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 Post subject: Puzzle Building and selling finances
PostPosted: Wed Feb 25, 2009 11:39 am 
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Joined: Thu Dec 21, 2006 5:32 pm
Location: Bay Area, CA
I just did my taxes. This year, given that I have sold puzzles on a somewhat serious scale (about 100 puzzles), I thought it proper to account for my income and expenses on my tax return.

Many new to the world of puzzles get excited about the "high" prices of puzzles on eBay or in waiting lists and immediately spawn threads asking about pricing, how they need to build and sell something quickly to afford to build other things etc. Most come to realize that puzzle building probably shouldn't be approached as a way to make a quick buck.

But let's look at things in more detail because, well, I have some hard numbers:

I have a separate bank account, PayPal account and credit card all devoted to tracking my puzzle expenses, but integrating all of these into one report was a challenge. Moving money back and forth between them can easily lead to double booked entries which I had to resolve.

One 150+ line spreadsheet later I had some results which I though I would share:
The top level summary:

Total income $4,413.11
Total Expenses -$4,948.07
============================
Year total -$ 534.96

For tax purposes I came out losing just over $500 last year.

Now a bit more detail:

Non-California income $3,994.10
California income $ 419.01
Web site/subscriptions -$ 548.64
Manufacturing services -$1,587.38
Supplies -$ 879.46
Postage -$ 460.59
Travel expenses -$1,472.00
========================================
Year total -$ 534.96

One thing that came out was that I have not been charging California sales tax for items I ship within California. I will have to pay it myself this year, but in the future will have to start charging about 8%.

A large missing aspect to all of this was that about $1300 of my puzzle income went to buying items for my personal collection ( :D :D :D ) and perhaps a bit more considering trades. This was pretty much balanced out by the fact that all of my travel expenses were not paid from the puzzle account.

So there you have it. Although a lot of money came in last year, a lot flowed out. I could have done better if I had properly priced my the Neon to begin with, but all in all I think I did OK.

Note that nowhere in any of these calculations are compensation for my time and effort. That's right, all of these figures come out negative before I charge a penny for my time and labor. So as a business I would be far, far in the red if I charged even minimum wage for my years worth of work.

Every puzzle seller will have their own prices and expenses, and I am sure puzzle building can be profitable. But don't assume it. I think a lot of my investments made in 2008 will mean more income and fewer expenses in 2009 so I imagine this year to be better for the bottom line. But I'm not going to worry too much about it. I'm having fun :)

Dave

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 Post subject: Re: Puzzle Building and selling finances
PostPosted: Wed Feb 25, 2009 3:28 pm 
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Joined: Fri Nov 04, 2005 12:31 am
Location: Greece, Australia, Thailand, India, Singapore.
That was an interesting report. :)

Will probably see you this August for details regarding more such reports.

;)


Pantazis

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 Post subject: Re: Puzzle Building and selling finances
PostPosted: Wed Feb 25, 2009 3:53 pm 
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Joined: Mon Jan 05, 2009 9:05 pm
Location: Fort Meade, MD
I think this is right on the money. I am still "in the hole" 350ish USD from things like my new sander & my 2 gallon alumilite.

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 Post subject: Re: Puzzle Building and selling finances
PostPosted: Wed Feb 25, 2009 3:59 pm 
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Joined: Thu Apr 05, 2007 8:05 pm
Location: Seed-nee
Yeah, I did the sums for last year too, although it was a bit tricky with the constantly-changing exchange rate as a factor...

Regardless, 2008 was a high-dollar year for me. Or so it would seem. After material costs, 3-D printing charges, transfer fees, etc. were deducted from the gross figure, I was less than $NZ1000 ahead. Take 38% off the top of that for tax, and you're left with what I have left to re-invest in further projects, my personal collection, and payment to myself for my time and effort.

Yup, its real gold-mine this puzzle building hobby ;)

(fear not, I'm sticking with it anyway!)

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 Post subject: Re: Puzzle Building and selling finances
PostPosted: Wed Feb 25, 2009 4:02 pm 
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Joined: Mon Jan 05, 2009 9:05 pm
Location: Fort Meade, MD
Its the little things that get me, like $80 for stickers and $140 for a few rubiks cubes (before I got that amazing deal with a few other forum members).

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 Post subject: Re: Puzzle Building and selling finances
PostPosted: Wed Feb 25, 2009 4:21 pm 
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Joined: Sat Apr 21, 2007 11:21 pm
Location: Marin, CA
David, I'm glad you posted this! Taxes are something that people often leave out of pricing calculations, and that percentage of your precious earnings can hit really hard.

Other little per-puzzle expenses that have surprised me:
sandpaper
mold release
failed molds (hundreds in silicone)
cups stirring sticks and gloves.
web hosting

When my father in law saw the work (hours) required to cast, clean, assemble, finish and sticker a single 3x3x5 cube, he made a comment on what my hourly wage really is, and it is ridiculous. If anyone's doing this for a wage they're in for a surprise!

Pantazis, maybe we can also compare reports when we meet! :)

The first rung I would like to reach would be to cover my puzzle hobby entirely with puzzles. That would be wonderful!

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 Post subject: Re: Puzzle Building and selling finances
PostPosted: Wed Feb 25, 2009 4:27 pm 
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Joined: Fri Nov 04, 2005 12:31 am
Location: Greece, Australia, Thailand, India, Singapore.
io wrote:
Pantazis, maybe we can also compare reports when we meet! :)


Sure! My puzzle business partner (and best friend) will be there too, and he will give you a complete analysis LOL

;)


Pantazis

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 Post subject: Re: Puzzle Building and selling finances
PostPosted: Wed Feb 25, 2009 9:19 pm 
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Joined: Tue Oct 09, 2001 6:14 am
Location: Orange County, CA, USA
If I broke down puzzle making to some sort of hourly wage, then I'd probably find out I'd be better off working the cash register at McDonald's. I still do this because I enjoy it. Although I like to believe that I'm not doing this for the money, I have to admit that the hobby has paid for itself monetarily even if it's not worth the Time invested if I think of it as a job.

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 Post subject: Re: Puzzle Building and selling finances
PostPosted: Thu Feb 26, 2009 6:05 pm 
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Joined: Sun Apr 30, 2006 4:17 am
Location: Düsseldorf, Germany
The issue of taxes does not only happen to the puzzle builders, but to the buyers, too.
Buying a puzzle from someone who's living outside the EU typically means, that the parcel will
be picked up by customs and I'll have to go to the customs office to pay for it before I get it.

The customs tax for toys being 4,7% here in Germany is not really a problem, but additionally
I have to pay the import VAT on the puzzle price, which is 19%. So a puzzle suddenly becomes
23,7% more expensive! This is something, which is not considered by many people buying
e.g. on ebay internationally (and is valid not only for puzzles, of course) and might become a
bad surprise.

Also the exchange rates are very important. When I paid for Drew's Teraminx last year, the
rates were 1€ = $1,43, when I got it two months later it had changed to 1€ = $1,23!
So sometimes it is an advantage for the buyer to pay early and it should be taken into
account by the builders, too. There was another thread discussing, if a puzzle should be paid
beforehand or just after completion before shipment. I think, both sides should be flexible on this.

Of course all this is a question of luxury, since collecting (expensive) puzzles is not necessary
for life and I know this before. It's not a complaint. I just want to add some more monetary
facts to this whole "business".

Frank

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Contact me via gcd@tiex.de for more information about the German Cube Day.

Link to my website: Frank's Puzzle Library
Please use puzzles@tiex.de to contact me. I disabled PMs.


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 Post subject: Re: Puzzle Building and selling finances
PostPosted: Thu Feb 26, 2009 6:13 pm 
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Frank Tiex wrote:
Of course all this is a question of luxury, since collecting (expensive) puzzles is not necessary
for life and I know this before. It's not a complaint. I just want to add some more monetary
facts to this whole "business".

Frank


*gasp*

For many years we've gone neck and neck - especially on eBay. So, I know my bills towards collecting is a lot! But thank goodness I don't have to pay 'extra fees'. :shock:

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 Post subject: Re: Puzzle Building and selling finances
PostPosted: Thu Feb 26, 2009 6:19 pm 
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Joined: Sun Apr 30, 2006 4:17 am
Location: Düsseldorf, Germany
Luckily Tony is living in the UK being part of the EU :D

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Link to my website: Frank's Puzzle Library
Please use puzzles@tiex.de to contact me. I disabled PMs.


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 Post subject: Re: Puzzle Building and selling finances
PostPosted: Thu Feb 26, 2009 8:01 pm 
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Joined: Sun Apr 16, 2000 3:17 pm
Location: Hong Kong
Buying puzzles worldwide and sending them to friends in other countries has made me all to aware of these extra charges. Anyone who receives a puzzle from me will notice that it is only worth HK$10 (US$ 1.25) and is always a gift. The only time I know of that this is a problem is if something gets lost in the mail. If anyone can tell me otherwise, please do. I'd hate to see the tax man get the money instead of you getting another puzzle.

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 Post subject: Re: Puzzle Building and selling finances
PostPosted: Sat Feb 28, 2009 3:47 am 
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Joined: Thu Aug 30, 2007 7:54 am
Location: Yorkshire, UK
A very interesting and insightful post Dave. I think of this when anyone posts a "whinge" about the high price of custom puzzles. I have not done done my accounting anywhere near as carefully as you, but now and then I trawl through my e-receipts and bills. At a generous estimate (generous as in the kind of estimate I would give my wife!), I am about 500 GBP in the red at the moment, though I have about £200 of silicone, eurethane etc for future use.

At one time I was just hoping to keep my neck above water financially and balance costs, maybe afford a Stika at some point out of sales. Hahaha.

I guess, if rather than see it as a job, see it as a hobby that has only cost (on balance) £300-£400 for two years of fun, it makes it a cheap hobby compared to many others, computer gaming scuba diving, biking etc.

Like io, it is the cost of the small things that has been most surprising. The largest single cost for me has been failed silicone molds. This includes daft mistakes with cast lines and making entire puzzles and just not being happy with the quality when they are finished, and having to redo masters and all molds. I keep hoping my build skills will improve enough for me to get it right first time. It hasn't happened yet.

For me sadly, I am too pragmatic (and hard up!) financially to the extent that I have no copies of my own puzzles that I am happy with: I have sold them all! I just get to keep the wobbly prototypes.

Still, it has been the most intellectually, technically and practically challenging thing I have ever done: and certainly the most fun and rewarding hobby I have pursued.

NOT a money-making past time, but definitely worthwhile!


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