BlogSmall growers
From hobby to business: the paperwork that comes first
Most nurseries start in somebody's back garden. A few flats of perennials go to a market, a neighbour asks for twenty more, and at some point the hobby is a business whether or not anyone has said so. That is the time to sort out the paperwork, because the rules for selling plants apply from the first sale rather than the first big one, and they are easier to meet before a buyer or an inspector asks.
The rules are set state by state, so what follows uses a few states as examples. The place to start for your own is your state department of agriculture. The National Plant Board, the association of state plant regulatory agencies, lists the official to contact in each state.
A licence to sell plants
In many states, selling plants needs a licence from the department of agriculture. California requires a License to Sell Nursery Stock of "any person who sells plants for planting, propagation or ornamentation", obtained before the first sale, and the county inspects the nursery once you apply. Even a grower selling under $1,000 a year of their own plants in their own county needs one, although that licence is fee exempt. Oregon licenses anyone selling more than $250 of nursery stock a year. Florida requires anyone growing plants for sale to register as a nursery and says the stock must be inspected before it is sold. Texas asks for a Nursery Floral licence for each place plants are grown or sold, a permit for each day at a flea market or plant show, and a licence to sell plants on any website.
Shipping across a state line adds a step. Texas says plants shipped out of state need a phytosanitary certificate from one of its inspectors. Michigan, in the summary it publishes through the National Plant Board, asks for an inspection certificate from the state the plants come from and advises talking to the regulators in both states first. The USDA says never to ship plants out of an area under quarantine.
Sales tax and the resale certificate
Selling plants at retail usually means a sales tax permit and collecting tax from the buyer. In California both wholesalers and retailers must hold a seller's permit, and the state's tax agency says ornamental and landscaping plants are generally taxable, while plants that will produce food, such as vegetable and fruit starts, are not. Texas asks for a permit from anyone doing business there who sells taxable goods.
When you sell wholesale, a buyer who will resell the plants gives you a resale certificate and you do not charge them tax. The Texas Comptroller calls the certificate the seller's evidence of why tax was not collected and says to keep it for four years. Ask for it before the first invoice rather than at the end of the year.
Keeping the business separate
The Small Business Administration advises opening a business bank account as soon as you start taking or spending money as a business, and keeping that money apart from your own is also how you find out whether the plants make money at all. The IRS tells a hobby from a business partly by whether it is run like one and whether you expect a profit, and a hobby's losses cannot be set against your other income. An employer identification number is needed once you have employees or form a partnership or company, and the IRS will issue one for banking even when you do not need it for tax.
Sprout keeps the sales side of that record from the first order. Every order, invoice and payment sits in one place, and the profit and loss, balance sheet and sales reports are built from them, ready to download for your accountant. A grower selling their first few flats starts with clean records rather than a shoebox of receipts, and a nursery that grows into wholesale already has every buyer's orders and payments on file.