Being Smart With Online Small Business Taxes

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.

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 on 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.


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.

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.