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Like many mothers, Mariza Ruelas exchanged food through a Facebook group as a hobby. Imagine her shock when she received a summons to court, charging her with running a food facility and operating a business without a permit.
The Washington Post reports that she turned down a plea agreement and is looking at up to a year in jail if she loses at trial.
According to Ruelas, this was never a business for her. She joined the 209 Food Spot to find a birthday cake for her daughter. Over the past two years, she traded dishes about once a month as a way to do something positive with her kids.
Investigators in San Joaquin, California spent over a year tracking food sales on the Facebook group and charged about seven people in the sting.
Even though Ruelas traded food for goods and only occasionally sold dishes through a Facebook group, California still considered it business activity.
Some states do allow hobbies to operate without being a business, but in Ruelas’ case, it was decided she was running a business and a food facility which requires inspections and health department certifications.
The state contended that allowing people to sell food online in uninspected kitchens was a public health danger.
It’s important to understand the various situations that require permits and licenses.
Selling online doesn’t exempt you from having the proper licenses and permits.
For example, an online business with employees will need to register with the workers' compensation and unemployment departments. While an online-only business is unlikely to run afoul of zoning laws or signage restrictions, the online proprietor must grapple with sales tax on certain transactions. In fact, the sales tax rules for online sales are often more complex, idiosyncratic, and ambiguous than those that apply to in-store or traditional mail order transactions. Therefore, a conversation with your accountant is advised before you start taking orders.
The IRS provides guidelines to help determine if your hobby is a business and subject to taxes, but the guidelines on hobby businesses vary from state to state. That’s why it’s important to talk to a trusted advisor and learn what you’ll need to do, even if you don’t consider your activities a business.
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