Selling homemade: A trap looms when it comes to taxes
Anyone who sells homemade goods at flea markets quickly slips into commercial trading. It is particularly tricky with food. This is to be considered with the taxes?
If you want to sell homemade goods, you have to pay attention to a few things. No matter whether he sews bags, cooks jam or felts hats. Those who are particularly good at something will find plenty of buyers for their own creations on special online portals such as DaWanda, vondir or on Ebay. The trend has long since reached flea markets and festivals as well. So why not earn a few euros on the side with your hobby?? But watch out: Anyone who sells homemade items not just occasionally, but regularly, is already acting like an entrepreneur. An overview of when a seller is considered a professional.
Selling handmade: What is allowed?
If you sell homemade goods such as silver jewelry or crocheted sweaters from time to time at street fairs, markets or festivals, you have nothing to worry about. The tax authorities are generous when it comes to small-scale trade among private individuals. Who clears out apartment or cellar and sells old treasures on flea markets or online platforms, also remains tax-free.
Taxes with self-made: Tax trap threatens
The tax office comes into play when the goods are purchased specifically for resale. Who buys cheese, wine or the handicrafts of others and brings on street festivals to the man should know: He behaves with it like a dealer and slips fast into the tax liability. The taxman also looks closely at speculative goods that are often sold online. This includes private valuables that can be resold quickly and at a profit, such as jewelry, gold bars or coins. If the seller has bought less than a year ago, he must pay tax on the proceeds – if it is over 600 euros a year. Only up to this limit such profits may be raked in tax-free, explains Isabel Klocke, tax expert with the federation of the taxpayers in Berlin.
In which cases it becomes treacherous?
If you go to markets regularly, for example every month, and offer your homemade goods there, you become an entrepreneur, as Markus Deutsch, vice president of the Berlin Brandenburg Association of Tax Advisors, points out: "This is also the case if I buy material for my homemade bags for 2,000 euros and thus generate income of 2,500 euros."The borderline to the commercial sector is crossed not only with regular trading, but also with high turnover or the sale of similar things or, for example, new goods, whether at the market stall or online. Any sustained activity to generate income is commercial, as expert Klocke explains. It doesn’t matter if the sales actually make a profit in the process.
Who has to register his business?
If someone wants to expand his hobby, permanently sell homemade products and earn a good income, he is obliged to register a trade. "It’s not advisable to just go for it," warns Klocke. Even finance officers are out at flea markets and festivals. However, the tax authorities have a much closer eye on the millions of Internet providers who have long since ceased to be occasional traders. If you want to avoid problems, you should get a trade license at the trade office of your place of residence. The tax office sends then still another questionnaire for the fiscal registration. If the hobby trader does not achieve a turnover of more than 17500 euros per year, the small business regulation applies, which exempts from the obligation to pay sales tax. For employees who earn on the side, up to 600 euros in profit per year is tax-free. If profits exceed 24500 euros a year, local authorities also demand trade tax.
Which sectors of the economy are most affected?
Those who want to sell homemade treats such as bread, dips, barbecue sauces, jams or juices must be especially careful. Those who offer their own creations only occasionally at school or church festivals or at cost price may do so without special permission. Everyone else who sells on street festivals or flea markets on the side is quickly considered a food entrepreneur. You’ll need a business license, you’ll have to register with the food inspectorate, and you’ll have to comply with a whole catalog of hygiene and labeling regulations. The production of easily perishable commodity must be shifted as a rule into trade kitchens.
What threatens hobby dealers?
If you are naive enough to think that selling your self-produced bread or fruit spreads without permission will not expose you, you are wrong. Markets are regularly inspected by food inspectors. Anyone who fails to register their food production and sales commits an administrative offense. If hygiene requirements are not met and customers become ill due to spoiled food, this may even be a criminal offense. Caught do-it-yourself cooks can face fines of up to 100.000 Euro threaten.
Note of the editorship: With this article it concerns a contribution from our on-line archives.