What Tax Deductions Can I Take As An Independent Representative Or Direct Marketing Representative?
If you are an Independent Representative for a direct selling company, you are a business owner. Many people forget this because in some states, they may not have to get a business license or occupation license. That is because they are distributors under the main company's business license. But this business model also allows for independent distributors to claim tax deductions that go along with running their own business. The main word here is Independent. I will give you some examples of standard tax deductions but here is a good general rule of thumb: If you spent money from your business account to purchase equipment, supplies or market your business, then you should record that in your accounting books as it can be a tax deduction.
If you run a business as an Independent Distributor or a Direct Marketing Representative, you probably file a Schedule-C or at least you should. This is a form to break down your business expenses as a Sole Proprietor. (Independent Representatives are generally not a corporation. Corporations do not file form Schedule-C.)
Some standard examples of tax deductions can be: business cards, websites you pay for, office supplies, postage, tables, table coverings, signs, stands or anything you purchase directly for displays at boutiques, fairs or home parties. Fees you pay for boutique or fair registrations. Demonstration supplies, ie. if you sell makeup the samples you purchase can be deducted. If you sell jewelry, an item you buy for display (not selling because that is stock) is a possible deduction. If you purchase a 10x10 tent and use it strictly for business purposes, possible deduction.
Do you see what I am getting at? Just because you are a direct seller or representative of a brand that you are blanketed under, does not mean you don't spend money to run your business, and that is where you are eligible for the tax deductions, like any other business owner.
Now some notes on this subject: As I always say, keep great, detailed records. If you want more detail on record keeping, let me know in the comments below and I can direct you to a video or blog post I have done.
I also want to address the example I used of a website. This is in regards to a replicated website that you pay for. Many direct sales companies offer replicated websites and even update them for their consultants. Some are free, like Avon, some charge a consultant a monthly or yearly fee, like Magnabilities. (I use these 2 examples because I am a representative in these companies so I know them.) There is no tax deduction for me with Avon, because it doesn't cost me anything. With Magnabilites, if I paid for the right to have the replicated website, then that would be a tax deduction for me that I can record and use on my Schedule-C.
That reminds me of one more item that comes up a lot in direct sales. Shipping. If you pay shipping to have your orders sent to your house and then you deliver them, that is a deduction. However, if you move that expense to your customer, then you offset that deduction by claiming the shipping income you charge your customer. If it equals out, then that is a 0 situation. If not, then you can deduct the difference.
I hope that is clear as mud...lol! Let's see if I can clarify a little more....
If I get an order sent to my house from Avon and I pay $9.50 for shipping but I have 9 customers in this order (not including me) and I charge them each $1.00 for shipping or delivery fee, then I have lost 50 cents and that can be claimed by my business as and expense. the $9.00 will zero out. Make sense?
If you have any further questions about this or other bookkeeping subjects, please contact me at Rebecca@RHBizSolutions.com. I look forward to talking to you about your bookkeeping needs.
Here's To Your Success!
RH Business Solutions
Any accounting, business or tax advice contained in these articles, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. Please seek consultation from the appropriate accounting/tax professional.