Copyright Question

True, though the intent is largely the same. There are variations, of course, but to my understanding, there’s generally a threshold beyond which you are considered self-employed.

If GPT is correct:
" Self-Employment Thresholds (Rule of Thumb)

  • UK:
    • Earn over £1,000 → Register as self-employed.
    • Income tax starts at £12,570 annually.
  • US:
    • Net earnings over $400 → Pay self-employment tax.
    • Extra Medicare tax applies over $200,000 (single) or $250,000 (married).

In both the UK and US, gift cards, vouchers, “free gifts,” promotional items, and similar non-cash compensation are generally considered taxable income if they are provided in exchange for services or as part of your business activities."

If you stick to reporting the fair market value, you’re likely on the right track no matter where you live.

It is correct for the US, but you may not be understanding what is meant by “self employment threshold” and “taxable income … as part of your business activities”. The “self employment tax” is more tax than normal people pay, it also includes social security and medicare, things that an employer usually pays. Since you are the employer of you, if you cross the “self employment threshold” you need to pay the self-employment tax.

In the US all of those things are also considered taxable income for ordinary, not self-employed people also. That doesn’t mean the free samples you get at costco or the vouchers you get in junk mail are taxable, it depends on context, but it should be obvious the distinction. If it isn’t, you should ask a tax professional for clarification.

The problem with GPT is it is rarely right based on the first quest and the first question has to be related to the subject at hand.

You started by including self employment as a factor.

This is capital gains, at least it is in the U.K…

Different rules for different circumstances.

I understand, and I was painting with broad strokes here. As you mentioned, context is key. If you set up your own print farm, buy filaments and printers with points, and earn money, points, or boosts, you’re most likely crossing that threshold in the eyes of the IRS (and equivalent authorities in other countries). I run my own business in Norway, and the distinction here is essentially ‘the right to deduct anything related to or enabling the business to operate’—and likewise, 'the obligation to declare any income or gains related to that business.

Yes, ‘self-employment’ was just a placeholder for ‘venturing into the business domain.’ We’ve seen cases where influencers made significant money (and received free stuff, vacations, etc.) ‘tax-free,’ only to suddenly face heavy penalties as if they were a large business due to the amounts involved. It’s a quick transition from being an unemployed kid to a business owner when large sums are at play.

In the US you report the “fair market value”. The more interesting question is when do they become taxable, the year you get the points, the year you get the gift cards, or the year you spend them? What is the fair market value of a “point”? Or a gift card that can only be spent in a particular store?

In the US, you follow the “constructive receipt rule”. You could argue that the points are restricted as they are untransferable and the conversion to gift cards is entirely at the discretion of the company that gave you the points. But it all becomes clear when you convert them to goods, if you do that then you owe taxes on the FMV of those items.

Just to clarify in the US there is no difference in taxability for filament bought with points when used either personally or for your home business, it’s taxable either way.

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Even if you’re only charging for materials and fabrication, you’re still engaging in a commercial transaction.
The key issue is that you’re not using the model for your own personal use, which is what “personal use only” licenses typically allow. Unless the model’s license explicitly permits commercial use or you have a proper commercial agreement with the designer, printing for a customer likely violates the “personal use only” terms.
The act of printing for a customer, regardless of who provides the STL file, is still a commercial use of the model. Applies to both free and paid models: This restriction isn’t just for free models - it applies to paid models too, unless their license specifically allows commercial use. Free models are not exempt from copyright and licensing restrictions

several misconceptions about 3D printing and intellectual property rights

  1. Legal responsibility: The lack of a “legally-recognized system” for STL ownership doesn’t absolve you of responsibility. Copyright law applies to 3D model files, including STLs, just as it does to other digital creations

  2. Ignorance of ownership doesn’t protect you from potential infringement.

  3. Commercial use: Even if you’re only charging for materials and machine time, you’re still engaging in a commercial transaction by printing an STL file for a customer. This likely violates most “personal use only” licenses that come with many 3D models

  4. Renting vs. printing service: There’s a significant difference between renting out equipment and providing a printing service. When you print for a customer, you’re actively participating in the creation of the object, not just providing access to equipment.

  5. Customer responsibility: While the customer bears some responsibility, as a service provider, you also have an obligation to ensure you’re not infringing on copyrights. The “I’m just following orders” defense doesn’t hold up legally.

  6. Non-commercial use: Even if the customer doesn’t intend to sell the printed object, printing it for them could still be considered commercial use on your part.

  7. Grey area fallacy: While 3D printing law is complex, it’s not entirely grey. Many aspects are clear, such as the copyright protection of original 3D models and the restrictions on commercial use without proper licensing

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  1. Commercial use definition:
    Commercial use isn’t defined solely by the form of payment. Whether you’re paid in cash, credit card, gift cards, or even barter, if you’re providing a service or product in exchange for something of value, it’s still a commercial transaction.
  2. Intent matters:
    The intent to profit or gain from the use of the 3D model is what defines commercial use, not just the method of payment. Trying to disguise the transaction doesn’t change its fundamental nature.
  3. Legal and ethical considerations:
    Attempting to circumvent licensing terms through alternative payment methods is still a violation of the creator’s intellectual property rights. It’s both legally and ethically questionable.
  4. Tax implications:
    Suggesting that gift card payments would be “tax free” is incorrect and potentially illegal. Income is taxable regardless of how it’s received, and intentionally hiding income is tax evasion.
  5. Licensing terms:
    The licensing terms for a 3D model don’t suddenly become void if you use an alternative form of payment. The restrictions on commercial use would still apply.
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So, Malc is wrong???

Here is the link he provided, I’m pretty sure this is saying gift cards aren’t income:


MartinW

MartinW

New Member

Hi slduffy5,

The value of the gift cards are taxable income.

Please report this under this here:

Federal taxes - Wages & income - I’ll choose what I work on - Less common income - Misc income 1099-A 1099-C

If your screen looks different than mine, it may be because you are using a different version of TurboTax than I am.

Gift certificates

Cash or cash equivalent items provided by the employer are never excludable from income. An exception applies for occasional meal money or transportation fare to allow an employee to work beyond normal hours. Gift certificates that are redeemable for general merchandise or have a cash equivalent value are not de minimis benefits and are taxable.

I’ve included a link to the IRS website for your reference:

http://www.irs.gov/Government-Entities/Federal,-State-&-Local-Governments/De-Minimis-Fringe-Benefits

I hope this resolves your question. If you need further help with this issue, please respond to this post.

Thank you for choosing TurboTax!

‎May 31, 2019 4:46 PM

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Nope.

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There is some discussion of this going on here, chatgpt seems to have a contrary opinion but it is so easy to get it to say what you want by misframing the question.

One aspect of the US tax system that I find particularly despicable is that you can no longer subtract hobby expenses from hobby income. So if I earned $240 in gift cards last year but spent thousands of dollars on filament (sadly, both true) I’m expected to pay tax on the $240. Not cool at all.

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That is crazy.
What is the breakpoint where it makes sense to form a business.

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That’s a tough call. There’s a series of questions the IRS has that you can use to decide if it’s a hobby or a business… but even if you go full business mode after 3 years of not making a profit it’s automatically classified as a hobby. So let’s say you really don’t want a business but you want to be able to claim some expenses to offset the giftcards, would the sweet spot be to claim enough of the expenses so that you still showed a small profit and you could keep the business classification?

Right now the tax for me would be tiny on the cards I’ve earned but I can see where the people who are doing really well would need a strategy.

I think I’m supposed to add I’m not a tax professional or expert and my experience is just paying tax and Google lol.

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Seems like a bad place for small business!
Hobby or business (micro businesses 1-2 people) are the place where economies grow.

This is Canada:
As of December 2022, there were 1.22 million employer businesses in Canada. Of these, 1.19 million (97.8%) were small/micro businesses, 23,395 (1.9%) were medium-sized businesses, and 3,128 (0.3%) were large businesses.

It takes a lot to grow a business, but hobby people are the seeds for good economic activity.
Don’t get me wrong, running a business takes effort, it isn’t easy.
Looks like the IRS doesn’t encourage small business.
The CRA (= IRS) isn’t easy to work with, but they don’t usually get in the way.

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Yes!

I tried in 2023. Got the business license, signed up to collect and remit sales tax to the state, registered the name, the whole shebang. It wasn’t the right time because I have a full time job that expects 50+ hours a week. If it wasn’t for that I think I could have made a go of it. Maybe give it another try when I retire.

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