Vendor Business Startup & Maintenance
The Texas Trade Days Vendor Business Startup & Maintenance helps vendors navigate the business creation process and creates a central place for future reference when it’s time for renewals of the most common business activities of our industry. This page is full of information. Save it and bookmark it for regular reference.
Why The Strength of Your Business Matters.
If you’re here, whether you’re a vendor or want to be a vendor at our markets, you’re a business. You and your business is called a vendor because the word, “market,” is short for “marketplace.” Instead of us buying inventory to fill our marketplace, we invite merchants (you) to provide your merchandise for us. We lease space for you to sell your merchandise direct-to-consumer rather than you leasing shelf, floor or rack space from us while we sell your merchandise like retail stores. Before we get into the details of building a strong business, let’s lay the foundation of how all this works.
IS IT REALLY A HOBBY?
You say its a hobby. The State of Texas and the Internal Revenue Service says its a business. Which is it?
It’s all based on your actions, not how you feel about those actions. When you make something and give it away, it’s a hobby. The moment you intend to make a profit on it by selling it, it’s a business (with one exception given by the IRS). Selling anything creates revenue (income), which is taxed in 3 major ways: sales and use tax, income tax, and business personal property (inventory) tax. Ouch!
Hobbies don’t generate revenue. They’re for personal enjoyment. Therefore, you’re not taxed on it, except when you buy the materials in many cases because, then, the merchant SOLD you the materials, so their sales act triggered the commercial category.
Sales is a commercial action. “Commercial” has 2 common definitions in this context.
concerned with or engaged in commerce.
"a commercial agreement"
Similar: trade, trading, business, private enterprise, mercantile, merchant, sales, merchandising
making or intended to make a profit.
"commercial products"
Similar: profit-oriented, money-oriented, commercialized, materialistic, mercenary
Opposite: non-profit-making
So, we see that once you intend to make money off the products you made, it’s no longer considered a hobby in the eyes of the government. With that said, let’s clear some air about our perceptions of the government. Some of us like big government, some of us like small government, and there are some of us who like no government. However, none of us get what we want. We have to deal with the government.
We believe in a medium-sized government, and that “no government” isn’t naturally possible. Humans by nature self-regulate in all group sizes, just like we see in wild animals. So, with “government” comes the regulation. Most regulations (rules and laws) are created to protect a group of people. In our case, it’s to protect consumers from unscrupulous merchants. Sellers almost always have the upper hand in a transaction because sellers have what buyers need. So because buyers have a need, it makes them vulnerable as an “easy” target for sellers to take advantage. This is the primary reason for commerce regulation. Thousands to millions of selling-buying transactions happen just for you to sell 1 little end-product to a buyer. Imagine the expense and all the potential issues that can happen without government regulation that can affect a small $5 sale we make at the market. Wow! This is a study topic of its own, so we’ll just stick with the basic principals here. Bottom line: Congratulations, you’re a business owner!
WHAT DOES THIS HAVE TO DO WITH THE STRENGTH OF MY BUSINESS?
Everything. Having a understanding that you’re a business owner is the first step in strengthening your business. It changes your perspective, your behavior, your future outlook, and determines your success as a vendor. It truly sets you a part from your “competition” in the eyes of buyers. Make them come to you, and you’ll never have to chase them again. THIS is how you succeed. So, let’s set your business up for success by continuing below.
NOTE: You should seek advice from a licensed attorney that specializes in business law anytime you have questions, need help or advice about business organization.
STEP 1: Determine what type of business you want to create.
ALSO: Don’t be afraid to contact any of these regulatory agencies with questions. They rather help you navigate the bureaucracy than to bring action against you and your business. They are willing to talk with you. Take them up on their offer.
The 2 common types for our industry are:
Sole proprietor (Assumed Name or DBA [“Doing Business As”])- if it’s just you and you want to sell under a commercial name.
Typically filed with the County Clerk in all counties you wish to sell.
IRS taxes are typically filed on the 1040 Schedule C form.
Costs around $10-40 for each filing depending on the county.
Business Entity Formation - Limited Liability Company (LLC), Partnership, Corporation, etc.
Filed with the Texas Secretary of State.
May have different IRS tax forms to file.
Costs around $300 for a standard LLC.
Has more legal and reporting requirements, but can receive more benefits.
Can survive the founder(s).
WARNING: The State of Texas recognizes oral partnerships. These partnerships activate certain laws just like a formed business entity partnership. Be careful who you call a “partner.” It’s best to use the terms “cooperation (co-op),” “collaboration (collab),” etc. when working in conjunction with another - separately.
The Texas Secretary of State provides a variety of online business services and information on their website at https://www.sos.state.tx.us/corp/index.shtml.
STEP 2: Determine if you sell taxable goods or services.
This is through the Texas Comptroller of Public Accounts (TXCPA). If their regulations say your products or services are taxable, you’ll need to apply for a Sales and Use Tax Permit. It can be done online directly through them, and it’s free. This tax does not come out of your “profit,” but rather, you’re simply collecting the tax for the state in addition to your charge for the product.
you are engaged in business in Texas; and
you sell or lease tangible personal property in Texas; or
you sell taxable services in Texas.
This is a good list to see what is and what is not taxable among the products our vendors typically sell at market.
Complete this Sales and Use Tax Permit application in the name of your DBA, business entity, or business entity’s DBA - whatever name you’re using for your business.
STEP 3: Get commercial general liability insurance, and any additional policies for your products or services.
General liability covers your business in case you damage other property, your business property is damaged, or you receive a bodily injury claim relating to your business operations.
Product or service liability insurance helps protect your business in cases of any claim of harm caused by your product or service.
Be sure to read your policy carefully before agreeing to it. Policy coverage can be different among insurance providers.
NOTE: It can be cheaper to purchase an annual policy with greater coverage than a “per event” policy for each market you sell at.
ALSO: This step and step 4 may need to be adjusted.
Some insurance providers may require or give better rates when all business licenses are obtained. However, sometimes, licenses require proof of insurance and/or bonding coverage at the time of application. Be sure to talk with the licensing agency and the insurance agency to get the correct information and process for your business needs.
STEP 4: Licenses, Permits and Certifications
Licensing and permits are generally determined by your business industry regulations, the products and services you sell, and the area in which you operate your business. In many cases, multiple licenses and permits may be needed. You’ll need to make calls and do some research to find out which ones you need, and who issues them to your business. Here are some common licenses and permits some of our vendors need to sell at markets. Remember, each of them has their own requirements and fees.
Temporary Food Establishment Permits (Required for Temperature Controlled food)
Galveston County Health District - Temporary Food Service Operations
Mobile Food Truck Permit
City of Kemah - Food Truck Application
Farmer’s Market Vendors
Galveston County Health District - Farmer’s Markets
NOTE: Some vendors may already have the above permits through the Texas Department of State Health Services. However, since our market is in an area governed by a local health district, vendors are required to obtain permits from the local health department at the department’s discretion.
***Vendors are required to notify Texas Trade Days prior to obtaining the above permits. We have reporting requirements, too.***
Texas Food Manufacturers License
Texas Department of State Health Services - Food Manufacturers General Information
Pet Food Manufacturing
FDA's (Food and Drug Administration) - Regulation of Pet Food
FDA - Pet Food
Association of American Feed Control Officials (AAFCO) - Starting a Pet Food Business
Texas Cottage Food Law
NOTE: It is very important to understand the Texas Cottage Food Law is a PROTECTION written into law. All requirements of this must be met in order to be granted the protection. Failure to do 1 part of it (like not having the required information on labels) could result in your cottage food business being considered an illegal food operation by the local and/or state health departments, which results in fines, business closures, and even possible incarceration in some cases.
Texas Health and Human Services (TXHHS) - Texas Cottage Food Production
Texas Cottage Food Law - Everything you need to know about starting your home food business in Texas.
Did you create a food or beverage with alcohol, but not sure if it’s considered an alcohol product?
Check out this recommendation given to us by the Texas Alcoholic Beverage Commission (TABC) - Houston Field Office, Product Registration Division:
Request a “Letter of Determination” from the Alcohol and Tobacco Tax and Trade Bureau for your product.
If they determine you have created an alcohol product, you’ll need to seek permits from TABC before you can sell it.
If they determine you did NOT create an alcohol product, contact the local health department for further guidance.
Caution about Vanilla extracts and flavorings - TBB Vanilla Extracts and Vanilla Flavors
Food Safety Certification
TXHHS - Licensing of Food Handler Training Programs
TXHHS - Accredited Food Handler Classroom Training Programs
ANSI National Accreditation Board - Food Handler Training Certificate Program (Accredited)
TXHHS - Certified Food Manager (CFM) Training
We use eFood Handlers, Inc. from the list
The Food Manager Certification is needed for those who supervise food handlers. So, if you have friends or family helping, or you have employees, they’ll need the food handlers certification, and you’ll need to get the CFM instead of the food handlers certification.
STEP 5: Protect Your Business
Protecting your business is one of the most overlooked and important things you can do to invest in your business, aside from insurance coverage. You want to protect your intellectual property as much as possible. You do get some loose protections with existence, but formally protecting your business’s intellectual property now will save you time, heartache and money in the future.
What is intellectual property?
According to World Intellectual Property Organization (WIPO), “Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.”
They continue to say, “IP [intellectual property] is protected in law by, for example, patents, copyright and trademarks, which enable people to earn recognition or financial benefit from what they invent or create.” Here’s some ways you can file:
STEP 6: Vendor Training
It may seem weird to talk about vendor training, but it’s a learning curve. So many markets and events seem very different, but the basics are much the same. The more knowledge you have in creating and operating your temporary storefront (booth) the better prepared you will be on market day. The following links are a great place to start learning and refreshing. Much of the information contained in each one applies to every vendor at most markets and events.
Online Vendor Courses (Courses are appropriate for all vendors)
Texas A&M University (TAMU) AgriLife - Texas Farmers' Markets: Becoming a Vendor
Pennsylvania State University (Penn State) - Clip of Farmers Markets: How To Be A Successful Market Vendor
Louisiana State University (LSU) - How to Be a Great Farmers Market Vendor
Texas Trade Days - Vendor Learning Series
Of course, don’t forget to read each market and event’s vendor policies! You can learn a lot from them. Learn about the “best practices” you should seek in each market and event, as well as the red flags you should avoid (coming soon).
STEP 6: State-level Associations and Programs
Texas Department of Agriculture - Go Texan program
State Chamber of Commerce - Texas Association of Business
The Stronger Your Business, The Better it Works.
Having a firm foundation laid for your business gives you the cornerstone you need to build a great business that works for you and not against you. Your business should be working for you after you created it. It takes time, but the information provided should help you be more efficient, so you can get back to the fun stuff. From here, you can work on your websites and social media, designing your booths, setting up or configuring your P.O.S. systems, inventory creation and selection, etc.
Once your business is structured and designed the way it needs to be and how you want it, you’ll be more prepared and confident that it will convert more lookers into buyers.