Reptile & Amphibian Forums

Hi Everyone,

Not sure if this belongs in another area of the forum...but I know there are plenty of folks in here!

I've been breeding ball pythons for only 2 years (going on the 3rd) with a small number of clutches each (1 or 2). It started out with 1 ball python and somehow I ended up with over 2 dozen...unheard of right? I even sold a few babies I hatched.

It's tax season and I know that I should be reporting any income (and costs) however small it is to Uncle Sam. Some people have told me... oh it's such a low amount... don't worry about it. I clearly fall into the category of business by the IRS definitions of hobby or business. I know I don't plan to become a huge breeder (it would be nice!) but I also don't want to mess up my opportunity by starting on the wrong foot with the IRS. How does everyone handle this aspect of their "hobby." (Please don't self incriminate!)

Also... I couldn't find information on this... but does anyone know at what point I would need a permit like after this # of snakes or if I even need one in California?

1. Check with your city and county for permit requirements as they can vary.

2. Any sale over 500 (I think it is) should be reported to the IRS - if you aren't making that much then don't worry about it. You do have to show a profit after the first few years. But best to sit down with an accountant and pick their brain - it will be worth it in the long run.
-----
Tosha
JET Pythons
The Blog
nihil facimus sed id bene facimus

>>2. Any sale over 500 (I think it is) should be reported to the IRS - if you aren't making that much then don't worry about it. You do have to show a profit after the first few years. But best to sit down with an accountant and pick their brain - it will be worth it in the long run.

Yes indeed check with your accountant. Beacuse, while these are commonly held beliefs, my accountant way back when told me these are myths.

>His ideas follow<

That to be a business you must be behaving like a business. That is buying or producing, selling, keeping detailed books, making invoices.... If you are running fast and loose not keeping books and not invoicing your buyers then you are a hobby. Hobbies must report profits but may not report a loss.

Lastly, profit is NOT a requirement of a business. You can indeed lose money every year and write off the losses. (amazon.com went over a decade without a single cent of profit!) BUT you must be behaving like a business. Otherwise it is a hobby and losses may not be written off.

>/end his ideas.<

Check with a real professional. I am not an accountant nor do I play one on TV.
-----
AMAZON REPTILE CENTER

I am also in Cali. I am in San Luis Obispo County.

If you make sales then you need a local business license or you could be in trouble with your city or county for doing business without one. As soon as you make one sale without a business license you are in violation.

You can use your SS # on your tax filing or you can get a taxpayer ID # (TIN) from the IRS by phone.

You may also (most likely) need a commercial animal breeding permit from your local (usually county) animal services division.

If you breed ANY native California wildlife then you MUST have a captive Propagation Permit for native reptiles from Cali DFG.

California has no laws or restrictions (that I am aware of) on non-native wildlife possession or propagation but some cities and counties do. You need to check your local laws, restrictions and regulations before you start setting up your biz or saying anything about it to anyone. You do not want to state what you are doing or what you have until you are sure you can legally do it and have it.

I suggest setting it up as a business if you are going to breed and sell.

I hope this helps.

Kevin

Thanks for the input Kevin!

It started out completely as a hobby and before you know it, it starts morphing. Please let me know if this is right...

Get a:
-Business License
-Breeder's license (or whatever it's called in my area)
-super awesome accountant

Let me know if I am missing anything.

Yep, that's pretty much it unless you breed native Cali stuff.

Keep all those receipts.

Kevin

Regarding the IRS issues - For tax purposes a business must be engaged in with the objective of making a profit. If this is the case then you can, generally, claim all of your business deductions. If your business deductions exceed your income for the tax year, you can claim a loss for the year.

However, if the IRS deems your business to have no profit motive your ability to deduct losses is limited to the amount of income generated by the activity. This is refered to as the Hobby Loss Rules.

To make it simple, your business plan must show that you will be profitable. If you were to take losses from your business year after year, that increases the chance of an audit. Upon audit you would have to prove that you know what your doing and you're doing it to making money.

What a breeder would have going in their favor is that they may not make money year after year but they would be building their breeding stock, which adds value to the overall business. So while, over the initial 5-10 years you may not show a profit, it may be the result of holding back breeding stock and overall the value of the businesses underlying assets are growing. This is a valid arguement for deducting the losses.

At any rate, if you have a profit motive then you have a business. Set up a separate checking account for the business and use that account for all business related income and expenses. This will help when putting together your figures at year end. And find a good accountant. Don't use the cookie cutter franchises. Find someone that knows what their doing and is willing to spend some time with you, not just at tax time, helping you set up good records, etc. It will be worth it in the end.

Sorry I rambled on for so long....D

Keep rambling... I'm all ears.

Thanks for the advice!

That was a great post with lost of good info. Does anyone have any recomendation of who to use to get set up?
-----
Brian Hettinger
480 Pythons
Contact us

... I think you just made my day... nothing like a short simple list of things to mark off... THANKS!!!!