In my day job I am an accountant and I am a CPA in the state of Florida, so how to do things as a business and the tax implications of that are the kinds of things I think about on a regular basis, for fun. Disclaimer: Please don’t consider this to be professional advice as I am just talking hypotheticals here. This blog will only apply to my American friends, as I am not familiar with any other country’s tax laws.
I have been thinking about what it would look like to run a tea blog as a business and thought I would share the thoughts I had on it. So, starting with the basics – In business you have revenue, which is the money or the value of items that you receive. And you have expenses – which is the cost of things that you pay for. So how does that look for a tea blog and what are the benefits and drawbacks of making the move to business status?
The main sources of revenue for a tea blog would be any advertising revenue that your website makes, and the value of any free samples that you receive from tea companies in exchange for posting on the blog. This means that you go to their website and look at the stated price for that tea, and record that as taxable revenue.
The main expenses for a blog would be website maintenance and tea purchases. For tea purchases, you can only deduct the portion of the tea that you use exclusively for reviewing purposes. So say you purchased a 30 gram pack of tea and you used 10 grams for your review, then you would take 10/30 or 33.33% of the cost of that tea and deduct that as a business expense. If you buy a tea and use all of it for reviewing, then the entire cost of the tea including tax and shipping is deductible. You will also have state and local business registration fees to pay.
What I consider to be the biggest advantage of having a business, is the ability to deduct tea-related travel. If you go to a tea festival in Chicago and participate in the bloggers roundtable, or even if you just go to keep up to date on the tea world, then you can deduct the cost of the conference, the travel and the lodging expenses. If you travel to Mississippi to visit a tea farm, that trip would be a deductible expense as well.
I imagine most people would show a net loss on their blog business. That means that it will reduce the amount of taxable income that you pay from your day job. Say you have a net loss of $100 and are in the 12% tax bracket, then you would save $12 in tax. So, you have to determine if it’s worth the effort for you.
So, what’s the drawback? Well, it’s a lot of effort. You would need to track every free sample you receive and the value of each. You would also need to track the portion of tea that you drink for blogging and the portion that you keep for personal use.
In my case, I have not made the jump to business yet. The ad revenue I make is zero and the value of the samples I have received wouldn’t even cover the cost of the website.
If you have a blog as a hobby, but receive free samples, don’t worry, you don’t have to count those as taxable income.
If you win tea or teaware in a giveaway, that is not considered taxable income. I won the gaiwan in the above picture in a giveaway that was available to anyone, so it’s not taxable. You may owe sales tax though if you live in the same state as the tea company, but that’s a different issue. The tea in the picture was a gift from a friend who just wanted to send me some tea. That is not taxable either as it’s considered a gift and gifts aren’t taxable up to a certain amount.
Some things to consider: I would recommend setting up a single member LLC for liability protection, but also because it will make filing your tax return much simpler. Other forms of business require a separate tax return which can get costly, but a single member LLC can be included in your 1040 individual tax return. Try to keep separate bank accounts if possible. You can’t always separate purchases that are made for both business and personal use. In that case, spreadsheets will be your friend.
If you want to get into the weeds on this, please hit me up. I love to nerd out on this stuff! Cheers!