to know about these kinds of things. So really if you were gonna lie, you could probably do so with cash transactions? No I am not planning on lying. Still only curious. Curiosity killed the cat though didn't it?


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## kimura-mma (Jul 26, 2008)

Kinda odd that someone who has never filed a tax return is so curious about how to deceive the IRS. Just saying.

You wouldn't really lie about cash transactions, you just wouldn't report them. But it wouldn't make sense not to report cash purchases, since those are deductions. If you make cash sales, I suppose you could pocket the cash and not report it. But since you are selling online, how many cash sales do you really expect?


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## Jmanindie93 (Apr 12, 2011)

I was meaning for local business. I'm not going to deceive the IRS, trust me, that would defeat the purpose of this. Thanks for all the info.


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## DayDreamerCr8 (Mar 23, 2009)

With all your questions answered the only that I will have to add is that if you decided to set-up as an LLC but you are the sole owner you will be taxed as a sole proprietorship. Also, you may need a sales and use tax id with your state. I know you mentioned that Oregon does not have a sales tax but the sales and use tax is a bit different.


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## Jmanindie93 (Apr 12, 2011)

What is use tax?


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## DayDreamerCr8 (Mar 23, 2009)

Jmanindie93 said:


> What is use tax?


A tax you pay to the state for the privilege of using a product to sale. You pay taxes on the product sold whether you make a profit or not. It's all a racket.


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## Jmanindie93 (Apr 12, 2011)

When I was looking at filinginoregon.com it said you only do the 1040 and schedule-c


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## DayDreamerCr8 (Mar 23, 2009)

Jmanindie93 said:


> When I was looking at filinginoregon.com it said you only do the 1040 and schedule-c


That's correct but that deals with your federal income tax filed every year. The sales and use tax (at least in Virginia) is filed every month.


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## Jmanindie93 (Apr 12, 2011)

My parent's business, restaurant, doesn't do that. And it would be for all businesses right?


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## Jmanindie93 (Apr 12, 2011)

My parent's business, restaurant, doesn't do that. And it would be for all businesses right?


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## Jmanindie93 (Apr 12, 2011)

I just read that Oregon is one of five states that don't have a sales or use tax on consumers.


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## DayDreamerCr8 (Mar 23, 2009)

Two thumbs up for Oregon


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## Jmanindie93 (Apr 12, 2011)

I thought of one more question. So this year's return would be from Jan 1, 2011 - December 1, 2011, and would include expenses during that year. But after that, in 2012, would I still count the previous expenses, or start over clean?


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## kimura-mma (Jul 26, 2008)

You would not carry over expenses. 2012 would start a new fiscal year.


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