Author: Dona Basu

Small Business Should Never Underestimate Taxes

The Internal Revenue Service has been more active in targeting small businesses for tax audits in the last several years. New businesses 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 right business entity can make your life as a new entrepreneur much easier in the coming future.

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 that affects 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 paycheck, 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.

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 both Social Security and Medicare taxes, so a self-employed individual will have to pay the full 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 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 

Just make sure that you follow guidelines and do not over-deduct.

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.

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.

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 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 over2020 was indeed $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.

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 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 

Just make sure that you follow guidelines and do not over-deduct.

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 that affects 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 paycheck, 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.

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.

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.

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 that affects 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.

Small Business Should Never Underestimate Taxes

The Internal Revenue Service has been more active in targeting small businesses for tax audits in the last several years. New businesses 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 right business entity can make your life as a new entrepreneur much easier in the coming future.

Healthcare Savings

Medical costs are rising and can be quite expensive. It is smart to save money for unexpected health care expenses even if you are healthy now. This can be accomplished through a Health Savings Plan or HSA.

An HSA is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. HSA funds generally may not be used to pay premiums. This will help greatly in lowering taxes associated with medical costs.

HSA helps you save in taxes by letting your contributions be pretax, letting them grow tax-free, and allowing any withdrawals to also be tax-free. They are an invaluable source of savings and peace of mind. 

Home Office Expenses

Using part of your home for business allows you to deduct expenses for the business use of your home. This can be applied to all types of homes including business owners who rent.

If you use your home exclusively and regularly for conducting business you can deduct the following:

• Mortgage Interest
• Insurance

To qualify for the home office deduction, you must show that your home is used regularly and exclusively for conducting business and is the principal place of business.

There are two methods for calculating the house office deduction. In the standard method, you use Form 8829 to itemize the various expenses involved in using and maintaining your home office. This includes rent or mortgage interest payments, utilities, homeowners insurance premiums, and property taxes. In the simplified method, you determine the square footage of your home office (up to 300 square feet) and multiply it by five dollars.

The simplified method is more straightforward but you should see which one gives you a larger deduction amount.

Advertising

Self-Employed people should keep in mind that all advertising costs are fully tax-deductible.

This can include the following

• The cost of printing business cards, flyers, and mailers
• Social media advertising like Facebook ads
• Promotions at conventions and trade shows
• The cost of advertising agencies
• Television and radio advertising
• Employing freelancers

You can also deduct all commissions paid to non-employees for sales and marketing purposes. This can include payments to individual sales reps, or marketing channels, and a platform like Amazon.

Hiring A Family Member

Employing a family member allows you to shelter income from taxes. Small business owners can even hire their children. You can pay a lower marginal tax rate or even go as far as eliminating the tax on income paid to one’s child.

A sole proprietorship does not need to pay the Federal Unemployment Tax or FUTA tax for a child or spouse. This tax is defined as a piece of legislation that imposes a payroll tax on any business with employees. The revenue it generates is allocated to state unemployment insurance agencies and used to fund unemployment benefits for people who are out of work. This can lead to great savings. Also, depending on the circumstances of the job, you might even be able to put aside some retirement savings for them.

Get 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 call them exemption certificates or reseller’s permits.

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. 

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 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. 

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 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.

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 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 can then legally conduct business outside the state where the company was originally formed and, therefore, should be able to apply for a tax resale certificate. 

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 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 is subsequently used in a taxable manner.

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. 

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. 

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 that affects 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.

Small Business Should Never Underestimate Taxes

The Internal Revenue Service has been more active in targeting small businesses for tax audits in the last several years. New businesses 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 right business entity can make your life as a new entrepreneur much easier in the coming future.

Healthcare Savings

Medical costs are rising and can be quite expensive. It is smart to save money for unexpected health care expenses even if you are healthy now. This can be accomplished through a Health Savings Plan or HSA.

An HSA is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. HSA funds generally may not be used to pay premiums. This will help greatly in lowering taxes associated with medical costs.

HSA helps you save in taxes by letting your contributions be pretax, letting them grow tax-free, and allowing any withdrawals to also be tax-free. They are an invaluable source of savings and peace of mind. 

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 that affects 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.

Small Business Should Never Underestimate Taxes

The Internal Revenue Service has been more active in targeting small businesses for tax audits in the last several years. New businesses 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 right business entity can make your life as a new entrepreneur much easier in the future.

Healthcare Savings

Medical costs are rising and can be quite expensive. It is smart to save money for unexpected healthcare expenses even if you are healthy now. This can be accomplished through a Health Savings Plan or HSA.

An HSA is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall healthcare costs. HSA funds generally may not be used to pay premiums. This will help greatly in lowering taxes associated with medical costs.

Get 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 call them exemption certificates or reseller’s permits.

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. 

Small Business Should Never Underestimate Taxes

The Internal Revenue Service has been more active in targeting small businesses for tax audits in the last several years. New businesses 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 right business entity can make your life as a new entrepreneur much easier in the coming future.

Healthcare Savings

Medical costs are rising and can be quite expensive. It is smart to save money for unexpected health care expenses even if you are healthy now. This can be accomplished through a Health Savings Plan or HSA.

An HSA is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. HSA funds generally may not be used to pay premiums. This will help greatly in lowering taxes associated with medical costs.

HSA helps you save in taxes by letting your contributions be pretax, letting them grow tax-free, and allowing any withdrawals to also be tax-free. They are an invaluable source of savings and peace of mind. 

Home Office Expenses

Using part of your home for business allows you to deduct expenses for the business use of your home. This can be applied to all types of homes including business owners who rent.

If you use your home exclusively and regularly for conducting business you can deduct the following:

• Mortgage Interest
• Insurance

To qualify for the home office deduction, you must show that your home is used regularly and exclusively for conducting business and is the principal place of business.

There are two methods for calculating the house office deduction. In the standard method, you use Form 8829 to itemize the various expenses involved in using and maintaining your home office. This includes rent or mortgage interest payments, utilities, homeowners insurance premiums, and property taxes. In the simplified method, you determine the square footage of your home office (up to 300 square feet) and multiply it by five dollars.

The simplified method is more straightforward but you should see which one gives you a larger deduction amount.

Advertising

Self-Employed people should keep in mind that all advertising costs are fully tax-deductible.

This can include the following

• The cost of printing business cards, flyers, and mailers
• Social media advertising like Facebook ads
• Promotions at conventions and trade shows
• The cost of advertising agencies
• Television and radio advertising
• Employing freelancers

You can also deduct all commissions paid to non-employees for sales and marketing purposes. This can include payments to individual sales reps, or marketing channels, and a platform like Amazon.

Hiring A Family Member

Employing a family member allows you to shelter income from taxes. Small business owners can even hire their children. You can pay a lower marginal tax rate or even go as far as eliminating the tax on income paid to one’s child.

A sole proprietorship does not need to pay the Federal Unemployment Tax or FUTA tax for a child or spouse. This tax is defined as a piece of legislation that imposes a payroll tax on any business with employees. The revenue it generates is allocated to state unemployment insurance agencies and used to fund unemployment benefits for people who are out of work. This can lead to great savings. Also, depending on the circumstances of the job, you might even be able to put aside some retirement savings for them.

Get 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 call them exemption certificates or reseller’s permits.

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.

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.

As an entrepreneur, understanding taxes is crucial to the success and compliance of your business. One important aspect that entrepreneurs should be aware of is the Tax Resale Certificate.

A Tax Resale Certificate, also known as a Reseller’s Permit or Sales Tax Exemption Certificate, is a document that allows businesses to purchase goods for resale without paying sales tax. Essentially, it enables entrepreneurs to buy products at wholesale prices and then charge sales tax when selling them to customers.

Obtaining a Tax Resale Certificate can provide significant benefits for entrepreneurs. It allows you to save money on purchases by avoiding sales tax, which can help increase profit margins. Additionally, having this certificate demonstrates credibility and legitimacy as a business entity.

To obtain a Tax Resale Certificate, entrepreneurs typically need to apply with their state’s taxing authority or Department of Revenue. The specific requirements may vary depending on the jurisdiction but generally involve providing information about your business and its activities.

It’s important to note that while having a Tax Resale Certificate can be advantageous, it also comes with responsibilities. Entrepreneurs must ensure they are following all applicable laws and regulations related to sales tax collection and reporting. Failure to do so can result in penalties or legal consequences.

In conclusion, understanding the role of a Tax Resale Certificate is essential for entrepreneurs who want to maximize their savings and comply with tax obligations. By obtaining this certificate and adhering to relevant regulations, you can navigate the complexities of taxes more effectively while optimizing your business operations.

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 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 over2020 was indeed $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.

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 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 

Just make sure that you follow guidelines and do not over-deduct.

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 that affects 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.

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.

As a small business owner, staying on top of your finances is crucial for success. One important aspect to consider is obtaining a tax resale certificate, especially as the new year begins. A tax resale certificate can provide numerous benefits and savings that can significantly impact your bottom line.

By obtaining a tax resale certificate, you are essentially registering your business as a legitimate reseller. This allows you to purchase goods and products from wholesalers without having to pay sales tax upfront. Instead, you can collect sales tax from your customers when they make a purchase.

The advantages of having a tax resale certificate are twofold. Firstly, it helps you save money by avoiding paying unnecessary sales taxes on items that will be resold. This can result in significant cost savings over time, especially if your business relies heavily on purchasing inventory or materials.

Secondly, having a tax resale certificate enhances your credibility as a legitimate business entity. It demonstrates to suppliers and potential clients that you are operating in compliance with state regulations and are authorized to engage in reselling activities. This can lead to increased trust and opportunities for collaboration with other businesses.

Furthermore, obtaining a tax resale certificate is relatively simple and affordable for small businesses. The process typically involves registering with the appropriate state agency or department responsible for handling sales taxes. Once approved, you will receive an official document certifying your eligibility for exemption from paying sales taxes on qualifying purchases.

In conclusion, getting a tax resale certificate should be high on the priority list for small businesses in the new year. Not only does it provide immediate cost savings by avoiding unnecessary sales taxes, but it also enhances credibility and opens doors for potential partnerships and growth opportunities within the business community. Don’t miss out on these advantages – take the necessary steps to obtain your tax resale certificate today!

What is A Tax Resale Certificate?

You must understand that tax resale certificates can also be used on items that will be resold. Office supplies, such as new computers for your employees, would not fall under the category of retail.  It would be considered fraud not to pay sales tax on these items.

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

How Do I Know If I Need To Pay Sales Tax In A Given State?

To establish whether or not a state can impose a sales tax upon your business there first needs to be nexus. Nexus relating to state sales tax is established by a connection between the state and your business. How this connection is defined has been subject to fairly recent changes that reflect changes in the way business is conducted in modern times.

Traditionally, the nexus has been established by the business having a physical presence in the state. However, due to the explosion of e-commerce, physical presence within a state is no longer a requirement for sales tax nexus. In the case of South Dakota v. Wayfair, the courts eliminated physical presence as the major requirement for creating nexus. It still should be noted that physical presence is considered an important requirement to allow a state to collect sales tax and is still one of the first considerations for sales tax.

What Happens If I Do Most Of My Business In A State That I Am Not Incorporated?

If you primarily do business in a state that you are not incorporated in, make sure you apply for a Foreign Qualification (also known in some states as a Certificate of Registration or Certificate of Authority). This is the process of registering your company, which is considered domestic to the state in which it was originally formed and foreign to all other states, as a foreign entity in the states in which it operates. The retailer is then able to legally conduct business outside the state in which the company was originally formed and, therefore should be able to 

Insurance

A self-employed person can deduct the premium of various types of business insurance. This can include:

• Fire
• Theft
• Worker’s Compensation
• General Liability

Vehicle Expenses

So, if a self-employed person uses their vehicle for 100 percent business use and the vehicle is in the company’s name, then the car or truck is fully deductible.

If the vehicle is in your personal name and used partly for personal, and partly for business use, then there are two ways to calculate the deductions

Track your actual car expenses, including gas, maintenance, insurance, and depreciation, and deduct a percentage supported by the number of business miles you drive.

Deduct a typical rate on each “business” mile driven for the year. For 2020, the quality mileage rate is 57.5 center per mile driven for business use, down from 58 cents per mile in 2019.

No matter which method you select, you’ll got to keep track of what percentage of business and private miles you drive. You can use a manual log or an online app.

Cellphones

You can deduct your percentage of business use from your cell phone bill on your taxes. For example, if you use 30 percent of your personal cell phone for business, then you can deduct 30 percent of the bill. 

You can also just purchase a cell phone that will just be used for business purposes.

Equipment and Furniture

Section 179 is a tax law that allows business owners to deduct the full purchase price of qualified equipment from their gross income. Rather than deducting a certain percentage of the equipment under a multi-year depreciation schedule, as is customarily done, business owners can deduct the full price, as long as it is under$2.5 million if it was financed or purchased in 2018.

Qualified assets for Section 179 include:

•    Machines or equipment purchased for business use.
•    Office furniture.
•    SUVs, pickups, and vans weighing more than 6,000 pounds.
•    Certain improvements to the interior of commercial property.

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

Advertising

Self-employed people should keep in mind that all advertising costs are fully tax-deductible.

This can include the following

• The cost of printing business cards, flyers, and mailers
• Social media advertising like Facebook ads
• Promotions at conventions and trade shows
• The cost of advertising agencies
• Television and radio advertising
• Employing freelancers

You can also deduct all commissions paid to non-employees for sales and marketing purposes. This can include payments to individual sales reps, or marketing channels, and a platform like Amazon.

As a small business owner, staying ahead on taxes is crucial for maintaining financial stability and maximizing profits. In 2024, one effective strategy to get ahead on taxes is by obtaining a Tax Resale Certificate.

A Tax Resale Certificate, also known as a resale license or sales tax exemption certificate, is a document that allows small businesses to purchase goods or services for resale without paying sales tax. This certificate is typically issued by the state’s tax authority and serves as proof that the business is registered to collect sales tax from customers.

By obtaining a Tax Resale Certificate, small businesses can benefit in several ways. Firstly, it helps them avoid paying unnecessary sales tax on inventory or materials purchased for resale purposes. This can result in significant cost savings over time.

Additionally, having a Tax Resale Certificate enables small businesses to establish stronger relationships with suppliers and wholesalers. By presenting this certificate when making purchases, they can demonstrate their legitimacy as resellers and potentially negotiate better pricing or discounts.

Furthermore, having proper documentation such as the Tax Resale Certificate ensures compliance with state tax regulations. It helps small businesses avoid potential penalties or audits related to improper collection or remittance of sales tax.

To obtain a Tax Resale Certificate, small business owners should typically apply through their state’s Department of Revenue or Taxation. The application process may involve providing relevant business information and documentation such as proof of registration and identification.

In conclusion, acquiring a Tax Resale Certificate can be an effective strategy for small businesses to get ahead on their taxes in 2024. By leveraging this certificate, they can save money on sales tax expenses, strengthen supplier relationships, and ensure compliance with state tax regulations. Taking proactive steps toward managing taxes will not only contribute to financial success but also provide peace of mind for small business owners in the ever-changing landscape of taxation laws and regulations.

What Are Some Of The Tax Surprises That A Business Might Stumble Upon?

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 need to realize that their available cash differs from the company’s net profit.

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.

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.

What Things Should A Business Be Monitoring/Be On The Lookout For To Avoid Any Tax-Related Surprises?

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 that can advise you in real-time, so you make the proper decisions through each crucial step of building your business.

Someone who waits till tax season to seek advice will realize that most of the stronger options are no longer available. Every business transaction the business owner makes will have a powerful impact on their tax liability. A solid tax professional will help guide your business through every crucial moment, allowing for more financial security and stability. They will ensure you are sidelined with correct information that will lead to good business tax decisions.

Remember that every business is different and 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 all year round to guide you through an often confusing tax code.

The tax professional will protect your business from liability and ensure you comply with all major and minor regulations. They understand as a busy owner of a small to medium-sized business, you already have enough on your plate without also worrying about the mind-numbing minutiae of your business tax scheme. Let a business tax professional help you to greater business success and financial stability.

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 tax retail certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies used in products 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 ensure 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 run your business confidently. Make sure you check out our second blog in this series so you can learn even more valuable information about tax resale certificates.