Hi, I have a couple of questions regarding some details of coin dealing. I'm working on a plan for an online, specialized, part-time (hence, small & focused) coin shop. Thanks in advance for your comments, especially considering the wealth of experience here on this forum. 1. Given the usual low margins in the business, how onerous is the tax burden and other small business-related costs on such a self-employed dealer, in practicality? (do most file as sole-pro or S-corp?) 2. PNG membership requires a "numismatic net worth. at all times, of at least $25,000". If one is a small dealer that doesn't reach this threshold to join the PNG, is there any practical negative effect? Is membership important enough that one should strive to maintain this, even in a small operation? I personally do not see it as such. I suppose my real motivation is to see whether my ideas warrant turning this into an official business or whether I should just play around as an individual. I'd like to have my own online store and not rely on ebay and the rest, in order to reduce selling fees and increase control over my advertising and visibility, but if the difference in business taxes and requirements overwhelms the sellers fees and personal capital gains taxes and effectively negates any benefit of having my own small online store, then I'd like to discover that up-front. Many thanks.
In my opinion, people recognize the ANA more than the PNG. So, that being said, why not look into joining the ANA? I do not believe they have any restrictions on the size or volume of your business. They are more concerned with how you conduct your business. So, if you are honest and willing to abide by their code of ethics, I think it would be a wise move. As for taxes and fees, you will do better with an online business than a store with set hours, where you have to be there during business hours. As for ebay/paypal, that is a tough decision to make. Either one has higher fees, but the volume of viewers of your merchandise is amazing on ebay. But, you can accept paypal without being on ebay. You will pay the paypal fees, but gain some customers in return. By the way, you can charge a small fee for paypal purchases, or offer a discount if someone pays with a check or money order. Many on line stores do it, and has become an acceptable, common practice today. I hope I shed a little light on the subject for you. Chris
Thanks for the comment. ANA is certainly a given, especially since they don't have the net worth restrictions. Paypal fees are also pretty much a given I think, whether it's selling on ebay or privately. You either have paypal fees and add the customers who want to use paypal, or you have credit card fees and miss out on some customers. I'm working under the assumption that paypal fees will always be present.
Just another bit of advice: Make it clear to customers paying with check that CHECKS MUST CLEAR PRIOR TO SHIPMENT. I buy from a dealer on line who has this as policy, but ships immediately. He has gotten burnt several times, but continues to ship promptly. I should know, I received my shipment (paid with a check) in four business days. My check did clear of course, but it was a big risk shipping to a newer customer.
Get an accountant, get a tax lawyer - then ask them, not us. It doesn't matter what anybody else does. What matters is your individual situation, and once you give all the pertinent information to your lawyer and accountant, then they can tell you which way is best for you to go. For me personally, a dealer being a member of the PNG, or the ANA for that matter, never made one iota of difference to me. I bought from dealers who I either personally knew and trusted, or from those who were recommended to me by other people I knew and trusted. This is something that people never seem to realize or understand, even though I have explained it a thousand times. And I'm talking about buyers as well as sellers here. As a seller it doesn't matter what your selling venue is, and as a buyer it doesn't matter what your buying venue is. By venue I mean - ebay, your own private web site, a brick and mortar shop, an auction house like Heritage or Teletrade or any of the others - every single one of these has fees built into the price you pay for the coin. let me repeat that - all venues have fees built into the price you pay for the coin - every one ! On Heritage, ebay, Teletrade - they tell you up front they are buyer fees. On private web sites or brick and mortar shops, they don't even mention any fees at all. But they are still charging you fees, they just are not calling them fees or telling you about it. The fees are merely added into the price of the coin. For these guys fees are known as overhead expenses. And they charge you for them every single time. And dealers who have brick and mortar shops, and also sell on ebay or other auction sites, pay fees at both places. No matter what you do or where or how you sell, or buy, you are going to pay something - fees - one way or another. Then do your homework. Start making calls, talk to your lawyer and accountant. Find out how much rent, utilities, insurance, security, etc etc etc - find out much everything is going to cost you. Then sit down with a pencil and paper and figure it out. It's called a business plan. And anybody who opens a business needs to have one. Or go broke in a hurry.
I thought talking to people who had personally been through it would have been a good idea, part of the homework - the rest of which I am doing.
It is. But nobody else can tell you how much rent for a shop in your area is going to cost you - only you can do that. Only you can find out what utilities you'll have to pay, and how much they'll be in your area. Only you can talk to the insurance agents, the security companies, a contractor, your local license bureau, etc etc etc. That's what your homework is.
Fortunately my plan is for an online specialty store so I don't have to worry about shop rent and utilities. I've already estimated the operating costs of what I'm planning out, but was interested to hear about the typical realistic tax burden from people who have experience. As for what I was saying about avoiding ebay fees, you're right that there are other costs that would replace those ebay fees, such as website maintenance costs. However, I'm technical enough I can develop and run most of that myself and therefore have more control those costs. Online auction fees are fixed for all intents, and cost far far more than website hosting and maintenance.
I personally think you are going in the right direction with your plans. I'm guessing you are (at least starting out) going to use this as a supplementary income. To go all out and put your life savings in a shop and have it being your sole source of income is extremely risky, especially with little or no experience. Starting your own on line store will be a great learning experience, if not the first big step towards something even bigger.
Those cost are overhead and while you won't have to worry about them you will have other overhead items. Such as if you are working from home insurance premiums on stored merchandise will be much larger. Most villages, cities even counties require business licensing especially if you plan to take business deductions on taxes (maybe even permits and if your home area is a 100% no commercial you would have to fight zoning laws very costly), you have self employment tax no matter where you set up shop because you aren't an employee and therefore no social security, unemployment, medicare, etc. taxes aren't being deducted for you. Accountants can do these for you at a cost above and beyond a normal personal tax return. There are also seperate business tax returns (schedules) that must be filed seperately and then combined into personal to show income or loss. You are responsible for collecting and paying your state any sales tax if your state has any or worse yet if there are special taxes levied on coins and bullion sales. There are things like new tax laws and forms that need to be sent out when bullion purchases and sales meet certain conditions or reach monetary thresholds. There is so much this is just a few things off the top of my head. Not to discourage you but talk to a coin shop owner especially one that does direct internet sales not an ebay store, ask a business lawyer, an commercial accountant. They will give you a laundry list of things you will need to do, have and be ready to show via documentation to get up and running. As for the ANA, PNG thing. It really doesn't matter execpt when ethics are involved. For what it's worth most people like the PNG number it's a placebo because those dealers are supposed to be more honest and ethical. Plus it gives them a governing body to complain to. In reality it's a mixed bag you get some with no ethics and are ANA or PNG and some that do same goes for a coin dealer with no credentials at all. I know may who think the ANA is kind of a joke and unethical simply for the reason that they sell lifetime memberships to anyone..curious on looker, collector, dealer. Kind of like pay to play politics.
Like I said in the beginning, they can't tell you because it is different for everybody. The only people who can help you with that are your accountant and lawyer.
I learned it the hard way... your three best friends in business: A good banker, a good accountant and a good lawyer. The accountant will cost you money but he/she can also help you keep more of your money. The lawyer protects you from your ignorance. What you don't know, can hurt you! It's good to have someone who can speak for you.
I understand every case will be different, and I'm not asking for a cheatsheet. I still think anecdotal conversation is enlightening.
I think most of the remaining questions you may have can be answered by a good qualified accountant. Any accountant worth hiring will be able to set you up with most of the tools you will need for an online store. There is work involved, but not near as stressful as setting up shop downtown. No need making this any more complicated than it has to be.
