Are Gift Baskets a Business Tax Deduction?
Diane asks:
“I am trying to capture our local Real Estate market for closing baskets and would like to know if the Real Estate Agent can write the basket expense off on her income tax as a business deduction? I think that would be a good tool to use to try and snag the account.”
I’m aware of how some of my clients deduct the gift basket orders I fulfill for them; however, the question you ask is best answered by your accountant.
Business laws aren’t always the same in every city, county, state, and country. I’m not an accountant, and I’d be irresponsible to advise you on this matter. That’s true for anyone who’s not a CPA (certified public accountant).
I agree with you that knowing and sharing this information is a good tool during a presentation. If you’re not yet working with a CPA, small business owners with whom you network may be able to recommend one to you (that’s how I found my accountant).
A 30-minute or one-hour meeting with a CPA is worth the investment, as you can ask many questions during that time frame.
Once you learn the right answer from this knowledgeable source, you’ll move forward confidently with your real estate market presentations.
Do I Sell My Baskets on Consignment or at Wholesale Cost?
Marcelle asks,
“I would like to display some of my baskets with local businesses to see if they would sell. What would be the best approach to this, and if I were to sell some of my baskets, what method of payment from the consumer would be best since by business has not been formally established yet.”
When I entered this business in 1990, the most-popular way of selling gift baskets with local businesses was through consignment. This entailed:
1) showing the shop owner/manager gift baskets that would be sold in the shop,
2) crafting an agreement that protected the gift baskets while out of your care, and
3) collecting payment at month’s end (or whatever time frame was chosen) for the baskets that sold.
Today, many designers sell their gift baskets outright to shop owners. They do so by:
1) Creating about six different gift basket designs to offer to another retailer. Buying nested baskets are often good for this type of designing, which you’ll learn about on this page.
2) Determining a wholesale price for selling them to shop owners, which is a price that not only allows you to make a profit when selling them outright but also lets the shop mark them up again before placing them on the sales floor.
So, the method you choose to display your gift baskets with local businesses is up to you. If you can sell outright to a retailer and not have to come back to fix gift baskets that have been mangled by their customers, that’s usually the better deal.
I understand that this option is not always open, so if selling on consignment, create an agreement that gives you the largest profit percentage possible. Check on your baskets regularly, and in time you’ll learn which ones sell faster so that those designs are the only ones offered to their customers.
Do I Need a Contract?
Angel asks:
“I have the opportunity to create gift baskets for a local brownie company. They supply the brownies and I will create the basket for them to give to the customer.
Should there be a contract between the brownie company and my basket business?”
Congratulations on obtaining this account. Many designers do not pursue a contract when working as an outsource supplier because they believe the informal connection is beneficial.
However, many more understand the complexities of this collaboration and work out the details in writing before starting.
I learned long ago that you, the company hired to complete a project, are the one responsible for creating the contract. It’s in your best interest.
The contract will include:
- the two parties’ names
- the contract terms (what will be provided)
- the contract length (how long you will work with them)
- the payment and when it’s due (charging for the entire project versus an hourly rate works in your favor)
- where the work will be completed (their facility or yours),
- who’s responsible or held harmless in case of fire or theft, and any intricacies associated with the terms
I’m not an attorney, so consider what I’ve shared as advice only.
I encourage you to seek guidance from a small business attorney to create this contract. If you think he’ll be expensive (it’s more affordable than you imagine), think about how much this project will cost you if something goes wrong and there’s a dispute that lands you into court.
I interviewed small business attorney, Robin Gronsky, on Legal Tips to Keep your Company Out of Court, which covers this and other topics. It’s a worthwhile investment to understand legal basics.
[tags]gift baskets business, finding a small business attorney, gift basket laws[/tags]
