business license

Post topics about the business side of magic.

Postby Guest » 09/12/03 10:24 PM

Hi I was wondering if anyone here knows whether or not you need a business license from your state and/or city to perform magic for a living because it is a business, even though your office will be in your home? Also if you have a home based business do you need a business license, I heard you only need it after you reach a certain income level. I live in california, does anyone here know the rules for california

Thanks
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Postby Steve V » 09/12/03 11:19 PM

That's a good question and I'd like clarification myself. I was told to get a sellers permit to be able to kind of be registered, that was with the Board of Equalization and it cost nothing. It means I get sent a form every year to pay sales tax. In some towns, like Fremont, you need a business permit from the city, which cost $5.00. If there is something more needed I don't know about it. Note, I'm in California about 90 miles South o' Davis.
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Postby Guest » 09/13/03 12:29 AM

yea thats why I posted the topic, nobody has brought the topic up. By the way right now I am in orange county, not up in davis, I guess I have to change my profile
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Postby Dustin Stinett » 09/13/03 01:27 AM

As a performer only, chances are you will not need a license, but every county and municipality is different, so check with your local city and county departments of commerce (if you live in an unincorporated area, then you need only to check with the county). If you are running a magic shop out of your home, that's a whole different game and chances are very good you'll need a business license. Again, that's your city and/or county's jurisdiction.

The California State Board of Equalization administers resale licenses and collects sales taxes. Services are generally not taxable, only those things that are tangible can be taxed. For example, when I owned my golf club repair and customizing business, I did not have to charge sales tax on any work that did not result in me adding anything to the existing equipment. But if I added a shaft or grip, those are taxable, so I collected the sales tax from the customer and sent it to the SBE (quarterly). That's how it works in California anyway. That's why mechanics charge for labor and parts separately: parts are taxed, labor (service) is not. If they did not itemize the two, the whole amount would be taxable. If, as a magician, you sell anything other than your service (for example, you sell Svengali decks after your show), you'll have to have a resale license from the SBE. If you travel, you'll need to become familiar with the sales taxes in any counties where you work. This is because each one is different (higher than the State minimum, whatever that is these days: it was 7.25% when I was in business, but Orange County was 7.5% so that's what I had to charge). You have to pay the sales tax rate in the county in which the transaction takes place. It doesnt matter where you live or where your "headquarters" is. It's where the item changed hands.

Obviously a home-based magic shop will need a resale license. If you are doing mail order out of state, the SBE will help you there in regard to what the current laws are (there used to be states that had reciprocal agreements with California for collecting sales taxes--I never got into that game however).

The resale license is what allows you to purchase things at wholesale prices without paying a sales tax to your supplier (who will require a copy of your resale license, or at the very least your number--all my suppliers required a copy on site) as long as you intend to sell the item(s) to an "end user" who will pay the appropriate sales tax which you in turn send to the State. If you do not sell the item, and use it yourself, you are liable for the sales tax because you are the end user. Get it? Somebody has got to pay! Now, with all that being said, go to your local SBE office and check with them! Tell them exactly what you intend to do. I always found the SBE to be the most helpful of all the government organizations I had to deal with. And besides, as my Daddy always said, "Talk is cheap!"

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Postby Steve V » 09/13/03 01:08 PM

Thank you Dustin...makes sense to me!
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Amir, I'm glad you are in Orange County, I felt bad for you every time I saw the word Davis...there is no there there.
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Postby Guest » 09/13/03 02:28 PM

I actually miss davis, I am taking a leave of absence from school this year and I miss davis and all my friends, Davis is what you make out of it. Once i get back into davis we should meet up
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Postby Steve V » 09/13/03 06:35 PM

Sure! You can stand by I-80 and we can wave at each other as I drive through!
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Postby Dustin Stinett » 09/13/03 06:55 PM

I want my daughter to go to Davis, Steve, so be kind!

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Postby Jim Riser » 09/13/03 11:45 PM

Amir;
There is more to getting a business license than the privelege of collecting sales taxes. There are other types of business licenses which might apply to your situation.

You indicated that you would have a "home office". If you are doing paid shows and making money, the IRS will be interested. A "home office" is one of the red flag items that the IRS looks for on returns. If you are reporting income and have a "home office", you are allowed a variety of deductions. You must be able to prove that you are a real business to keep the IRS happy and to get them to allow your deductions. Having a business license and a yellow page listing shows that your intent is to be in business. Whether you make a profit after deductions every year is another story :eek:

Keep good records and use the "home office" space only for business. The IRS has several booklets describing the various deductions you might be able to take. Studying these will help.
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Postby Steve V » 09/14/03 01:16 AM

UC Davis is a wonderful school, great vet school. Thanks for the info Jim.
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