I'm thinking about selling some original artwork: when does the government start caring about sales tax and income tax and such?
First - get a professional tax consultation with a NY-licensed CPA or EA. At what point do I need to worry about collecting sales taxes for the city and state of New York? Generally, from the beginning. See here for more information on NYS sales tax.  At what point do I need to worry about record-keeping to report the income on my own taxes? From the beginning. Even before that, since you need the records to calculate the costs of production and expenses. I suggest starting recording everything, as soon as possible. What sort of business structures should I research if I want to   formalize this as less of a hobby and more of a business? You don't have to have a business structure, you can do it as a sole proprietor. If you're doing it for-profit - I suggest treating it as a business, and reporting it on your taxes as a business (Schedule C), so that you could deduct the initial losses. But the tax authorities don't like business that keep losing money, so if you're not expecting any profit in the next 3-4 years - keep it reported as a hobby (Misc income). Talk to a licensed tax professional about the differences in tax treatment and reporting. You will still be taxed on your income, and will still be liable for sales tax, whether you treat it as a hobby or as a business. Official business (for-profit activity) will require additional licenses and fees, hobby (not-for-profit activity) might not. Check with the local authorities (city/county/State). If you sell through an intermediate who sets up the shop for you, odds are they collect and pay the sales tax for you. My experience is with publishing books through Amazon, where they definitely handle this for you. If you can find a retailer that will handle the tax implications, that might be a good reason to use them.  It looks like Etsy uses a different model where you yourself are responsible for the sales tax, which requires you to register with your state (looks like this is the information for New York) and pay the taxes yourself on a regular basis; see this link for a simple guide. If you're doing this, you'll need to keep track of how much tax you owe from your sales each month, quarter, or year (depending on the state laws).  You can usually be a sole proprietor, which is the easiest business structure to set up; if you want to limit your legal liability, or work with a partner, you may want to look into other forms of business structure, but for most craftspeople a sole proprietorship is fine to start out with.  If you do a sole proprietorship, you can probably file the income on a 1040 Schedule C when you do your personal taxes each year.
I've had zero taxable income for the past 2 years and yet the calculations say I owe the government $250 for each year for the Self Employment tax.  How can they charge a non-zero tax on my income when my taxable income is zero?  That is theft. That demands reform. You're not paying taxes three times but you are paying three different taxes (or more). Sales tax is a business expense, just like costs of goods sold or interest on a loan.  Then, depending on how you structure the business, the net income of the business just hits you personally and you pay income taxes.  You can work with a tax person to lend some efficiency to this on a long term basis, but it's not like you pay all the taxes against your gross receipts. Whether or not you can make this profitable is a whole different issue. "Believe it or not, unless you directly contact an accountant with experience in this field or a lawyer, you may have a tough time getting a direct answer from a reputable source.  The reason is two fold.  First, legally defining in-game assets is exceptionally difficult from a legal/taxation stand point.  Who really owns this data?  You or the company that has built the MMO and manages the servers containing all of the data? You can buy-and-sell what is effectively ""data"" on their servers but the truth is, they own the code, the servers, the data, your access rights, etc. and at any point in time could terminate everything within their systems.  This would render the value of your accounts worthless! As such, most countries have overwhelmingly avoided the taxation of in-game ""inventory"" because it's not really definable.  Instead, in game goods are only taxed when they are exchanged for local currency.  This is considered a general sale.  There may be tax codes in your region for the sale of ""digital goods"".  Otherwise, it should be taxed as sale a standard good with no special stipulations. The bottom line is that you shouldn't expect to find much reliable information on this topic, on the internet.  Law's haven't been welled defined, regarding in-game content worth and taxing of sales and if you want to know how you should pay your taxes on these transactions, you need to talk to a good accountant, a lawyer or both." The question seems to be from the point of view actual sales and not its impact on one's taxation. In case you just want to sell, why brokers will respond differently each times. Either there may be issues with ownership and/or the company whose shares it is? In case you feel that the issues lies with brok "Tax is often calculated per item.  Especially in the days of the internet, some items are taxable and some aren't, depending on the item and your nexus.  I would recommend calculating and storing tax with each item, to account for these subtle differences. EDIT: Not sure why this was downvoted, if you don't believe me, you can always check with Amazon: http://www.amazon.com/gp/help/customer/display.html/ref=hp_468512_calculated?nodeId=468512#calculated I think they know what they're talking about. FINAL UPDATE: Now, if someone goes to your site, and buys something from your business (in California) and the shipping address for the product is Nevada, then taxes do not have to be collected.  If they have a billing address in California, and a shipping address in Nevada, and the goods are shipping to Nevada, you do not have to declare tax. If you have a mixture of tangible (computer, mouse, keyboard) and intangible assets (warranty) in a cart, and the shipping address is in California, you charge tax on the tangible assets, but NOT on the intangible assets. Yes, you can charge tax on the whole order.  Yes for most businesses that's ""Good enough"", but I'm not trying to provide the ""good enough"" solution, I'm simply telling you how very large businesses run and operate.  As I've mentioned, I've done several tax integrations using software called Sabrix (Google if you've not heard of it), and have done those integrations for companies like the BBC and Corbis (owned and operated by Bill Gates). Take it or leave it, but the correct way to charge taxes, especially given the complex tax laws of the US and internationally, is to charge per item.  If you just need the ""good enough"" approach, feel free to calculate it by total. Some additional reading: http://en.wikipedia.org/wiki/Taxation_of_Digital_Goods Another possible federal limitation on Internet taxation is the United States Supreme Court case, Quill Corp. v. North Dakota, 504 U.S. 298 (1992),[6] which held that under the dormant commerce clause, goods purchased through mail order cannot be subject to a state’s sales tax unless the vendor has a substantial nexus with the state levying the tax.  In 1997, the federal government decided to limit taxation of Internet activity for a period of time. The Internet Tax Freedom Act (ITFA) prohibits taxes on Internet access, which is defined as a service that allows users access to content, information, email or other services offered over the Internet and may include access to proprietary content, information, and other services as part of a package offered to customers. The Act has exceptions for taxes levied before the statute was written and for sales taxes on online purchases of physical goods." "Can't vouch for LA, but property typically is taxed at either the appraised value, the most recent purchase price (""if it wasn't worth that much, you wouldn't have paid that much""), or some combination of the two (usually highest of the two, to prevent ""$1 and other goods and services"" from lowering the tax to zero). You have now explicitly paid a total of $125k for the property; the fact that you bought it in two stages shouldn't be relevant. But ""should"" and law are only tangentially connected. I'd recommend asking a tax accountant who know your local practices, unless someone here can give you an authoritative answer." There are no clear guidelines. If you are selling as individual, then what ever profit you make gets added to your overall income as you pay tax accordingly. This is true for sole proprietor or partnership kind of firms. If you are registered as a Company, the profits are taxed as business income. There may be VAT and other taxes. Please consult a CA who can guide you in specifics as for eCommerce, there is no defined law and one has to interpret various other tax laws. "This forum is not intended to be a discussion group, but I would like to add a different perspective, especially for @MrChrister, on  @littleadv's rhetorical question  ""... estates are after-tax money, i.e.: income tax has been paid on them,    yet the government taxes them again. Why?"" For the cash in an estate, yes, that is after-tax money, but consider other assets such as stocks and real estate. Suppose a rich man bought stock in a small computer start-up company at $10 a share about 35 years ago, and that stock is now worth $500 a share. The man dies and his will bequeaths the shares to his son. According to US tax law, the son's basis in the shares is $500 per share, that is, if the son sells the shares, his capital gains are computed as if he had purchased the shares for $500 each. The son pays no taxes on the inheritance he receives. The deceased father's last income tax return (filed by the executor of the father's will) does not list the $490/share gain as a capital gain since the father did not sell the stock (the gain is what is called an unrealized gain), and so there is no income tax due from the father on the $490/share. Now, if there is no estate tax whatsoever, the father's estate  tax return pays no tax on that gain of $490 per share either. Would this be considered an equitable system? Should the government not tax the gain at all? It is worth noting that it would be possible for a government to eliminate estate taxes entirely, but instead have tax laws  that say that unrealized gains on the deceased's property would be taxed (as capital gains) on the deceased's final tax return." There is more than one kind of tax. It is a little confusing because in reality the tax revenues collected by the Government aren't earmarked to a particular usage based on where they came from, usually. Well, the Gov't often CLAIMS they do, but for all practical matters it all goes in a big bucket. So just because a business or individual isn't paying income taxes doesn't mean they aren't paying anything for the use of Government furnished infrastructure/services. You are limiting the scope of your question to Income Taxes, which are taxes paid on profits to a business or individual. It makes perfect sense that you wouldn't pay a tax on something you didn't get. However, you aren't considering taxes that ARE being paid even by a company that isn't profitable. For example consumption taxes, employment taxes, and other fees. That same company paid sales tax on all the supplies it purchased, and probably collected/paid sales taxes on anything it sold. To take one of your examples, it paid for its share of using the roads through Government imposed taxes on fuel.  Don't worry about the Government. They know how to get theirs. They might not pull it from your right pocket, but they will make sure to get it from the left. I believe its relevant, because, depending on what you believe your view of what level of taxation is acceptable, if any, is affected.  Someone who believes in big govt will weigh the impact on individuals take home pay much less than someone who doesn't believe in big govt. I like how whether or not its okay to do *exactly* what the tax code says is determined by your presumed intent in following the tax code, and not whether or not you actually followed the tax code.   Besides, what reasonable person or business *doesn't* minimize their tax burden, in the same way they minimize *every* and *any* burden? I don't know how taxes work in Israel, but I imagine it is relatively similar to taxes in the US. In the US you need to pay taxes on investment earnings when you sell them or in this case trade them for something of value. The amount that would typically would be taxed on would be the difference between how much you paid for the currency and the value of the item you traded it for.  In theory there shouldn't be any difference in trading bitcoins versus dollars or euros. Reality is that they are rather weird and I don't know what category they would fall into. Are they a currency or a collectors item? I think this is all rather hypothetical because there is no way for any government to track digital currencies and any taxes paid would be based on the honor system.  I am not an account and the preceding was not tax advice... "In 2014 the IRS announced that it published guidance in Notice 2014-21. In that notice, the answer to the first question describes the general tax treatment of virtual currency: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. As it's property like any other, capital gains if and when you sell are taxed. As with any capital gains, you're taxed on the ""profit"" you made, that is the ""proceeds"" (how much you got when you sold) minus your ""basis"" (how much you paid to get the property that you sold). Until you sell, it's just an asset (like a house, or a share of stock, or a rare collectible card) that doesn't require any reporting. If your initial cryptocurrency acquisition was through mining, then this section of that Notice applies: Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities? A-8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income. That is to say, when it was mined the market value of the amount generated should have been included in income (probably on either Line 21 Other Income, or on Schedule C if it's from your own business). At that point, the market value would also qualify as your basis. Though I doubt there'd be a whole lot of enforcement action for not amending your 2011 return to include $0.75. (Technically if you find a dollar bill on the street it should be included in income, but usually the government cares about bigger fish than that.) It sounds like your basis is close enough to zero that it's not worth trying to calculate a more accurate value. Since your basis couldn't be less than zero, there's no way that using zero as your basis would cause you to pay less tax than you ought, so the government won't have any objections to it.  One thing to be careful of is to document that your holdings qualify for long-term capital gains treatment (held longer than a year) if applicable. Also, as you're trading in multiple cryptocurrencies, each transaction may count as a ""sale"" of one kind followed by a ""purchase"" of the other kind, much like if you traded your Apple stock for Google stock. It's possible that ""1031 like kind exchange"" rules apply, and in June 2016 the American Institute of CPAs sent a letter asking about it (among other things), but as far as I know there's been no official IRS guidance on the matter. There are also some related questions here; see ""Do altcoin trades count as like-kind exchanges?"" and ""Assuming 1031 Doesn't Apply To Cryptocurrency Trading"". But if in fact those exchange rules do not apply and it is just considered a sale followed by a purchase, then you would need to report each exchange as a sale with that asset's basis (probably $0 for the initial one), and proceeds of the fair market value at the time, and then that same value would be the basis of the new asset you're purchasing. Using a $0 basis is how I treat my bitcoin sales, though I haven't dealt with other cryptocurrencies. As long as all the USD income is being reported when you get USD, I find it unlikely you'll run into a lot of trouble, even if you technically were supposed to report the individual transactions when they happened. Though, I'm not in charge of IRS enforcement, and I'm not aware of any high-profile cases, so it's hard to know anything for sure. Obviously, if there's a lot of money involved, you may want to involve a professional rather than random strangers on the Internet. You could also try contacting the IRS directly, as believe-it-or-not, their job is in fact helping you to comply with the tax laws correctly. Also, there are phone numbers at the end of Notice 2014-21 of people which might be able to provide further guidance, including this statement: The principal author of this notice is Keith A. Aqui of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information about income tax issues addressed in this notice, please contact Mr. Aqui at (202) 317-4718" "As a minor you certainly can pay tax, the government wants its cut from you just like everyone else :-) However you do get the personal allowance like everyone else, so you won't have to pay income tax until your net income reaches £10,800 (that's the figure for the tax year from April 2015 to April 2016, it'll probably change in future years). Once you're 16, you will also have to pay national insurance, which is basically another tax, at a lower threshold. The current rates are £2.80/week if you are making £5,965 a year or more, and also 9% on any income above £8,060 (up to £42,385). Your ""net income"" or ""profits"" are the income you receive minus the expenses you have to support that income. Note that the expenses must be entirely for the ""business"", they can't be for personal things. The most important thing to do immediately is to start keeping accurate records. Keep a list of the income you receive and also the expenses you pay for hardware etc. Make sure you keep receipts (perhaps just electronic ones) for the expenses so you can prove they existed later. Keep track of that net income as the year goes on and if it starts collecting at the rate you'd have to pay tax and national insurance, then make sure you also put aside enough money to pay for those when the bill comes. There's some good general advice on the Government's website here: https://www.gov.uk/working-for-yourself/what-you-need-to-do In short, as well as keeping records, you should register with the tax office, HMRC, as a ""sole trader"". This should be something that anyone can do whatever their age, but it's worth calling them up as soon as you can to check and find out if there are any other issues. They'll probably want you to send in tax returns containing the details of your income and expenses. If you're making enough money it may be worth paying an accountant to do this for you." Capital losses from the sale of stocks can be used to offset capital gains from the sale of a house, assuming that house was a rental property the whole time.  If it was your principal residence, the capital gains are not taxed.  If you used it as both a rental and a principal residence, then it gets more complicated: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/127/rsdnc/menu-eng.html