Category: Uncategorized

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.

Make Sure Your Documents Are In Order

Do an inventory of all your business records. It is key to have the right documents to accurately report your earnings and expenses. Computer software like Excel or Quicken greatly helpsfor in organizing your tax records. These programs can also save you time by importing information directly into your tax return.

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.

Depreciation

If you have a business asset that is expected to last more than one year, you can depreciate the cost of the asset over its life rather than deducting the cost of the asset the year that you purchase it. Depreciation is fully deductible. Examples of assets that can be depreciated are:

• Cars
• Furniture
• Technology like computers
• Improvements to leased property

You can not include inventories, stock-in-trade, and land cannot be as a depreciated tax deduction.

Employee benefits

If you have employees and provide health insurance and other benefits then you can fully deduct the costs of those benefits.

Home Office Deduction

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
• Utilities
• Repairs
• Depreciation for that area

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. 

For a full explanation of tax deductions for your home office refer to Publication 587, Business Use of Your Home. In this publication you will find:

• Requirements for qualifying to deduct expenses (including special rules for storing inventory or product samples).
• Types of expenses you can deduct.
• How to figure the deduction (including depreciation of your home).
• Special rules for daycare providers.
• Tax implications of selling a home that was used partly for business.
• Records you should keep.
• Where to deduct your expenses (including Form 8829, Expenses for Business Use of Your Home, required if you are self-employed and claiming this deduction using the regular method).

Any Labor That is Contracted

This includes all fees paid to independent contractors. If you hired a graphic designer to style a logo for you or contracted with a developer to make your website, their fees are fully tax-deductible.

If you paid a contractor $600 or more over the course of the year, you’ll even have to file Form 1099-MISC.

Depreciation

If you have a business asset that is expected to last more than one year, you can depreciate the cost of the asset over its life rather than deducting the cost of the asset the year that you purchase it. Depreciation is fully deductible. Examples of assets that can be depreciated are:

• Cars
• Furniture
• Technology like computers
• Improvements to leased property

You can not include inventories, stock-in-trade, and land cannot be as a depreciated tax deduction.

Employee benefits

If you have employees and provide health insurance and other benefits then you can fully deduct the costs of those benefits.

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 name and used partly for personal, 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 will have to keep track of what percentage of business and private miles you drive. You can use a manual log or an online app.

Job Security No Longer Exists.

Many people think that starting a business is just too risky. However, the workforce no longer offers the security it once did. Companies do not take care of employees for a lifetime and then provide them with a large pension for retirement like they did a generation ago. People are often replaced and those who switch employers regularly, actually make more money. There is a sense that there is no longer any loyalty on the part of employers or employees. This type of environment actually makes starting your business not seem so risky.

Remember that every business is different and there is never going to 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.

Starting Up

Even though starting up a business is easier than ever before, there are still costs associated with any new venture. Luckily, You can deduct up to $5,000 of all the costs related to starting a new business if your business was started this tax year. This can include things like market research and advertising for your business launch. 

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, 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 have 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.

Corporate Alternative Minimum Tax Credits

The corporate alternative minimum tax is defined as “A variety of exclusions, deductions, and credits are available to corporations, which often allow them to reduce the amount of tax that they are required to pay on the income they earn, sometimes to zero. To ensure that these corporations pay at least some tax on their income, Sec. 55 imposes an alternative minimum tax (AMT), which requires many corporations to add back some of these deductions and credits and pay tax on this reconfigured amount.”

This was repealed in 2017 and the AMT was made available as refundable credits ending in 2021. The federal government is allowing businesses that were going to receive AMT credits at the end of 2021 to claim a refund now due to the pandemic.

How Do I Know If My Business Needs To Collect Sales Tax?

Forty-five out of the fifty states require businesses to collect sales tax. This does not even include that many cities and localities that also have sales tax regulations. You must understand the rules of the places that you do business. Does your state or local area require some sort of license or sales permit? Be sure that you are charging the correct rate for both the point of sale and the types of products your business sells.

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.

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 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.

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. 

It Can Be Confusing

Sales Tax regulations can be a source of great confusion for small businesses. The rules seem to be continuously changing and it can be very difficult to keep up.

However, remembering some relatively simple concepts will go a long way toward easing the stress associated with sales tax issues.

How Do I Know If My Business Needs To Collect Sales Tax?

Forty-five out of the fifty states require businesses to collect sales tax. This does not even include that many cities and localities that also have sales tax regulations. You must understand the rules of the places where you do business. Does your state or local area require some sort of license or sales permit? Be sure that you are charging the correct rate for both the point of sale and the types of products your business sells.

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

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

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

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

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

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

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

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

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

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

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

Are You Dealing With Taxable Products?

You need to make sure that the type of product your business is dealing in the jurisdiction that you are selling said product. You should make sure to ask the following questions:

Does your state collect sales tax?
Is the state sales tax based on the origin or destination?
Are you selling a product or a service?
Is your specific product or service taxed in the state or locality that you are selling?

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.

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.

Tax Resale Certificate Is Here To Help

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

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

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.

Make Sure Your Documents Are In Order

Do an inventory of all your business records. It is key to have the right documents to accurately report your earnings and expenses. Computer software like Excel or Quicken greatly helpsfor in organizing your tax records. These programs can also save you time by importing information directly into your tax return.

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.

Depreciation

If you have a business asset that is expected to last more than one year, you can depreciate the cost of the asset over its life rather than deducting the cost of the asset the year that you purchase it. Depreciation is fully deductible. Examples of assets that can be depreciated are:

• Cars
• Furniture
• Technology like computers
• Improvements to leased property

You can not include inventories, stock-in-trade, and land cannot be as a depreciated tax deduction.

Employee benefits

If you have employees and provide health insurance and other benefits then you can fully deduct the costs of those benefits.

Home Office Deduction

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
• Utilities
• Repairs
• Depreciation for that area

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. 

For a full explanation of tax deductions for your home office refer to Publication 587, Business Use of Your Home. In this publication you will find:

• Requirements for qualifying to deduct expenses (including special rules for storing inventory or product samples).
• Types of expenses you can deduct.
• How to figure the deduction (including depreciation of your home).
• Special rules for daycare providers.
• Tax implications of selling a home that was used partly for business.
• Records you should keep.
• Where to deduct your expenses (including Form 8829, Expenses for Business Use of Your Home, required if you are self-employed and claiming this deduction using the regular method).

Any Labor That is Contracted

This includes all fees paid to independent contractors. If you hired a graphic designer to style a logo for you or contracted with a developer to make your website, their fees are fully tax-deductible.

If you paid a contractor $600 or more over the course of the year, you’ll even have to file Form 1099-MISC.

Depreciation

If you have a business asset that is expected to last more than one year, you can depreciate the cost of the asset over its life rather than deducting the cost of the asset the year that you purchase it. Depreciation is fully deductible. Examples of assets that can be depreciated are:

• Cars
• Furniture
• Technology like computers
• Improvements to leased property

You can not include inventories, stock-in-trade, and land cannot be as a depreciated tax deduction.

Employee benefits

If you have employees and provide health insurance and other benefits then you can fully deduct the costs of those benefits.

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 name and used partly for personal, 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 will have to keep track of what percentage of business and private miles you drive. You can use a manual log or an online app.

Take Hold Of Your Destiny

Some people are scared of the stress that often comes along with managing a business. They think that they will not be able to keep up with the ever-changing marketplace. What they often do not take into account is that day-to-day jobs can be just as stressful. Often, employees have to live up to the unrealistic expectations of several managers. Being an entrepreneur gives you more control over your own destiny, rather than having your fate be in other people’s hands. This way you can shape your life according to your needs.

Corporate America Is No Longer Stable

Perhaps you love your job. There is nothing wrong with being fulfilled by your work and enjoying a corporate environment. This can quickly change when your company merges or is sold to new owners. It is common for things to change completely just on the resignation of key officers. This can make the workplace atmosphere you once loved suddenly become unbearable. You might now be in the predicament of proving yourself all over again, even after many years of loyal service. It is better to work for yourself and be the master of your destiny. 

Being An Entrepreneur Is Hard Work

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

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.

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

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.

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.

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

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.

Make Sure Your Documents Are In Order

Do an inventory of all your business records. It is critical to have the correct documents to accurately report your earnings and expenses. Computer software like Excel or Quicken greatly helps in organizing your tax records. These programs can also save you time by importing information directly into your tax return.

Is Your Business a Pass-Through Entity?

A pass-through entity is when the business’s tax liability 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, 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. Some types of pass-through businesses may not qualify for this deduction: The IRS regulations detail the limitations.

Make Sure You Have The Proper Forms

You should first make sure you have the proper forms for your small business entity. 

What is a business entity?

A business entity is a corporation created by one or more natural persons to hold on to a trade or business.

The following are types of business entities:

• Sole proprietorship: Unincorporated business with one owner or jointly owned by a marriage

• General partnership: Unincorporated business with two or more owners

• Limited partnership: Registered business composed of active, general partners and passive, limited partners

• Limited liability company: Registered business with limited liability for all members

• Professional limited liability company: LLC structure for professionals, like doctors and accountants

• C-corporation: Incorporated business composed of shareholders, directors, and officers

• S-corporation: An Incorporated business that is taxed as a pass-through entity

• Professional corporation: Corporate structure for professionals, such as doctors and accountants

• B-corporation: For-profit corporation that is certified for meeting social and environmental standards

• Nonprofit: Corporations: Formed primarily to benefit the public interest rather than earn a profit.

You will use different forms, but calculating the taxes itself will be similar.

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 total amount.

Remember The Quarterlies

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

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 enter 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.

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 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 out of work. This can lead to significant 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 utilizing tax resale certificates to your best advantage. In short, a retail tax certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that will be used in products that you will resell, such as wood for a cabinet.

You must understand that tax resale certificates can also be used on items resold. For example, office supplies, such as new computers for your employees, would not fall under retail. Therefore, it would be considered fraud not to pay sales tax on these items.

If this is confusing, 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. For example, 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 registration headache to someone else.

On the other hand, misunderstanding and not paying the correct sales tax to a state government could 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. 

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

Small and Medium-sized are both the lifeblood of our economy and a crucial part of the American Dream. However, most of the industrious people who run these companies have neither the time nor proper understanding of the tax code to correctly prepare their business taxes even with the assistance of software.

It might be tempting to shelve tax-related issues until April, but this is highly unwise. It is smart to have the right tax professional by your side from the beginning to look out for all the unexpected issues that often plague small business accounting.

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

Documenting Yourself

Have you, the owner, been taking money out of the 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 into 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.

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.

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 and the Internal Revenue Service or IRS regulations on such matters can be very perplexing.

What are some things that a startup should be monitoring/On the lookout for to avoid any tax-related surprises?

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

Someone who waits till tax season to seek advice will realize that most of the stronger options are no longer available to them. Every business transaction made by the business owner 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 make sure that you are not sidelined with incorrect information that will lead to bad business tax decisions.

Why You Should Pay For Professional Advice

Many new business owners think they can do taxes on their own and end up owing back taxes. I remember the first time a client of mine went to a tax professional. The person was able to analyze the code and get my client a refund of well over $6,000. This was well worth the $800 that was spent going to the professional in the first place.

A Tax Professional Can Offer The Following Benefits To A Small Or Medium-Sized Business:

• A tax professional will study your business structure and explain to you what is the best structure for your particular businesses’ tax liability. They will help you alter the structure if this is the best course of action.
• Tax professionals will examine how your business is paying and reporting independent contractors and make sure that you are compliant in this area with all IRS regulations to avoid harsh penalties.
• They can look at past tax returns for deductions that have been missed or valuable credits that are available to the business.
• The tax professional can point out all manner of compliance issues that can be immediately corrected throughout the year so you have the strongest confidence going forward with all your regular business transactions.

Remember that every business is different and there is never going to 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 make sure 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.

Tax Resale Certificate Is Here To Help

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

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

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.

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.

Business Structure

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

What is a business entity?

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

The following are types of business entities:

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

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. 

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.