Author: Dona Basu

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.

Become Proactive

Business taxes are determined by net income. This is when you subtract business expenses from gross revenues. Having an online accounting system automatically keeps track of your figures. If you use an online accounting system and you’ve entered all income and expenses, the system will automatically provide you with a gross profit figure.  Those that use spreadsheets, please take the time to add up the numbers so you can forecast what you will need to owe in taxes for the following year.

Is Your Business a Pass-Through Entity?

A pass-through entity is when the tax liability of the business actually passes through to the owner.

Pass-through entities include:

• Sole Proprietorships
• Limited Liability Companies
• S Corporations

A business that has not filed any paperwork is automatically considered a sole proprietorship by the Internal Revenue Service.

If you are a pass-through entity then you could owe less in taxes. The Tax Cuts and Jobs Act allows a 20 percent tax deduction on qualified business income from pass-through businesses. Generally, the deduction is available to eligible taxpayers whose taxable income is below $315,000 for joint returns and $157,500 for individual filers, according to the IRS. Some types of pass-through businesses may not qualify for this deduction: The IRS regulations detail the limitations.

If your business is a pass-through entity, then the taxable business income must be reported with your personal tax return. This means the amount you owe will be determined by your personal tax bracket. For 2020, personal tax brackets range from 10 percent (for individuals earning up to $9,875 and joint filers earning up to $19,750) to 37 percent for individuals earning more than $518,400 and joint filers earning more than $622,050.

If Your Business Is A C-Corporation

A business that is not a pass-through entity is a C-corporation. These are usually larger companies that do not qualify as small businesses.  However, if your business is a c-corporations it will now be taxed at a flat rate of 21 percent. Remember that c-corporations are always taxed twice. That is because the c-corporation itself is looked upon as a separate entity. These entities are taxed at the business level and the shareholder level.

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 in excess of $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 not a separate employer to pay it for you.

Remember The Deductions

Read our helpful article on deductions that your small business can not afford to miss.  It includes the following:

• 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 as a result of 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, and the work location, and from one customer to another, or from one place of business to another.
• 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 deduct 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 stenographer’s fees, computer rental fees, and operating and maintaining a house trailer.)
• Many apps have come on the market that makes it exceptionally easy to scan and track receipts for travel-related expenses. Some of these apps also automatically categorize expenses which is very nice for accurate bookkeeping.

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 Buzz

You have probably heard about a lot of buzz words like e-commerce and POD. You have this vague feeling that other people are making good money on these buzz words and you want to join the party. Tax Resale Certificates are an excellent way to make the most out of your e-commerce business.

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.

What is POD?

POD stands for print on demand. POD is a printing technology and business process in which designs are not printed until the company receives an order, allowing prints of single or small quantities. 

What is the advantage of POD?

This is an industry that has grown leaps and bounds because of digital printing technology. Before it only made sense to print in bulk because of the relatively high cost of small scale printing. Now, a business can make great margins on printing products just based on customer demand. This means that you no longer have to order in bulk and sit on a bunch of unsold inventory.

What does this mean for me as a budding entrepreneur?

Print on demand is providing an amazing opportunity for people to start their own businesses online without having to provide any capital upfront. This means there is little risk for what could be very lucrative rewards. You offer a selection of designs that can be printed on various items such as t-shirts, hoodies, pullovers, and pop sockets.

How do I get started?

One of the most popular platforms from print on demand is Merch by Amazon. You will first need to apply and be accepted to create an account. Because of the enormous popularity of the program, it was not unusual for people to wait months before they got a confirmation. The way you create an account is by requesting an invitation from Amazon. After you request an invitation and sending a letter about yourself, Amazon will review your invitation and accept or reject your application. The process can take up to 6 months to be approved. It is hard to wait for an invitation but the good news is that you can spend that time researching so you will be ready to go once Amazon approves your request.

Follow these steps:

• Get Your Account
• Make a Gameplan.
• Recognizing Merch T-Shirts.
• Understanding Amazon Best Sellers Rank.
• Check the Competition.
• Creating Your First T-Shirt

Amazon has the following tiers:

• Tier 1: 10 designs.
• Tier 2: 25 designs
• Tier 3: 100 Designs
• Tier 5: 500 Designs
• Tier 6: 1000 Designs
• Tier 7: 2000 Designs
• and goes on… up to 16,000 or more…

The truth of the matter is many people have actually turned this print on demand-side hustle into a lucrative money-making business that pays more than many full-time gigs.  In fact, a Merch by Amazon business actually sold for almost six figures in as little as 19 days!

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 

Here are some examples of other connections to a state that could result in sales tax:

• 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 retailers hold a substantial interest or are 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.

• 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.

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.

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 exemptions 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 way you can completely focus on the great opportunities presented by your Print on Demand business.

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.

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.

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.

Nexus

Nexus is defined as having a presence or a significant connection to a state. Your sales tax obligations can change significantly depending on the state. 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 

Nexus Can Change Depending On The State

Nexus requirements for dropshipping can vary greatly depending on the state.

In the following states, nexus is created just by any drop shipping connection:

• Texas
• Florida
• California
• New York

In other states, dropshipping nexus is created by spending a minimum amount of dollars.

Tax Scenarios For Drop Shipping

Neither the retailers nor the suppliers have nexus:

• Retailers and suppliers are generally not required to collect sales tax.
• The customer is required to pay use tax on the purchase (unless it is tax-exempt).

Nexus for the retailer but not the supplier:

• The retailer must collect sales tax from the customer.

The supplier has nexus but not the retailer:

• The supplier might be responsible for collecting either sales tax or proper documentation (such as a resale certificate) from the retailer.
• The sales tax might be taken from the wholesale price or subject to a predetermined formula if the exact price is unknown.

The Various State Tax Laws Can Be Confusing

Dropshippers must understand that each state has its own 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 out 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.

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 actually call them exemption certificates or reseller’s permits.

That Is Why We Are Here To Help

It is understandable that 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 exemptions 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. 

We provide a tax resale certificate for the top states that include:

• California
• Texas
• Massachusets
• New York
• New Jersey
• Illinois
• Florida

Let us handle the hassle so you can go about the important work of leading your retail business to great success. 

How to Start Your Online Retail Business

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?

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

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 that 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 bar codes 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 bar codes for different patterns, styles, and combination of features. You can purchase barcodes easily online. 

Make sure you have a decent size inventory to handle the demand. 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 blog. Do not forget important factors like a shopping cart and easy to pay options. This should not be difficult if you are using a typical e-commerce platform. You also want to make sure to constantly update and check your website to make sure there is no technical issue that could interfere with your sales.

Remember to get a Tax Resale Certificate.

As a savvy online business retailer, it is important that you are aware of how to utilize tax resale certificates to your best advantage. In short, a 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. This is a significant saving and can save your business a ton of money if utilized properly. Our article Everything You Need to Know About Tax Resale Certificates will give you an in-depth rundown about how these types of certificates can help your business.

Unfortunately, the rules of Tax Resale Certificates can vary greatly by the state which can be very confusing. Our site makes the process as easy as possible. Just take advantage of these user-friendly options to help take the headache of applying for a tax resale certificate off your plate.

Launching and Marketing

Once you have worked out all the operational and technicals 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.

You have now entered the lucrative world of online retail. Your careful planning has put you ahead of the game in regards to your competitors. Just remember that business is dynamic and you must always be proactive in improving your products and services.

As the employment landscape changes more and more people are going into business for themselves. Entrepreneurship has long been a symbol of American ingenuity and independence.

However, many people are often overwhelmed when faced with all the challenges of running their own business. It is why the SBA estimates that almost 30% of new businesses fail during the first year and 66% during the first ten years of life.

One of the reasons so many businesses do not make it is because of their leaders not fully utilizing all business opportunities that are available to them. 

Sure there is a ton of information available online about what you should or should not do when trying to navigate the business landscape. We will focus on some commonly missed business opportunities that can have a giant effect on your business’s bottom line.

What is a missed business opportunity?

This might seem like the most basic of questions. However, for this article, we are going to define the missed business opportunity in the following manner:

• Failure to enter or utilize a marketplace for the best results as associated with the business goals.

• Failure to take advantage of a tax break that would have been lucrative for the business’s profit margin. 

Lets first explore how many small businesses miss marketplace opportunities and how some of these common mistakes can be avoided.

They underestimate the power of being proactive.

There are many ways to earn a great passive income online and sites like these can help you bring in that extra chunk of change with very little investment.

However, if you are running a small business that you want to become your main source of income, you have to actively pursue an opportunity at every turn.

It is not enough just to let social media do all the work for you. It is still important to make personal connections and make sure your business is an appreciated member of the community.

Go to meetups and networking meetings.

Not only can these events be a lot of fun but they can also be a great way to make important contacts that can help you move your business forward.

Allow the networking to organically grow into speaking opportunities.

Did you know that 26.2 percent of the leads generated for professional services firms come from speaking engagements (second only to referrals/recommendations at 26.9 percent)?

Speaking engagements are a great way to showcase your business’s expertise and get your message out into the community. The leads generated from a speaking engagement can be invaluable in terms of marketing and social media strategy. It helps define your audience as well as promote respectability for your brand.

Understanding how to utilize cause marketing. 

Is there a cause that you are passionate about and that aligns well with your company goals and world view?  It is important for a business in day and age to communicate that they have an altruistic attitude and have intentions that go beyond just making money.

This is not limited to cash donations since many new small businesses do not always have giant budgets. A business can help with a drive that donates backpacks and school supplies for underprivileged children in the community. Think about creative ways in which you can incorporate charity and make your name stand out from other sponsors.

Sign up for the SAM Directory.

Many new businesses miss very lucrative opportunities with the federal government by not registering in the SAM Directory.

SAM stands for System Award Management.

In order to do any business with the federal government, you must register your business in the System for Award Management. The government will not hire any type of business large or small that has not registered in SAM.

A business also has to be registered with SAM before they can begin to apply for valuable federal grants.

A grant is a way the government supports your business by providing funds. Grants support economic initiatives and many other programs listed in the Catalog of Federal Domestic Assistance (CFDA).

This website can help guide you through the confusion of SAM registration so you can qualify for valuable government contracts and grants as soon as possible.

Do not forget tax deductions and how important they are for your bottom line.

We have talked about making the most of marketplace opportunities but a lot of small businesses lose unneeded money because they do not understand how much they can save on smart tax deductions.

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 provision in tax law that enables 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 they limit expenditures to a spending cap of $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.

Tax Resale Certificates

A tax resale certificate is a signed document that indicates that the purchaser intends to resell the goods. In some states, resale certificates are also used to purchase taxable services that become a part of the property for resale.

Tax resale certificates can provide great savings that are fantastic for a business’s bottom line. However, the rules and regulations can vary greatly by the state which may cause a lot of confusion. Luckily there are websites that take the headache out of the process. 

Read our handy article Tax Deductions that Every Small Business Owner Should Know to find out about more money-saving tax deductions.