Looking for Collecting Taxes on Your Cottage Food Sales in 2023? Scroll down this page and follow the links. And if you bring home some fruit or vegetables and want to can, freeze, make jam, salsa or pickles, see this page for simple, reliable, illustrated canning, freezing or preserving directions. There are plenty of other related resources, click on the resources dropdown above. If you are having a hard time finding canning lids, I've used these, and they're a great price & ship in 2 days.
Many of the states that allow cottage food businesses (basically making and selling certain allowed food products from and out of your home) have lots of guidance except about taxes. Here are the basics. Of course, you should also check with your accountant or tax attorney. This is a layman's perspective!
You need to find out what is the tax rate in your state, county, and city. The may each set their own sales tax rate.
State sales tax: 4%
County sales tax: 2%
City sales tax: 0%
In this case, you would need to collect 6% on the sales.
And if you sell from locations that are in a different jurisdiction, you will need to know the sales tax rate in effect at the location where the sale takes place. If you are allowed to ship items (most cottage food laws prohibit this) to your customers, you will need to charge the sales tax at the destination.
Some cottage food items may be exempt from some jurisdictions taxes. For example the State of Georgia exempts the state portion of the sales tax. So, you need to verify whether cottage food sales are taxable at each level of jurisdiction.
In order to report and remit (hand in) the the collected sales tax to the government, you will need to apply for a Sales Tax Number (STN) from your state's Revenue Department.
You will need to collect and submit information about the sales, including the total for each jurisdiction in which sales were made. Most states also require other information, such as about exempt sales. Reporting and remitting is usually done monthly.
You may be able to avoid paying sales tax when you buy ingredients. There is typically a form like a Sales Tax Certification of Exemption that you must complete. Not all vendors will sell you ingredients without collecting the sales tax. For example, the local grocery store is probably not able to remove the tax from your purchases. This usually only works with suppliers and wholesalers who specifically sell to businesses engaged in resale. Costco could, for example.
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