Are “Basement Vendors” Ruining The Reefing Industry?

[reef’r]

My lfs are TSA and WCC. Their prices keep me out of there and have made me search out locals, which I prefer. Those places are in the extreme ends of a lfs and yes no doubt they are amazing to go to it’s more like an exhibit than a corner fish store but still and all prices are high and to be honest the frags they sell more often than not are not the nicest. I much more enjoy the local guys growing and selling coral and also I find them to be more knowledgeable than the store employees

 

[drbark]

Ohh I was being sarcastic. If you had me order in a bunch of exotic coral and then later decided it was too expensive to pick up, we would have a falling out ad well.

LOL gotcha. It was a coral that I can get for $300 from a online vendor and he was asking $800 for it. So some info might have been better before you being sarcastic. I would have paid more and I told him that but doubling it is not good business so, Yes, we are both in agreement in not wanting to do business with each other.

 

[Solo McReefer]

Funny

When you check out videos of some pro coral vendors, many look like basement farmers

Not everyone has the ambition to build a WWC or Tidal Gardens

 

[BeanAnimal]

LOL gotcha. It was a coral that I can get for $300 from a online vendor and he was asking $800 for it. So some info might have been better before you being sarcastic. I would have paid more and I told him that but doubling it is not good business so, Yes, we are both in agreement in not wanting to do business with each other.

Did he show you his cost? If not, how do you know his markup?
Did you negotiate a price before you asked him to order it?

 

[Solo McReefer]

Yeah, but then I have to prove to the IRS that I’m trying to make a living off of it, which I am not. They would consider me a hobbyist. So I just add the business income to my personal income taxes and pay the sales taxes too.

You don't have to prove that at all

You do have to keep track of all your income and expenses

Sales tax is an expense

 

[drbark]

Did he show you his cost? If not, how do you know his markup?
Did you negotiate a price before you asked him to order it?

I didn't ask cost because that's not what I think is cool. Yes we had agreed around $300 for a green Acanthophyllia. I asked him why so much and he said prices have gone up. I didn't want to look like a jerk and ask about his wholesale price. When I got the wholesale account a couple of weeks later, I went to the same wholesaler he buys from for these types of corals and it was $150-200 for various types of green Acanthos. It's the basic one. I was just seeing if he was going to be a man of his word and then ask for the higher priced Acanthos.
Honestly, I don't have to explain this to you and why I usually don't post here.

 

[BeanAnimal]

I didn't ask cost because that's not what I think is cool.

I don't think it is cool either... the point is you don't know, so it is hard to compare his price or his overhead.

Yes we had agreed around $300 for a green Acanthophyllia. I asked him why so much and he said prices have gone up.

You said $800 before. So was it $300 or $800? Those are two very different numbers.

When I got the wholesale account a couple of weeks later, I went to the same wholesaler he buys from for these types of corals and it was $150-200 for various types of green Acanthos. It's the basic one. I was just seeing if he was going to be a man of his word and then ask for the higher priced Acanthos.

Wait - so now the guy is a jerk for trying to sell you a $200 coral for $300? I don't get it? You found wholesale access and you are comparing that to retail and holding it against the LFS?

Honestly, I don't have to explain this to you and why I usually don't post here.

You are 100% correct, you don't have to explain anything to me. I simply commented because you posted an opinion in a public forum and I don't happen to think it is reasonable given what I understand (from your posts) about the situation. I have not forced you to respond and you are free to walk away and explain nothing more.

 

[Reefer Matt]

You don't have to prove that at all

You do have to keep track of all your income and expenses

Sales tax is an expense

Hobbies are not tax deductible.

Know the difference between a hobby and a business | Internal Revenue Service

FS-2022-38, October 2022 — Most people take up hobbies for personal enjoyment, not to make a profit. Sometimes, however, the line between hobbies and businesses isn’t clear cut. There are several different factors people should consider when making the determination and the IRS provides...

www.irs.gov

When the IRS Classifies Your Business as a Hobby

If your business claims a net loss for too many years, or fails to meet other requirements, the IRS may classify it as a hobby, which would prevent you from claiming a loss related to the business. If the IRS classifies your business as a hobby, you'll have to prove that you had a valid profit...

turbotax.intuit.com

 

[BeanAnimal]

Hobbies are not tax deductible.

Know the difference between a hobby and a business | Internal Revenue Service

FS-2022-38, October 2022 — Most people take up hobbies for personal enjoyment, not to make a profit. Sometimes, however, the line between hobbies and businesses isn’t clear cut. There are several different factors people should consider when making the determination and the IRS provides...

www.irs.gov

When the IRS Classifies Your Business as a Hobby

If your business claims a net loss for too many years, or fails to meet other requirements, the IRS may classify it as a hobby, which would prevent you from claiming a loss related to the business. If the IRS classifies your business as a hobby, you'll have to prove that you had a valid profit...

turbotax.intuit.com

You are conflating two different things. You absolutely do not have to prove you are trying to make a living off of it and you can take related deductions against it. The second link is explaining that if those deductions consistently exceed the gross profit then the business is not viable and the IRS is footing the tab (in lost taxes) for you to screw around.

So - you are selling products. You have a business. It does not have to be your sole income. For tax purposes, you need to ensure that your deductions against that business do not exceed the earnings of that business every year. They can for some years, but not every year.

I strongly suggest that you contact a competent CPA - they will help guide you in the right direction. In general the goal would be to do enough business to cover the expenses and have enough of those expenses that you can use them instead of the standard deduction and pay a bit less tax on the extra income that you earned.

Before the "side business"
You make 100K a year as a technician.
After taxes you take home 75K.

You start selling coral
You make 100k a year as a technician.
You take home 75K of that
You make another 20K in side money
You OWE the IRS about $6K of that.

The idea is to itemize your taxes with the help of your side business so that that $6 becomes $3k or $4k...

It may not work out that your itemized expenses are enough to offset the standard deduction... but it is always worth checking. But instead of doing this on your own, let the CPA tell you exactly how to structure everything to minimize your tax burden and also minimize red flags. Don't just eat the expenses and call your business a "hobby" without getting professional opinion.

 

[danreef55]

You are conflating two different things. You absolutely do not have to prove you are trying to make a living off of it and you can take related deductions against it. The second link is explaining that if those deductions consistently exceed the gross profit then the business is not viable and the IRS is footing the tab (in lost taxes) for you to screw around.

So - you are selling products. You have a business. It does not have to be your sole income. For tax purposes, you need to ensure that your deductions against that business do not exceed the earnings of that business every year. They can for some years, but not every year.

I strongly suggest that you contact a competent CPA - they will help guide you in the right direction. In general the goal would be to do enough business to cover the expenses and have enough of those expenses that you can use them instead of the standard deduction and pay a bit less tax on the extra income that you earned.

Before the "side business"
You make 100K a year as a technician.
After taxes you take home 75K.

You start selling coral
You make 100k a year as a technician.
You take home 75K of that
You make another 20K in side money
You OWE the IRS about $6K of that.

The idea is to itemize your taxes with the help of your side business so that that $6 becomes $3k or $4k...

It may not work out that your itemized expenses are enough to offset the standard deduction... but it is always worth checking. But instead of doing this on your own, let the CPA tell you exactly how to structure everything to minimize your tax burden and also minimize red flags. Don't just eat the expenses and call your business a "hobby" without getting professional opinion.

@ Reefer Matt
You are receiving sound advice here. Please sit down with an accountant. If you declare expenses accurately and maintain good records the worst thing that is going to happen is you will get audited. A real PIA but if you have done nothing wrong you are golden.

 

[BeanAnimal]

@RedReefer

I was not aware that I was being humorous. You appear to think a lot of my posts are funny. I am flattered that you are such a fan