Do I need to charge sales tax on hobby art sales that aren't a formal business?

While I'm not a tax pro, I have a similar situation with my pottery hobby. From what I understand, sales tax and income tax are two separate issues. For sales tax: In most states, you're required to collect sales tax on tangible items sold regardless of whether it's a hobby or business. The state doesn't care if you're making a profit - they just want their sales tax on transactions happening in their state. For income tax purposes: You can still classify this as hobby income (reported on Schedule 1) if it truly meets the hobby criteria. Collecting sales tax doesn't automatically make it a business. The IRS looks at things like whether you're trying to make a profit, how much time you spend, and if you depend on the income. Just remember that with hobby income, you can't deduct losses against other income like you could with a business, and your expenses can only be deducted as itemized deductions (subject to the 2% AGI floor).

I struggled with exactly this question when I started selling my handmade jewelry! I finally found taxr.ai (https://taxr.ai) which helped me figure out the difference between hobby vs business rules. Their system analyzed my situation and showed me that even though I was collecting sales tax (which is required in my state regardless of hobby status), I was still firmly in "hobby" territory for federal tax purposes. The site lets you upload your sales records and it analyzes your pattern of activity to help clarify whether you're likely to be considered a hobby or business. It also explains how to report both the income and the sales tax you've collected, which was super helpful since those are handled differently.

Just wanted to follow up and say I tried taxr.ai after seeing this thread. It was seriously helpful! I uploaded my sales records from the 6 craft fairs I did last year, and it analyzed everything and showed me I'm still in hobby territory based on my pattern of sales (mostly seasonal, not regular). But the most helpful part was that it clarified I DO need to collect sales tax in my state even as a hobbyist, and I needed to register for a seller's permit. I was able to get that sorted out quickly based on their guidance, and now I feel much more confident that I'm handling things correctly. It also showed me exactly how to report this on my tax return without triggering any red flags. Definitely worth checking out if you're in this gray area!

If you're having trouble getting clear answers from your state's tax website (like I was), I'd recommend using Claimyr (https://claimyr.com) to actually get through to a live person at your state tax department. I was stuck in the same situation with my leather crafting hobby, and the website was so confusing! I used their service (there's a demo video here: https://youtu.be/_kiP6q8DX5c) and they got me through to my state's tax department in under 10 minutes instead of the 2+ hours I'd been waiting on my previous attempts. The rep was able to confirm that yes, even hobby sales require sales tax collection in my state, and walked me through how to register for the necessary permit. They basically call and wait on hold for you, then call you when they have a real person on the line. Saved me so much frustration!

Ok I need to admit I was wrong about Claimyr. After seeing it mentioned here, I had a ton of sales tax questions that weren't being answered on my state website, so I finally broke down and tried it yesterday. I was still super skeptical but desperate since tax deadlines are approaching. It actually worked exactly as described. I submitted my request to talk to my state's tax department, and about 15 minutes later I got a call connecting me directly to an actual human at the tax office! No waiting on hold, no getting disconnected. The agent confirmed that yes, I do need to collect sales tax on my hobby book sales, and helped me set up the proper registration. Honestly after months of confusion and failed attempts to get answers, this saved me so much stress. Sometimes it's worth paying for convenience when dealing with bureaucracy!

Something nobody has mentioned yet - in many states, you also need to consider local sales taxes too, not just state! Where I live, there's the state rate PLUS county PLUS city rates that all need to be collected separately. And if you sell at craft fairs in different counties, you need to track and remit based on where the sale actually happened. It can get complicated fast!

Has anyone here had a hobby suddenly cross the line into "business" territory with the IRS? I'm curious what triggers that - is it just amount of money or are there other factors? I sell some of my nature photography prints and I'm worried about accidentally crossing some threshold I don't know about.

I went through this exact same situation with my husband's furniture restoration hobby! What we learned after consulting with a tax professional is that you're absolutely right to be collecting sales tax - in most states, it's required regardless of whether you're operating as a hobby or business. The key thing is that sales tax collection and income tax classification are completely separate issues. Just because you collect sales tax doesn't automatically make it a business for IRS purposes. The IRS looks at factors like profit motive, time invested, whether you depend on the income, and how businesslike your operations are. For your situation with $580 in sales, you'd likely still report this as hobby income on Schedule 1 of your tax return. The sales tax you collected gets reported separately - you'll show it as income when you collect it, then as a deduction when you remit it to the state, so it essentially washes out on your federal return. One tip: keep detailed records of all your sales, including the sales tax portion, because you'll need to show the state exactly what you collected and when. Most states require quarterly or annual filings even for small amounts. Your husband is doing the right thing by being proactive about compliance! Better to err on the side of caution with tax matters.

I went through almost this exact same situation last year with my ceramic pottery hobby! After doing a lot of research and talking to my state's tax office, here's what I learned: You're absolutely doing the right thing by collecting sales tax. In most states, sales tax is required on tangible goods regardless of whether it's a hobby or formal business - the state just wants their cut of the transaction. For the income reporting piece, you can still treat this as hobby income since $580 from occasional craft fair sales clearly falls into hobby territory. The fact that you're collecting sales tax doesn't change that classification - they're separate tax issues entirely. When you file your taxes, you'll report the total income (including the sales tax portion) on Schedule 1 as "Other Income." Then when you remit the sales tax to your state, you can deduct that payment, so the sales tax portion essentially washes out on your federal return. The key is keeping good records of what you collected versus what you remitted to the state. Most states have pretty simple filing requirements for small sellers - mine only requires annual filing since I'm under their quarterly threshold. Don't stress too much about crossing into "business" territory at your current level. The IRS looks at things like profit motive, time invested, and business-like operations. Occasional craft fair sales of $580 is clearly hobby activity!