As a small business owner, staying on top of your finances is crucial for success. One important aspect to consider is obtaining a tax resale certificate, especially as the new year begins. A tax resale certificate can provide numerous benefits and savings that can significantly impact your bottom line.
By obtaining a tax resale certificate, you are essentially registering your business as a legitimate reseller. This allows you to purchase goods and products from wholesalers without having to pay sales tax upfront. Instead, you can collect sales tax from your customers when they make a purchase.
The advantages of having a tax resale certificate are twofold. Firstly, it helps you save money by avoiding paying unnecessary sales taxes on items that will be resold. This can result in significant cost savings over time, especially if your business relies heavily on purchasing inventory or materials.
Secondly, having a tax resale certificate enhances your credibility as a legitimate business entity. It demonstrates to suppliers and potential clients that you are operating in compliance with state regulations and are authorized to engage in reselling activities. This can lead to increased trust and opportunities for collaboration with other businesses.
Furthermore, obtaining a tax resale certificate is relatively simple and affordable for small businesses. The process typically involves registering with the appropriate state agency or department responsible for handling sales taxes. Once approved, you will receive an official document certifying your eligibility for exemption from paying sales taxes on qualifying purchases.
In conclusion, getting a tax resale certificate should be high on the priority list for small businesses in the new year. Not only does it provide immediate cost savings by avoiding unnecessary sales taxes, but it also enhances credibility and opens doors for potential partnerships and growth opportunities within the business community. Don’t miss out on these advantages – take the necessary steps to obtain your tax resale certificate today!
What is A Tax Resale Certificate?
You must understand that tax resale certificates can also be used on items that will be resold. Office supplies, such as new computers for your employees, would not fall under the category of retail. It would be considered fraud not to pay sales tax on these items.
If this is confusing for you, just think of tax resale certificates as state tax exemption certificates. Some states call them exemption certificates or reseller’s permits.
How Do I Know If I Need To Pay Sales Tax In A Given State?
To establish whether or not a state can impose a sales tax upon your business there first needs to be nexus. Nexus relating to state sales tax is established by a connection between the state and your business. How this connection is defined has been subject to fairly recent changes that reflect changes in the way business is conducted in modern times.
Traditionally, the nexus has been established by the business having a physical presence in the state. However, due to the explosion of e-commerce, physical presence within a state is no longer a requirement for sales tax nexus. In the case of South Dakota v. Wayfair, the courts eliminated physical presence as the major requirement for creating nexus. It still should be noted that physical presence is considered an important requirement to allow a state to collect sales tax and is still one of the first considerations for sales tax.
What Happens If I Do Most Of My Business In A State That I Am Not Incorporated?
If you primarily do business in a state that you are not incorporated in, make sure you apply for a Foreign Qualification (also known in some states as a Certificate of Registration or Certificate of Authority). This is the process of registering your company, which is considered domestic to the state in which it was originally formed and foreign to all other states, as a foreign entity in the states in which it operates. The retailer is then able to legally conduct business outside the state in which the company was originally formed and, therefore should be able to
Insurance
A self-employed person can deduct the premium of various types of business insurance. This can include:
- Fire
- Theft
- Worker’s Compensation
- General Liability
Vehicle Expenses
So, if a self-employed person uses their vehicle for 100 percent business use and the vehicle is in the company’s name, then the car or truck is fully deductible.
If the vehicle is in your personal name and used partly for personal, and partly for business use, then there are two ways to calculate the deductions
Track your actual car expenses, including gas, maintenance, insurance, and depreciation, and deduct a percentage supported by the number of business miles you drive.
Deduct a typical rate on each “business” mile driven for the year. For 2020, the quality mileage rate is 57.5 center per mile driven for business use, down from 58 cents per mile in 2019.
No matter which method you select, you’ll got to keep track of what percentage of business and private miles you drive. You can use a manual log or an online app.
Cellphones
You can deduct your percentage of business use from your cell phone bill on your taxes. For example, if you use 30 percent of your personal cell phone for business, then you can deduct 30 percent of the bill.
You can also just purchase a cell phone that will just be used for business purposes.
Equipment and Furniture
Section 179 is a tax law that allows business owners to deduct the full purchase price of qualified equipment from their gross income. Rather than deducting a certain percentage of the equipment under a multi-year depreciation schedule, as is customarily done, business owners can deduct the full price, as long as it is under$2.5 million if it was financed or purchased in 2018.
Qualified assets for Section 179 include:
- Machines or equipment purchased for business use.
- Office furniture.
- SUVs, pickups, and vans weighing more than 6,000 pounds.
- Certain improvements to the interior of commercial property.
Read our handy article Tax Deductions that Every Small Business Owner Should Know to find out about more money-saving tax deductions.
Advertising
Self-employed people should keep in mind that all advertising costs are fully tax-deductible.
This can include the following
- The cost of printing business cards, flyers, and mailers
- Social media advertising like Facebook ads
- Promotions at conventions and trade shows
- The cost of advertising agencies
- Television and radio advertising
- Employing freelancers
You can also deduct all commissions paid to non-employees for sales and marketing purposes. This can include payments to individual sales reps, or marketing channels, and a platform like Amazon.