Author: Dona Basu

As a small business owner, you already have a lot on your plate. Your priority may be sales, customer retention, and growth. However, paying attention to the financial and legal aspects of running a business can be a costly mistake. You may not enjoy doing taxes, but understanding small business taxes is critical if you want to avoid penalties, deductions, or audits. In this blog post, we will cover the basics of small business taxes, the types of taxes, tax deductions, and how to stay compliant.

What Is Small Business Tax?

Small business tax is a mandatory payment of a portion of profits or income to the government. The revenue you earn from your business counts as taxable income, and you have to calculate and pay taxes on it. Tax rates vary depending on the type of business structure, revenue, and state. Failing to file taxes or pay them on time can lead to penalties and consequences, such as losing your business license, bank account freezing, or a visit from the IRS.

Types of Small Business Taxes

Small businesses may have to pay different types of federal and state taxes. Federal taxes include income tax, self-employment tax, employment tax, and excise tax. State taxes vary depending on the state but may include state income tax, sales tax, property tax, and franchise tax. Your business structure also impacts your tax liabilities, as sole proprietors, partnerships, LLCs, and corporations have different tax obligations.

Tax Deductions

One way to reduce your small business tax bill is to take advantage of tax deductions. Tax deductions allow you to reduce your taxable income by deducting expenses related to your business. The expenses may include office supplies, software, travel, insurance, marketing, and utilities. Keeping accurate records of your expenses is essential to claim tax deductions. If you work from home, you may also qualify for the home office deduction. Consult with a tax professional to find out which deductions apply to your business.

Staying Compliant

Staying compliant with small business tax rules may feel daunting, but it is necessary to avoid legal and financial issues. To stay compliant, you need to register for an employer identification number (EIN), keep track of your revenue and expenses, file tax returns on time, make estimated tax payments, and be aware of tax updates and changes. You may also benefit from hiring a tax professional or using tax software to make tax filing more manageable.

Small business taxes can be complicated, but they are an essential part of running a successful enterprise. By understanding the basics of small business taxes, you can reduce your tax liability, prevent costly mistakes, and stay compliant with the law. Remember to keep accurate records, take advantage of tax deductions, and consult with a tax professional, if needed. Don’t let small business taxes intimidate you, embrace them as part of your entrepreneurial journey.

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 needs to be clarified 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. A connection between the state and your business finds Nexus relating to state sales tax. 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 reality as the significant requirement for creating nexus. It should be noted that physical presence is considered an essential requirement to allow a state to collect sales tax and is still one of the first considerations for sales tax.

What Information Do I Need For The Tax Certificate Registration Form?

You must provide the following information:

• The name and address of the purchaser
• The name and address of the seller
• The registration number of the purchaser
• An accurate description of property purchased for resale
• The reason for the exemption
• A statement that if the property is put to use in a taxable manner the purchaser will remit the consumer use tax
• Date Signature and Title of the authorized individual at the purchaser

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 initially formed and foreign to all other states, as a foreign entity in the conditions in which it operates. The retailer can then legally conduct business outside the state in which the company was initially formed and, therefore, should be able to

Getting A Tax Resale Certification Is One Of The Best Things You Can Do As An Entrepreneur

If you decide to start a business, a tax resale certificate can save you money on taxes.

In short, a tax retail certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that are going to be used in products that you will resell, such as wood for a cabinet.

However, the process can be difficult and the rules are different for each state. That is why TaxResaleCertificate should do all the hard work for you. We can make sure that you get all the advantages of a tax resale certificate without having to deal with the hassle of government red tape. Let us handle the hard stuff so you can proceed to run your business with confidence. Make sure you check out our second blog in this series so you can learn even more valuable information about tax resale certificates.

For any business, particularly those newly established and operating in the digital sphere, navigating the complexities of state and local tax regulations is a critical, and often early, hurdle to success. Among the most essential documents a retail business must possess is a Tax Resale Certificate, also commonly known as a Reseller’s Permit, Sales Tax Permit, or Certificate of Authority, depending on the state. Obtaining this certificate is not merely a bureaucratic formality; it is a foundational requirement that provides both legal compliance and significant operational benefits to online enterprises. 

The primary and most fundamental reason for an online business to acquire a tax resale certificate is to legally purchase inventory, raw materials, or components without paying sales tax at the point of acquisition.

• Avoiding Double Taxation: Sales tax is, by its nature, intended to be a consumption tax levied on the final consumer. When a business buys goods with the intent to resell them to an end-user, paying sales tax on the purchase would constitute “double taxation”—once when the business buys the item, and again when the final customer purchases it. The resale certificate certifies to the supplier that the purchasing business is a legitimate reseller and will be responsible for collecting and remitting the sales tax to the appropriate state authority when the final sale occurs.
• Inventory and Cost Management: For a new online enterprise, managing capital and costs is paramount. By leveraging a resale certificate, the business can accurately classify its inventory purchases as non-taxable expenses. This significantly improves cash flow, as capital is not tied up in refundable sales tax payments. It also simplifies accounting and inventory costing, ensuring that the cost of goods sold (COGS) reflects only the wholesale price, not an unnecessary sales tax component.

2. Legal Compliance and Supplier Requirements

Operating an online retail business without a valid resale certificate, where required by law, can lead to serious legal and financial repercussions.

• State-Specific Mandates: Nearly every state that imposes a sales tax requires retailers to hold a valid resale certificate for making tax-exempt purchases of inventory. Suppliers are legally obligated to collect sales tax unless the buyer provides a valid, state-issued resale certificate.
• Audit Protection: Tax authorities conduct regular audits. If an online business has been purchasing inventory tax-free without the proper certification, or if it is unable to produce the required documentation upon audit, it can be held liable for the uncollected sales tax, plus significant penalties and interest. A valid resale certificate provides the necessary proof of exemption to withstand tax scrutiny.
• Building Supplier Relationships: Reputable wholesalers and distributors will demand a valid resale certificate before agreeing to a business relationship. This is a vital step for the supplier to ensure their own compliance with state tax laws. For a new enterprise, having this certificate streamlines the onboarding process with vendors, securing the supply chain necessary for growth.

3. Establishing Nexus and Legitimizing the Business

The process of applying for a resale certificate often coincides with, or is a consequence of, establishing Sales Tax Nexus.

• Nexus Determination: A resale certificate is typically issued only after a business registers with the state’s tax authority and obtains a Sales Tax Permit (the same document in many states). This act of registration officially recognizes the business as having “nexus”—a significant enough presence in the state to require it to collect and remit sales tax. For online sellers, nexus can be established through physical presence (an office, warehouse, or employee), or increasingly through economic nexus (meeting a state’s threshold for sales volume or transaction count).
• Operational Legitimacy: Obtaining this official government documentation signals to customers, suppliers, and financial institutions that the online enterprise is a legitimate, compliant entity. It moves the business from a casual operation to a professionally recognized commercial endeavor, which is essential for scaling, securing financing, and building consumer trust.

In conclusion, for newly established online enterprises, the tax resale certificate is an indispensable tool. It underpins cost-efficient inventory management, safeguards the business from significant legal penalties, is a prerequisite for wholesale purchasing, and formally integrates the business into the required state and local tax collection system. Securing this documentation early is a non-negotiable step toward long-term operational health and regulatory compliance.

Business Structure

One of the most important things you can do is be aware of the different types of legal structures that exist and how they affect your overall tax and liability burden. You should be fully aware of the different types of business entities and what that means for your business.

What is a business entity?

One or more natural persons create a business entity to carry on a trade or business. Business owners often favor corporations and LLCs because they offer several layers of protection for their owners.

The following are types of business entities:

• Limited liability company: A registered business with limited liability for all members
• Professional limited liability company: An LLC structure for professionals, such as doctors and accountants
• C-corporation: An incorporated business composed of shareholders, directors, and officers
• S-corporation: An incorporated business that is taxed as a pass-through entity
• Professional Corporation: A corporate structure for professionals, such as doctors and accountants
• B-corporation: A for-profit corporation that is certified for meeting social and environmental standards
• Nonprofit: Corporations: A formed primarily to benefit the public interest rather than earn a profit.

It Is Never Too Early To Plan For Taxes

It is true that 2020 was a year that had a lot of personal challenges for small businesses. However, understanding your tax liability for the coming year is always a good idea and it is never too early to start. There is no reason that taxes need to be a mystery and you can forecast what you will owe in the coming year.

Net Profit

Do you properly understand how to handle your cash flow? Are you going to pay taxes purely based on

What is available in your checking account? Many business owners do not realize that their available cash is not the same as the company’s net profit.

Remember The Quarterlies

Since self-employed owners do not get taxes withheld from their paychecks, it is a good idea to withhold the correct amount and send the Internal Revenue Service quarterly payments. This is particularly important if your tax liability is over $1.000. Ignoring quarterly payments could result in costly interest payments or penalties.

Decide what state you want to form your business.

Most new online business retailers file their documents within the state that they are physically located. This helps avoid the cost of hiring an out-of-state registered agent in your home state. However, if your business is large in scope, you might want to file your documents in Delaware. This state has advantages like laws that are generally favorable to businesses, and, unlike other states, it has a separate Court of Chancery that hears cases involving corporate law. It also does not collect corporate taxes if your Delaware Corporation actually does business in another state.

Build your inventory and make sure you get barcodes for all of your products.

To legally sell products to consumers through an online store, you will need UPC bar codes for each item you are selling, with separate barcodes for different patterns, styles, and combinations of features. You can purchase barcodes easily online. 

Make sure you have a decent size inventory to handle the demand. The online customer expects their orders to come through quickly.

Set up your Domain and design a great website.

Your domain name is your internet address. You want your domain name to be memorable and interesting. Many companies offer domain name registration. Set up an account, and then you identify the name of your domain.  There is usually an annual fee.

You also want to design a pleasing website that offers customers a pleasing and simple-to-use interface. This includes setting up the theme, headers, and product lines. You will also need to organize your products into categories and decide whether you want to include sections such as a FAQ page or a blog. Do not forget important factors like a shopping cart and easy-to-play options. This should not be difficult if you are using a typical e-commerce platform. You also want to constantly update and check your website to ensure there is no technical issue that could interfere with your sales.

Always start with a business plan.

A business plan is a strategy that lays out all the important aspects of your company including goals, financing, and operations. Many online retailers mistake a lack of brick and mortar overhead as an excuse for not planning out the details of their business properly. In order for your online retail business to be taken seriously, you must treat it as a serious business.

Think of it this way; a good business plan should tell anyone who reads all the essential details of your company. 

A solid business plan should contain some elements of the following:

• Executive Summary
• Company (who we are)
• Products and Services (what we sell)
• Market Analysis (who we sell to)
• Strategy (how we sell, who the competition is, what the roadmap is)
• Operations (how it is made)
• Financial Plan (what are the funding requirements, what is the expected return on investment)

A good business plan often makes a critical difference between failure and success. It provides a clear pathway on which your online retail business can navigate.

Launching and Marketing

Once you have worked out all the operational and technical bugs, it is time to launch your new online retail business. Make sure that you market to your customers on multi-levels, including taking advantage of many types of social media. You should also be aware of search engine optimization to make sure that your customers can find you easily. It is a good idea to maintain an ongoing flow of content on the site to both attract and engage your core market.

Make Sure You Understand The Specific Guidelines Of Your State

A tax resale certificate is a wonderful way a business can avoid unnecessary taxes. However, we understand that there are a lot of rules and regulations, which can be very confusing to any business owner.

Tax Resale Certificate Is Here To Help

Not correctly understanding sales tax and the benefits of a tax resale certificate can lead to a great deal of trouble. A retailer could lose out on extremely beneficial sales tax exemption status. A savvy business owner will understand that having a tax resale certificate will save them a good deal of money but leave the actual headache of registration to someone else.

On the other hand, misunderstanding and not paying the correct sales tax to a state government could very much hurt a business’s standing and reputation. At Tax Resale Certificate,  we make the process as easy as possible. Just take advantage of our user-friendly interface to help take the headache of applying for a tax resale certificate off your plate.

This Is A Great Moment For Reflection

It is never easy to lose your job or sense of security. However, this can be a great blessing in disguise because it forces you to reevaluate your life. Are you someone who just knows that they do not want to continue working for other people? The pandemic might be the right time to leave your comfort zone and strike out on your own. We will explore some of the reasons people are too intimidated to take the steps to become an entrepreneur. The recent COVID-19 pandemic has turned the world upside down. Many people have lost or been furloughed from their jobs. There is high anxiety all around.

Economic Hardship Often Spurs Innovation

A great number of amazing companies like Uber, Square, and Instagram were birthed in the last recession. Hardship often leads to amazing innovation. It will not be surprising if we see many innovative companies coming out on the heels of this pandemic. Think about how many talented people have been furloughed and now have the time to devote their energies elsewhere. Millennials and Gen Z have shown that they are generations that embrace the challenges of being an entrepreneur.

What is Drop Shipping?

Dropshipping is a fulfillment method where the selling merchant does not stock or own inventory. When a customer buys a product, the seller purchases the item from a third party. The third party is usually a wholesaler or manufacturer who then ships the product directly to the customer. In dropshipping scenarios, the seller does not handle the product directly. This is a particularly popular form of e-commerce.

Dropshipping Can Make Sales Tax Complicated

Dropshipping is a new and innovative way of doing business. This is very exciting but also comes with unique operational challenges. This is particularly true when it comes to figuring out relatively simple things like sales tax.

In a traditional brick-and-mortar sales environment, sales tax is rather straightforward. Customers are usually making purchases from their stores and the retailer collects the sales tax from these purchases at the checkout. This is all happening in the same state in one location, so there is little confusion.

With drop shipping, the retailer could be in Kansas, while the order is forwarded to a supplier in Delaware and then shipped to a customer in Tennessee. This makes it confusing about who charges the sales tax and to exactly what state sales tax is owed.

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.

Is The Tax Resale Certificate The Same As A Seller’s Permit?

Even though tax resale certificates are called reseller’s permits in some states, it is important not to confuse them with seller’s permits. A seller’s permit allows a retailer to charge tax on items that they are going to sell to a customer. A tax resale certificate allows you to buy items that are intended for resale without paying a sales tax on those items. 

Does A Vendor Have To Accept My Tax Resale Certificate?

It is extremely important to a retailer’s bottom line that they do not pay sales taxes on goods if there is a possibility that the tax can be exempted on a state level. However, it is also crucial to understand that a wholesaler is not required to accept your tax resale certificate in some states. 

What If A Customer Presents Me With A Tax Resale Certificate? 

A customer can also present a tax resale certificate to you as a retailer and it is your discretion whether or not you want to exempt them from the required sales tax. It is always a good idea to check on the certificate because you will be held responsible, if the certificate is expired or fraudulent, for the unpaid state sales tax. Verification is key in making sure that the correct due diligence has been completed to authenticate the tax resale certificate.

The Various State Tax Laws Can Be Confusing

Dropshippers must understand that each state has its unique tax laws related to retail sales tax that are constantly changing. There are many different definitions of what is nexus and what manner of tax resale certificates are acceptable. Some states accept resale documentation from other states, while many do not.

Third-party fulfillment companies make this even more difficult to comprehend.  A large company like Amazon can have one shipment travel through a dozen states, which can often trigger nexus.

Do Not Be Caught Unaware

Many dropshipping third-party suppliers are being unpleasantly surprised by large fines and hefty audits. This has made them require retailers to pay sales tax or be able to present valid tax resale certificates. However, the type of documentation required for each state can vary greatly.

Getting A Tax Resale Certification Is One Of The Best Things You Can Do As An Entrepreneur

If you decide to start a business, a tax resale certificate can save you money on taxes.

In short, a tax retail certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that are going to be used in products that you will resell, such as wood for a cabinet.

However, the process can be difficult and the rules are different for each state. That is why TaxResaleCertificate should do all the hard work for you. We can make sure that you get all the advantages of a tax resale certificate without having to deal with the hassle of government red tape. Let us handle the hard stuff so you can proceed to run your business with confidence. Make sure you check out our second blog in this series so you can learn even more valuable information about tax resale certificates.

The internet has opened up new opportunities for many people. It is a vast marketplace that can be a goldmine for enterprising and smart business people. The numbers are very promising.

In 2017, e-commerce was responsible for around $2.3 trillion in sales and is expected to hit $4.5 trillion by 2025. In the US alone, e-commerce represents almost 10% of retail sales and that number is expected to grow by nearly 15% each year.

It is tempting to want to jump into this very lucrative market, but how do you begin?

What is E-commerce?

E-commerce simply refers to the buying and selling of goods and services on the internet and the data transactions that constitute payment. Brick and mortar stores are no longer the go-to for shopping as more people are going online for their retail needs.

How much money is in E-commerce?

Online shopping has been around for over 25 years and is expected to grow into a 4 trillion dollar industry. It is by far the fastest-growing retail market.

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 Are The Different Methods In Which The States Establish Sales Tax Nexus?

The definition of sales nexus can vary greatly from state to state. Here is a list of the different ways in which states can determine sales tax nexus:

• Click-Through Nexus legislation
• Affiliate Nexus legislation
• Marketplace Nexus legislation
• Notice and Reporting Requirements
• Economic Nexus 

Click-Through Nexus legislation- This usually requires a remote seller to meet a minimum sales requirement in the state resulting from an in-state referral agent who is a resident of the state. The agent must be making commission payments to the referral agent for any sales that are the result of the click-through referrals from the agent’s website. 

Affiliate Nexus legislation– A remote retailer holds a substantial interest or is owned by a retailer that is located within the state and sells a similar type of product under a similar business name. Instate retailers can also be used to promote or market the product to in-state customers. Affiliate nexus does not require common ownership and may not include services such as sales and delivery.

Marketplace Nexus legislation– This definition applies to marketplace facilitators who operate a business in the state and provides e-commerce infrastructure, customer service, payment processing, and marketing services to individual sellers. The facilitator is the one that is required to register with the state and collect the sales tax rather than the individual sellers.

Notice and Reporting Requirements– This legislation requires that a retailer does not collect the state sales tax themselves but notify their buyers that they must report state use tax on all their purchases. The retailer might be required to send the purchaser a statement of all their purchases.

Economic Nexus– An out-of-state retailer generally is required to collect and remit sales tax once the retailer meets a set level of sales transactions or gross receipts activity (a threshold) within the state. No physical presence is required.

To find out more about state sales tax please visit the sales tax institute.

What Is A Tax Resale Certificate

A tax retail certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that are going to be used in products that you will resell.

What Is Sales Tax Nexus?

Nexus is defined as having a presence or a significant connection to a state. Your sales tax obligations as an online store owner vary. Most of the time, however, a mere economic connection to a state is enough to create nexus.

State connections include:

• Having offices in the state
• Warehouses and distributors located in the state  
• Employees
• Affiliates located in the state
• Making a certain amount of money or transactions in a state 
• Doing physical business in a state for some time 

The Various State Tax Laws Can Be Confusing

Dropshippers must understand that each state has its unique tax laws related to retail sales tax that are constantly changing. There are many different definitions of what is nexus and what manner of tax resale certificates are acceptable. Some states accept resale documentation from other states, while many do not.

Third-party fulfillment companies make this even more difficult to comprehend.  A large company like Amazon can have one shipment travel through a dozen states, which can often trigger nexus.

Do Not Be Caught Unaware

Many dropshipping third-party suppliers are being unpleasantly surprised by large fines and hefty audits. This has made them require retailers to pay sales tax or be able to present valid tax resale certificates. However, the type of documentation required for each state can vary greatly.

Do Not Get Frustrated.

We understand that this is a whirlwind of information that can be very frustrating. There are great differences between states and you do not have the time to sort this out and properly run your business. That is why TaxResaleCertificate should do all the hard work for you. We can make sure that you get all the advantages of a tax resale certificate without having to deal with the hassle of government red tape. Let us handle the hard stuff so you can proceed to run your business with confidence. Make sure you check out our second blog in this series so you can learn even more valuable information about tax resale certificates.

The internet has opened up new opportunities for many people. It is a vast marketplace that can be a goldmine for enterprising and smart business people. The numbers are very promising.

In 2017, e-commerce was responsible for around $2.3 trillion in sales and is expected to hit $4.5 trillion by 2025. In the US alone, e-commerce represents almost 10% of retail sales and that number is expected to grow by nearly 15% each year.

It is tempting to want to jump into this very lucrative market, but how do you begin?

What is E-commerce?

E-commerce simply refers to the buying and selling of goods and services on the internet and the data transactions that constitute payment. Brick and mortar stores are no longer the go-to for shopping as more people are going online for their retail needs.

How much money is in E-commerce?

Online shopping has been around for over 25 years and is expected to grow into a 4 trillion dollar industry. It is by far the fastest-growing retail market.

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 Are The Different Methods In Which The States Establish Sales Tax Nexus?

The definition of sales nexus can vary greatly from state to state. Here is a list of the different ways in which states can determine sales tax nexus:

• Click-Through Nexus legislation
• Affiliate Nexus legislation
• Marketplace Nexus legislation
• Notice and Reporting Requirements
• Economic Nexus 

Click-Through Nexus legislation- This usually requires a remote seller to meet a minimum sales requirement in the state resulting from an in-state referral agent who is a resident of the state. The agent must be making commission payments to the referral agent for any sales that are the result of the click-through referrals from the agent’s website. 

Affiliate Nexus legislation– A remote retailer holds a substantial interest or is owned by a retailer that is located within the state and sells a similar type of product under a similar business name. Instate retailers can also be used to promote or market the product to in-state customers. Affiliate nexus does not require common ownership and may not include services such as sales and delivery.

Marketplace Nexus legislation– This definition applies to marketplace facilitators who operate a business in the state and provides e-commerce infrastructure, customer service, payment processing, and marketing services to individual sellers. The facilitator is the one that is required to register with the state and collect the sales tax rather than the individual sellers.

Notice and Reporting Requirements– This legislation requires that a retailer does not collect the state sales tax themselves but notify their buyers that they must report state use tax on all their purchases. The retailer might be required to send the purchaser a statement of all their purchases.

Economic Nexus– An out-of-state retailer generally is required to collect and remit sales tax once the retailer meets a set level of sales transactions or gross receipts activity (a threshold) within the state. No physical presence is required.

To find out more about state sales tax please visit the sales tax institute.

What Is A Tax Resale Certificate

A tax retail certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that are going to be used in products that you will resell.

What Is Sales Tax Nexus?

Nexus is defined as having a presence or a significant connection to a state. Your sales tax obligations as an online store owner vary. Most of the time, however, a mere economic connection to a state is enough to create nexus.

State connections include:

• Having offices in the state
• Warehouses and distributors located in the state  
• Employees
• Affiliates located in the state
• Making a certain amount of money or transactions in a state 
• Doing physical business in a state for some time 

The Various State Tax Laws Can Be Confusing

Dropshippers must understand that each state has its unique tax laws related to retail sales tax that are constantly changing. There are many different definitions of what is nexus and what manner of tax resale certificates are acceptable. Some states accept resale documentation from other states, while many do not.

Third-party fulfillment companies make this even more difficult to comprehend.  A large company like Amazon can have one shipment travel through a dozen states, which can often trigger nexus.

Do Not Be Caught Unaware

Many dropshipping third-party suppliers are being unpleasantly surprised by large fines and hefty audits. This has made them require retailers to pay sales tax or be able to present valid tax resale certificates. However, the type of documentation required for each state can vary greatly.

Do Not Get Frustrated.

We understand that this is a whirlwind of information that can be very frustrating. There are great differences between states and you do not have the time to sort this out and properly run your business. That is why TaxResaleCertificate should do all the hard work for you. We can make sure that you get all the advantages of a tax resale certificate without having to deal with the hassle of government red tape. Let us handle the hard stuff so you can proceed to run your business with confidence. Make sure you check out our second blog in this series so you can learn even more valuable information about tax resale certificates.

Small businesses are an important part of the economy and have a significant impact on their local communities. As such, they need to be aware of the various tax regulations that apply to them. Knowing the right tax advice for small businesses can help them save money and ensure compliance with all applicable laws. This article will discuss the different types of taxes that small businesses must pay, as well as provide tips on how to maximize deductions and take advantage of available credits. It will also cover some common mistakes made by small business owners when it comes to filing taxes so that readers can avoid making costly errors.

Being An Entrepreneur Is Hard Work

No doubt, being a successful entrepreneur will require hard work and dedication. However, the younger generations are no strangers to working several jobs and/or side hustles and still barely making enough money to pay the bills. This is not a comfortable life and will quickly wear anyone down. Comparatively, you will work hard in your own business, but it will feel much more worthwhile. The money will be much more satisfying, and you will be motivated and challenged in a new way.

There is no greater joy than owning and operating your own business. You look over your record-keeping and have a sense of well-deserved pride in your accomplishments of the past year. Then you remember tax season is looming over you like a dark shadow and a knot of worry forms in the pit of your stomach.

It Is Never Too Early To Plan For Taxes

2020 was indeed a year that had a lot of personal challenges for small businesses. However, understanding your tax liability for the coming year is always a good idea and it is never too early to start. There is no reason that taxes need to be a mystery, and you can forecast what you will owe in the coming year.

There Are Other Taxes Besides Income Taxes

Businesses pay more than just income taxes. They include the following:

• Employment taxes on wages paid to employees and to the owner (you). 
• Social Security
• Medicare tax 
• Federal unemployment tax (FUTA)

Social Security tax is 12.4 percent of all wages paid up to $137,700, with half paid by the employee and half paid by the employer. Medicare is equal to 2.9 percent of wages paid (3.8% on wages over $200,000 ($250,000 for joint returns, $125,000 for married taxpayers filing a separate return), half paid by the employee, and half paid by the employer. FUTA is generally equal to 6 percent of the first $7,000 of each employee’s wages and is paid by the employer. Self Employed owners will have to pay a total amount of Social Security taxes and Medicare taxes since there is no separate employer to pay it for you.

Business Organization

Are you sure that you have chosen the proper business organization? The type of organization has a strong bearing on your tax structure, and you should make sure your organization utilizes the best tax structure for your business needs. Having a small business tax professional look over the Consumer Price Index is a good way to understand your business should be properly structured.

Independent Contractors

Are you confident that your independent contractors have not become employees during the tax year? Did you provide them with the right forms? Businesses need to understand how to properly document all those who have done work for them. The Internal Revenue Service or IRS regulations on such matters can be very perplexing.

Documenting Yourself

Have you, the owner, been taking money out of business to pay personal or professional expenses?

Do you know what to call the money you have taken out? Are you drawing a salary?

Small business accounting can be quite complex and confusing. The wrong guess to any of these tough questions can land you a lot of trouble with the IRS. This is why having the proper small business consultant is crucial to protecting your business from unnecessary taxes and fines.

Never Underestimate Taxes

Tax planning is an important part of running a successful small business. By understanding the tax laws and regulations, you can ensure that your business is operating within the law and taking advantage of all available deductions. As a small business owner, it’s important to stay up-to-date on the latest tax laws and advice to ensure that you are taking full advantage of all available deductions. This article will provide some helpful tips for small businesses when it comes to tax advice.

Small businesses often face a wide range of tax-related issues that can be difficult to navigate. With the right tax advice, however, small business owners can ensure they are compliant with all relevant tax regulations and maximize their profits. This article will discuss the key considerations for small businesses when it comes to taxes and provide advice on how to make sure you are taking advantage of all available deductions and credits.

Tax Implications Can Have Brutal Consequences

It is important to understand the tax implications of your business decisions. Knowing the basics of small business taxation can help you make informed decisions that can save you money and time in the long run. This article will provide an overview of some key tax advice for small businesses, including how to maximize deductions, filing deadlines, and more. With this knowledge, you can ensure that your taxes are properly taken care of and that your business is running as efficiently as possible.

Getting A Tax Resale Certification Is One Of The Best Things You Can Do As An Entrepreneur

If you decide to start a business, a tax resale certificate can really save you money on taxes.

In short, a tax retail certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that are going to be used in products that you will resell, such as wood for a cabinet.

However, the process can be difficult and the rules are different for each state. That is why TaxResaleCertificate should do all the hard work for you. We can make sure that you get all the advantages of a tax resale certificate without having to deal with the hassle of government red tape. Let us handle the hard stuff so you can proceed to run your business with confidence. Make sure you check out our second blog in this series so you can learn even more valuable information about tax resale certificates.

The Self-Employment Tax

A self-employed person has to file additional taxes besides their income tax. This usually amounts to an extra 15.3% burden for small business owners. This is because employers and employees each pay 7.65% for Social Security and Medicare taxes, so a self-employed individual will have to pay the total amount.

Solution

Small businesses should take advantage of the many business deductions available to small businesses to counteract this tax burden.

These include:

• Travel by airplane, train, bus, or car between your home and your business destination. (If you’re provided with a ticket or you’re riding free due to a frequent traveler or similar program, your cost is zero.)
• Fares for taxis or other types of transportation between the airport or train station and your hotel, the hotel, the work location, and from one customer to another, or from one place of business to another.
• There is shipping of baggage and sample or display material between your regular and temporary work locations.
• Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can remove only the business-use portion for the expenses.
• Meals and lodging.
• Dry cleaning and laundry.
• Business calls while on your business trip. (This includes business communications by fax machine or other communication devices.)
• Tips you pay for services related to any of these expenses.
• Other similar ordinary and necessary expenses related to your business travel. (These expenses might include transportation to and from a business meal, public 

Tax-Related Issues Do Not Begin During Tax Season.

Tax saving opportunities are available from January 1^st to December 31^st and are not limited to the tax season. You must have someone who can advise you in real-time to make the proper decisions through each crucial step of building your business.

Someone who waits till tax season to seek advice will realize most more substantial options are no longer available. Every business transaction made by the business owner will have a powerful impact on their tax liability. A solid tax professional will guide your business through every crucial moment, allowing for more financial security and stability. They will ensure you are not sidelined with incorrect information, leading to lousy business tax decisions.

A tax professional can offer the following benefits to a small or medium-sized business:

• Tax professionals will study your business structure and explain to you what is the best system for your particular businesses’ tax liability. Then, they will help you alter the form if this is the best course of action.

• Tax professionals will examine how your business is paying and reporting independent contractors and ensure that you are compliant in this area with all IRS regulations to avoid harsh penalties.

• They can look at past tax returns for deductions that have been missed or valuable credits available to the business.

• The tax professional can point out all compliance issues that can be immediately corrected throughout the year. Hence, you have the most robust confidence with all your regular business transactions.

Remember that every business is different, and there will never be a one-size-fits-all solution to tax questions and problems. This is why it is vital to have a tax professional on your side to guide you through an often confusing tax code.

It Is Never Too Early To Plan For Taxes

2021 was indeed a year that had a lot of personal challenges for small businesses. However, understanding your tax liability for the coming year is always a good idea, and it is never too early to start. There is no reason that taxes need to be a mystery, and you can forecast what you will owe in the coming year.

Net Profit

Do you correctly understand how to handle your cash flow? Are you going to pay taxes purely based on

What is available in your checking account? Unfortunately, many business owners do not realize that their available cash is not the same as the company’s net profit.

Remember The Quarterlies

Since self-employed owners do not get taxes withheld from their paycheck, it is good to withhold the correct amount and send the Internal Revenue Service quarterly payments. This is particularly important if your tax liability is over $1.000. Ignoring quarterly payments could result in costly interest payments or penalties.

The Self Employment Tax

A self-employed person has to file additional taxes besides their income tax. This usually amounts to an extra 15.3% burden for small business owners. This is because employers and employees each pay 7.65% for Social Security and Medicare taxes, so a self-employed individual will have to pay the total amount.

Solution

Small businesses should take advantage of the many business deductions available to small businesses to counteract this tax burden.

Small Business Should Never Underestimate Taxes

The Internal Revenue Service has been more active in targeting small businesses for tax audits in several years. New companies have spent 2.5 billion each year preparing taxes and answering questions from the IRS about tax return inquiries.

However, there are things that any new business can do to lessen its tax burden. We will discuss how choosing the correct business entity can make your life as a new entrepreneur much easier in the coming future.

Getting A Tax Resale Certification Is One Of The Best Things You Can Do As An Entrepreneur

As a self-employed person, getting a tax resale certificate can save you money on taxes.

In short, a retail tax certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that will be used in products that you will resell, such as wood for a cabinet.

However, the process can be complex, and the rules are different for each state. That is why TaxResaleCertificate should do all the hard work for you. We can make sure that you get all the advantages of a tax resale certificate without dealing with the hassle of government red tape. Let us handle the hard stuff so you can proceed to run your business with confidence. Make sure you check out our second blog in this series so you can learn even more valuable information about tax resale certificates.

Tax Resale Certificates

A tax resale certificate allows you to not pay sales tax on items that you simply decide to resell. This will also apply to supplies that are getting to be utilized in products that you simply will resell, like wood for a cupboard.

It is critical that you simply understand that tax resale certificates also can only be used on items that will be resold. Office supplies, like new computers for your employees, wouldn’t fall into the category of retail. It can be considered fraud to not pay sales tax on these things.

If this is confusing for you, just consider tax resale certificates as state tax exemption certificates. Some states call them exemption certificates or reseller’s permits. 

Do All States Charge Sales tax?

Some states do not charge sales tax. Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge sales tax on a state level. Alaska and Montana do allow municipalities to charge sales tax on retail goods at a local level. A tax retail certificate is not needed in these places concerning a state 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 apply for a tax resale certificate. 

What Do I Do if I Purchase Goods In Multiple States?

The tax resale certificate can be challenging if you purchase and sell goods in multiple states. It can mean keeping track of many types of certificates for different vendors. The multijurisdiction resale certificate, which is also known as a blanket retail certificate or a uniform sales tax certificate, can help ease this burden.  As its name suggests this document can be used over multiple states. However, the document itself can be confusing and it is not accepted the same way in every state. The document must be filled out correctly, and the retailer is aware of the different issues that can arise if it is misused.   

What Happens To Goods That I Do Not Sell?

You might be wondering what becomes of goods you do not sell on which a sales tax has not been collected. These goods could be subject to a use tax. 

What Is The Use Tax?

Use tax applies to purchases made outside the taxing jurisdiction but used within the state. Use tax also applies to items purchased exempt from tax which are subsequently used in a taxable manner.

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.

Is The Tax Resale Certificate The Same As A Seller’s Permit?

Even though tax resale certificates are called reseller’s permits in some states, it is important not to confuse them with seller’s permits. A seller’s permit allows a retailer to charge tax on items that they are going to sell to a customer. A tax resale certificate allows you to buy items that are intended for resale without paying a sales tax on those items. 

Make Sure You Understand The Specific Guidelines Of Your State

A tax resale certificate is a wonderful way a business can avoid unnecessary taxes. However, we understand that there are a lot of rules and regulations, which can be very confusing to any business owner.

Do Not Get Frustrated.

We understand that this is a whirlwind of information that can be very frustrating. There are great differences between states and you do not have the time to sort this out and properly run your business. That is why TaxResaleCertificate should do all the hard work for you. We can make sure that you get all the advantages of a tax resale certificate without having to deal with the hassle of government red tape. Let us handle the hard stuff so you can proceed to run your business with confidence. Make sure you check out our second blog in this series so you can learn even more valuable information about tax resale certificates.

That Is Why We Are Here To Help

Understandably, all this information can be very daunting. Not correctly understanding sales tax and the benefits of a tax resale certificate can lead to a great deal of trouble. A retailer could lose out on extremely beneficial sales tax exemption status. A savvy business owner will understand that having a tax resale certificate will save them a good deal of money but leave the actual headache of registration to someone else.

On the other hand, misunderstanding and not paying the correct sales tax to a state government could very much hurt a business’s standing and reputation. At Tax Resale Certificate,  we make the process as easy as possible. Just take advantage of our user-friendly interface to help take the headache of applying for a tax resale certificate off your plate. 

Choosing the appropriate business structure and why it matters.

The type of business structure you choose has a great impact on very important matters like taxation and liability. You can choose from the following:

• Sole Proprietorships
• Partnerships
• Corporations
• S Corporations
• Limited Liability Company (LLC)

Carefully research what is the best fit for your online retail business model. Each structure has its own pros and cons and makes sure you know what is right for you. Most online businesses are Limited Liability Companies as they often offer the liability protections of corporations without the personal liabilities of a partnership or sole proprietorship.

Decide what state you want to form your business.

Most new online business retailers file their documents within the state where they are physically located. This helps avoid the cost of hiring an out-of-state registered agent in your home state. However, if your business is large in scope, you might want to file your documents in Delaware. This state has advantages like laws that are generally favorable to businesses, and, unlike other states, it has a separate Court of Chancery that hears cases involving corporate law. It also does not collect corporate taxes if your Delaware Corporation actually does business in another state.

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 a 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’s 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 Are The Different Methods In Which The States Establish Sales Tax Nexus?

The definition of sales nexus can vary greatly from state to state. Here is a list of the different ways in which states can determine sales tax nexus:

• Click-Through Nexus legislation
• Affiliate Nexus legislation
• Marketplace Nexus legislation
• Notice and Reporting Requirements
• Economic Nexus 

Click-Through Nexus legislation- This usually requires a remote seller to meet a minimum sales requirement in the state resulting from an in-state referral agent who is a resident of the state. The agent must make commission payments to the referral agent for any sales that are the result of the click-through referrals from the agent’s website. 

Affiliate Nexus legislation– A remote retailer holds a substantial interest or is owned by a retailer that is located within the state and sells a similar type of product under a similar business name. Instate retailers can also promote or market the product to in-state customers. Affiliate nexus does not require common ownership and may not include services such as sales and delivery.

Marketplace Nexus legislation– This definition applies to marketplace facilitators who operate a business in the state and provide e-commerce infrastructure, customer service, payment processing, and marketing services to individual sellers. The facilitator is the one that is required to register with the state and collect the sales tax rather than the individual sellers.

Notice and Reporting Requirements– This legislation requires that a retailer does not collect the state sales tax themselves but notify their buyers that they must report state use tax on all their purchases. The retailer might be required to send the purchaser a statement of all their purchases.

Economic Nexus– An out-of-state retailer generally must collect and remit sales tax once the retailer meets a set level of sales transactions or gross receipts activity (a threshold) within the state. No physical presence is required.

To find out more about state sales tax, please visit the sales tax institute.

What is A Tax Resale Certificate?

It is critical that you 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.

What Happens To Goods That I Do Not Sell?

You might wonder what becomes of goods you do not sell on which a sales tax has not been collected. These goods could be subject to a use tax. 

Does A Vendor Have To Accept My Tax Resale Certificate?

It is extremely important to a retailer’s bottom line that they do not pay sales taxes on goods if there is a possibility that the tax can be exempted on a state level. However, it is also crucial to understand that a wholesaler is not required to accept your tax resale certificate in some states.

Getting A Tax Resale Certification Is One Of The Best Things You Can Do As An Entrepreneur

If you decide to start a business, a tax resale certificate can save you money on taxes.

In short, a tax retail certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that will be used in products that you will resell, such as wood for a cabinet.

However, the process can be difficult, and the rules are different for each state. That is why TaxResaleCertificate should do all the hard work for you. We can make sure that you get all the advantages of a tax resale certificate without having to deal with the hassle of government red tape. Let us handle the hard stuff so you can proceed to run your business with confidence. Make sure you check out our second blog in this series so you can learn even more valuable information about tax resale certificates.

What is A Tax Resale Certificate?

As a savvy small business retailer, you must be aware of how to utilize tax resale certificates to your best advantage. In short, a tax retail certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that are going to be used in products that you will resell, such as wood for a cabinet.

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 actually call them exemption certificates or reseller’s permits.

Do All States Charge Sales tax?

There are also states that do not charge sales tax. Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge sales tax on a state level. Alaska and Montana do allow municipalities to charge sales tax on retail goods at a local level. A tax retail certificate is not needed in these places with regard to a state sales tax.

What Do I Do if I Purchase Goods In Multiple States?

The tax resale certificate can be challenging if you purchase and sell goods in multiple states. It can mean keeping track of many types of certificates for different vendors. The multijurisdiction resale certificate, which is also known as a blanket retail certificate or a uniform sales tax certificate, can help ease this burden.  As its name suggests this document can be used over multiple states. However, the document itself can be confusing and it is not accepted the same way in every state. It is important that the document is filled out correctly, and the retailer is aware of the different issues that can arise if it is misused.   

What Information Do I Need For The Tax Certificate Registration Form?

You must provide the following information:

• The name and address of the purchaser
• The name and address of the seller
• The registration number of the purchaser
• An accurate description of property purchased for resale
• The reason for the exemption
• A statement that if the property is put to use in a taxable manner that the purchaser will remit the consumer use tax
• Date and Signature and Title of the authorized individual at the purchaser

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 apply for a tax resale certificate. 

Remember To Verify Any Tax Resale Certificate Presented To You

In the first part of our series, we mentioned that a vendor can refuse a tax resale certificate. This is because the vendor will be the one liable to the state government should anything be remiss. That is why you should always take the following steps to assure that anything presented to you is valid.

• Make certain that the certificate is properly filled out and signed by the business owner
• You should be able to verify the certificate online by using the certificate
• You should also be able to verify online if the certificate has expired
• Be aware of purchase that seems suspicious and does not relate to the customer’s business in a logical manner
• You must keep the certificate on file for at least 5 years in case of a tax audit.

That Is Why We Are Here To Help

Understandably, all this information can be very daunting. Not correctly understanding sales tax and the benefits of a tax resale certificate can lead to a great deal of trouble. A retailer could lose out on extremely beneficial sales tax exemption status. A savvy business owner will understand that having a tax resale certificate will save them a good deal of money but leave the actual headache of registration to someone else.

On the other hand, misunderstanding and not paying the correct sales tax to a state government could very much hurt a business’s standing and reputation. At Tax Resale Certificate,  we make the process as easy as possible. Just take advantage of our user-friendly interface to help take the headache of applying for a tax resale certificate off your plate.