Archive for November, 2011

jamFor those of you who are not aware of etsy.com, it is similar to eBay.com, but it is oriented more towards homemade, handcrafted, and vintage items. Looking for a vintage 5-qt 1960’s lime green club brand pot, it might be a cool place to look. It has a ton of interesting items and lots of artistic flair. I however have a major problem with etsy and eBay, food sales.

Want some online chocolate chip cookies, granola, or jam? Etsy and eBay have them all. Homemade food. My problem becomes, who is regulating these sales.

I understand that regulation can be a barrier to small business, but this is an issue of safety. How can these online sites be allowing people to distribute food without verifying that they are safely prepared and stored?

With a cover-all statement found on their sites:

Etsy:
“Do I need a license to sell edibles on Etsy?

According to Etsy’s Terms of Use, it is up to each seller on Etsy to abide by the appropriate laws, statutes, and regulations relating to your business and selling your products.  However, many laws vary from country to country and from state to state.  For example, many states require that all items intended for human consumption are stored, prepared, labeled, and packaged in a licensed kitchen. Other states require notifying the local health department and filing the respective paperwork for a food permit. Alternatively, a seller may have to secure a licensed kitchen with yearly inspections and a state approved food handlers.  The state may even limit what you can legally produce for sale on and off the Internet. Your first step is to contact your local health department or department of agriculture depending on where you reside.”

 

eBay:
“Be sure to follow federal and state laws when listing food items. Here are a few examples:

  • Ingredients: Federal and state laws require labels to state, among other things, the food’s ingredients, nutrition information, and place of manufacture.

  • Food licenses: Almost all states require food manufacturers and sellers to register with or obtain a license from the state.

  • Import/export: Laws restrict the import and export of many food products.


In other-words, make sure you don’t break any laws, statues, or regulations. Also make sure you have every permit you need and make sure everything is up to code.

I’m not buying these cover-all statement.

Etsy and eBay should be forced to verify that these individuals distributing food, have the right to do so.

Some of these items in particular items containing fruits – could be harmful. If went to a major distributor with my homemade jam, you can bet that they would be legally required to verify that I have the proper kitchen, permits, etc. to prepare this item. That major distribution also has to fear distributing a potentially harmful product. Furthermore, not to sound crazy, but if you are selling 100 jars of jam a day and you want to hurt people (for whatever reason) you could have a mass poisoning through your distribution chain for your jam. By the time people figure it out – you may have hurt or even killed hundreds of people (I realize this sounds extreme).

I understand that this can be a barrier for people who legitimately want to sell their products, but this is a recipe for disaster. Mass distribution methods for food need to be regulated for safety.

1099Many people make a living with online sales through eBay and amazon, but many of these sellers are not up on their taxes what-so-ever. 2011 is a game-changer, now companies like amazon and eBay are required to serve their sellers a 1099-K. The 1099-K outlines how much these sellers have been distributed.

Why is these changes so important? Sadly, many sellers do not pay their taxes. Going through the amazon seller forum, you see posts entitled “Do I have to pay taxes on my income?.” You click on some of their profiles and they very active and have been selling for 5+ years! Unbelievable these people snuck buy for so long, but it ends now.

Taxes such as:

  • Sales tax if applicable (That amazon does not collect)
  • Payroll taxes (which eat a substantial amount of your bottom-line)
  • Federal taxes
  • State taxes
  • City taxes

Many sellers were able to hide in the shadows of the online world, but no longer.

I myself am a very active amazon seller. I am now in the process of researching the best method to approach my taxes with my side business that I started this year. This year I will most likely have to file a Schedule C (to figure out net income for taxes) and a Schedule SE (to pay employment taxes).

Many people suggests S-corporations or LLCs that offer some tax benefits, but at the end of the day – no matter what you choose it going to result in you paying a lot taxes and doing a lot of paperwork. A sole proprietor offers virtually no tax benefit and is viewed as slightly brutish, but it is also the easiest way for someone who makes a few thousand bucks a year. Note that if you are selling only personally items and are not making a profit (selling for less than you paid), then you most likely do not have to file anything.

Many sellers maybe required to file quarterly estimated taxes. You think most of these online sellers are doing quarterly taxes? They are not. That isn’t to say the big players aren’t on top of things. If you have revenues of over a million – odds are its in your best interest to hire an accountant. Sadly I think there are an overwhelming amount of people who are making some money (think $15k – $40k) who are going to be crippled or even removed from online selling once they fact the true tax bill and time to keep proper books.

I for one want to be as transparent as possible to the government. It is important to pay your taxes – I just wish all of the paperwork wasn’t involved.

Disclaimer: Follow all federal, state, and local laws. Keep proper records and pay all applicable taxes. CONSULT A PROFESSIONAL ACCOUNTANT for your tax needs. Epicfinances.com is not to be used as a reference for your actual tax preparation.

Time Warner Cable Fails Me Again

My hatred for Time Warner Cable grows again. Yet again, I was lied to. My service has been canceled since October 18th, 2011. I was told at the time of my cancelation that I would not be charged again and I would receive a check for approximately $45 dollars for unused services that I had paid for, but this was incorrect. Later I learned, you pay after the month of service (i.e. You pay for September’s service in October).

Okay that’s fine, I don’t expect free money or to get away from not paying for service I used. The amount of days I was on their service for October for my new billing cycle was 4 days. Therefore I had 4 days of unpaid service, which would result in a bill for: 53.95 / 30 days * 4 days = $7.20.

I log onto my credit card statement and find this:

dasda

Sigh.. Another magical journey through time warner’s phone support is in store. After navigating through the vague menus and waiting about 7 minutes I get someone on the phone who tells me that effectively it is my fault. She even went so far to say “when you setup automatic payment with your credit card company or bank it doesn’t turn off…”  to which I interrupted to say “I never setup anything with my credit card or bank, your company uses an internal automatic billing system that after calculating the amount – then charges my charge card or bank on file, your system charged me $53.95 when it should have charged me $7.20”

She quickly made a statement about how people are not aware that automatic billing doesn’t turn off after your service is disconnected. I dismissed it and asked her how I get my refund. A check, via mail that takes 4 to 6 weeks. Thank you Time Warner for improperly charging me a higher amount, that you would have possibly stolen if I would not have called. Thank you for holding onto my $48.55 (pending refund) for over a month. Thank you for giving me a trip to the bank to cash your check.

All of this coming from the company that says how much they value their customers, but at the same time that they charge their existing customers extremely higher rates than new customers. Basically they value you enough to charge you more. I would value customers that paid me too much as well.

Time Warner Fails Again.

I Almost Became a Landlord

1280903_1I caught the bug a day after I wrote about “Why I should not be a Landlord”. Buy a property and make passive income – so tempting. I found a condo that was (and still is) in desperate selling status. 2 Bedroom / 1 Bathroom condo (894 sq. feet) with HOA of $147 a month and taxes only only $1034 a year, in a great school district. The cost of the unit: Listed $40,000 and I believe a 95% chance of obtaining it for only $30,000. Approximate carrying cost if you finance the entire thing: $400. What they are renting for: $705.

I went to check out the unit and it was renter ready condition. The furnace/ac combo was function and cheaper to replace than a conventional furnace/ac (maybe $800 – $1000 to replace). It had appliances in the unit and everything was freshly painted and cleaned. The only thing I spotted that could be a problem was one of the windows needed to be replaced because of a bad seal and one of the cabinet drawers was broken. Also the unit had a patio with a fence that probably needed to be painted.

After factoring in some maintenance costs, I think the positive cash flow would be about $250+ a month if you managed the property. This is literally the perfect rental unit. No lawn to mess with, no snow shoveling, ready to go unit.

Does it get any more perfect for a want to be landlord? l

Well I did what I always do – I put a pencil to it.
Assuming that I finance 100%, maintenance costs of $840 a year, and rented 11 out of 12 months, I think the cash net would be roughly $2,000 with approximately $700 more in equity and tax benefit. So in a good year – a net of $2,756.49. Sounds like a pretty sweet deal doesn’t it?

But lets not forget some of the downsides that ultimately pushed me away from this property.

  • Closing costs: $1,800.
  • Drafting a lease
  • Repairs are expensive. Even just panting the place for the next rental can be costly. Even paint has gotten fairly expensive. Might cost you $300 – $500 plus your time to prepare the unit for the next tenant. .
  • On call 24/7
  • Disastrous repairs can destroy your margin. Although this condo had a very cheap furnace and ac unit; I don’t want to do have to spend time or money dealing with a broken stove, fridge, water heater, or furnace.
  • These condos are now mainly rentals. When you go to finance or sell this condo – you are going to hit a wall. If a condo development is less than 51% owner occupied it is marked as an “investment condo.” In the State of Ohio, approximately 90% (non scientific guess) of banks will not give loans out for an “investment condo”, because condos have burned banks pretty badly in the last decade by condos.
  • Biggest Turn-off was that there were two individuals who owned oven a dozen of these units each – and neither of them picked up this unit. One individual owned 16 and had 2 currently available for rent.

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