Part 2 of “The path to Open Studios:  the how-to guide”: the financial side of things

Click this LINK to go to Part 1 Introduction

OK, this is a long, but hopefully thorough, post.  Not all these steps for doing open studios are necessary.  I just wanted to share how I handle money during these events, although in many cases there are alternative ways.  However, this is not a guide to what you spend on making the art in the first place!  That is a topic for another time.

Well in advance of the weekend, you should apply for and get a seller’s permit from the CA Board of Equalization.  You cannot legally sell anything without it!  Along with getting this permit, you should find out what the sales tax where you will be selling your art will be so that you can collect the correct sales tax.  When CA asks you the status of your collections, fill out the state forms reporting sales tax collected during the specified time period, then you send it to the CA State Board of Equalization.  One side benefit of obtaining a seller’s permit is that with your tax ID number, you don’t have to pay sales tax on materials, e.g., art supplies, that are part of the production of your art!

You should also consider a way to take credit cards.  I use Square, but there are a number choices which you may prefer.  For a modest overhead charge, these money collection services process the card and place the money into your bank account.  You also need to make a decision on what you will require in the way of identification should someone offer a check–or even if you will accept a check.  I do not have any advice on how to remedy the situation should you receive a “bad check”, as I haven’t yet had that issue.

I post policies on the weekend to avoid any confusion.

Another decision that needs to be made is about what you would charge for a commission so that when asked, you have an answer.  For example: 

1. What is the price? If the print is one of my stock images, I charge nothing additional beyond my set price list for that size print or framed image.  If it is request for something I have no current image of (like the customer’s dog!), then pricing will depend on my labor involved in taking the photo, approval by the customer, and then printing plus framing.  Since I used to be a commercial photographer years ago, I would rely on that experience to guide me;
2. Can I make installment payments, i.e., layaway, for my purchase?
3. How much down payment is required, and how many payments?  After full payment, then the picture would be delivered.  I am making mine 1/4 down, 3 more monthly payments and then the customer gets the piece.  

You can make a commission or layaway form either on paper or electronically. I use Jotforms for any of the forms I require.

Your homeowners insurance most likely does not cover public guests! You are highly advised to get business insurance.  I called my homeowner insurer, which is USAA, and they said for events where the public was invited, they cover no liability to injury.  They do, however, up to a certain limit, cover equipment used for business, but no artwork that I have for sale, which can be considerable.  I asked what I needed, and they put me on to a company called RLI that gives you $1 million liability coverage, $5000 actual cash value for artwork, protection from terrorism–but no coverage for communicable diseases, for only $216 a year! There were other options available I decided against.   This insurance covers your studio, but if you do something like Art at the Source or Art Trails not in your home, you can list another location for $20, and the coverage would be the same at that location.

The next critical step is to price artwork appropriately and make sure each piece displays a price.  To do this fairly, neither too high or too low, I have been compiling other photographer’s prices at art fairs, studios, and galleries, locations comparable to the market I believe I am in Sonoma County.  I take an average of those artists’ prices, and then set my price to the result.

If you make a lot of $$$s – and I hope you do – you need to report it to the IRS on your income tax.  I did for a few years, but since I lost money doing this each year, under advisement from my tax professional, I stopped.  A good thing about declaring this business to the IRS is the ability to depreciate cameras or other tools used.  Be sure to keep all relevant receipts that are business-related expenses since you pay tax on net income.  I highly recommend you consult a CPA rather than using tax software, before you try taking this tax advantage. 

That’s it!  As I love asking someone, “Do you know how to make a small fortune doing art?”… Answer:  “Start with a large one”

the Cashbox

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5) Get a cash box and cash to make change. It doesn't need to be fancy. I keep other things there, like my name tag and visitor counter (many events want a tally after the weekends).

The next article will be:

Link to Part 3 is “Publicity before the weekend.“