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When it comes to tax deductions for the self-employed, there are several opportunities to maximize your savings and reduce your taxable income. By taking advantage of these deductions, you can keep more of your hard-earned money in your pocket.

One of the most significant tax deductions for the self-employed is the home office deduction. If you use a portion of your home exclusively for business purposes, you may be eligible to deduct expenses such as rent, mortgage interest, utilities, and even repairs and maintenance.

Another valuable deduction is the vehicle expense deduction. If you use your vehicle for business purposes, whether it’s for meetings with clients or delivering products, you can deduct expenses such as gas, insurance, maintenance costs, and even a portion of your lease or loan payments.

Health insurance premiums are also deductible for self-employed individuals. This includes not only medical and dental insurance but also long-term care coverage. By deducting these premiums, you can offset some of the costs associated with staying healthy and protected.

Additionally, don’t forget about deductions related to business-related travel expenses. If you need to travel for business purposes – whether it’s attending conferences or meeting clients – you can deduct expenses such as airfare or mileage costs, accommodations, meals, and even transportation while at your destination.

Lastly, don’t overlook deductions related to professional development and education. Expenses incurred for courses or workshops directly related to improving your skills in your field are generally deductible.

Remember that keeping accurate records is crucial when claiming these deductions. It’s always recommended to consult with a tax professional who can guide you through the process and ensure that you’re maximizing all available deductions while staying compliant with tax laws.

Taking advantage of these good tax deductions for self-employed individuals like yourself can significantly reduce their tax liability and keep more money in their pockets – allowing them to invest back into their businesses or enjoy personal financial growth.

Many people are turning to self-employment as a means of earning income and doing something that they love. There is a great opportunity today for someone to be their own boss and start a company even if they do not have a great deal of money. However, being self-employed can be quite challenging when it comes to taxes. That is why we have composed a listing of tax deductions that smart self-employed people can not afford to miss.

Professional Services

A self-employed person can deduct fees paid to licensed professionals like attorneys and accountants, as long as some of the services are done in furtherance of your business. Just make sure you separate the business and personal fees.

Licenses And Certifications

You can deduct any expenses associated with business licenses, certifications, and regulatory fees related directly to your business. This can include incorporation fees and small business licenses for your state.

Rent Or Leasing Payments

If you rent office space, cars, or any physical equipment for your business, all those expenses are deductible.

If you leased your car for a term of 30 days or more, though, you’ll need to reduce the deduction by an “inclusion amount.” For more information, refer to the “Leasing a Car” section in chapter 4 of Pub. 463.

Repairs and maintenance

This category includes incidental repairs and maintenance made to machines and other property. For example, you can deduct costs for painting your office or fixing your broken computer.

Educational Expenses

Any expenses that are work-related education expenses can be deducted.

To be deductible, your expenses must be for education that:

(1) Maintains or improves your job skills or

(2) The law requires you to keep your status or occupation. 

However, albeit the education meets either of those tests, the education cannot be a part of a program that will qualify you for a replacement trade or business or that you have to meet the minimal educational requirements of your trade or business.

Expenses that you can deduct include:

• Tuition, books, supplies, lab fees, and similar items
• Certain transportation and travel costs, and
• Other educational expenses, like the value of research and typing

Supplies

Incidental office supplies such as paper, pens, and clips can be deducted from your taxes. However, if the supplies are consumable, such as plastic needed to produce a product, you are limited to only deducting the amount that you use for the tax year, not the total amount that you purchased.

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 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.

If you have a fleet of business vehicles, which is usually five or more, you must use the actual expense method.

Mileage

The Internal Revenue Service allows you to deduct mileage that is used for business purposes.

They are as follows:

• 58 cents per mile for business miles driven, up from 54.5 cents for 2018
• 20 cents per mile driven for medical or moving purposes, up from 18 cents for 2018
• 14 cents per mile driven in service of charitable organizations, unchanged from 2018

Remember to add all business parking fees and tolls paid during the year, as these are deductible too.

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 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.

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

In order 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 actually 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 actually 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 state resident. The agent must make commission payments to the referral agent for any sales resulting from 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 located within the state and sells a similar product under a similar business name. Instate retailers can also promote or market the product to in-state customers. Affiliate nexus does not require common ownership and may not include services such as sales and delivery.

Marketplace Nexus Legislation– This definition applies to marketplace facilitators who operate a business in the state and 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.

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

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

Do All States Accept The Multijurisdictional Resale Certificates?

One should also recognize that the following states do not accept the multijurisdictional resale certificate:

• California
• Florida
• Hawaii
• Illinois
• Louisiana
• Maryland
• Massachusetts
• Washington

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 about a state sales tax.

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

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

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.

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.

Become Proactive

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

Is Your Business a Pass-Through Entity?

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

Pass-through entities include:

• Sole Proprietorships
• Limited Liability Companies
• S Corporations

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

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

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

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 true $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.

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.

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’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.

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.

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.

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. 

Being An Entrepreneur Is Hard Work

There is no doubt that 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 be working 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.

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 apply for a tax resale certificate. 

Remember To Verify Any Tax Resale Certificate Presented To You

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

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

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 All States Accept The Multijurisdictional Resale Certificates?

One should also recognize that the following states do not accept the multijurisdictional resale certificate:

• California
• Florida
• Hawaii
• Illinois
• Louisiana
• Maryland
• Massachusetts
• Washington

Do All States Charge Sales tax?

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

What 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 in which the company was originally formed and, therefore, should be able to apply for a tax resale certificate. 

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.

Become Proactive

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

Is Your Business a Pass-Through Entity?

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

Pass-through entities include:

• Sole Proprietorships
• Limited Liability Companies
• S Corporations

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

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

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

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 true $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.

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.

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’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.

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.

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.

This Is A Great Moment For Reflection

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

Economic Hardship Often Spurs Innovation

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

What is Drop Shipping?

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

Dropshipping Can Make Sales Tax Complicated

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

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

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

What is A Tax Resale Certificate?

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

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

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

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

Does A Vendor Have To Accept My Tax Resale Certificate?

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

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

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

The Various State Tax Laws Can Be Confusing

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

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

Do Not Be Caught Unaware

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

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

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

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

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

There is something so energizing about the word start-up that it makes you want to jump out of your seat and start running around. Start-ups have this reputation of being a carpe diem/seize the day exercises in spontaneity.

We all fantasize about quitting our daily grind and just passionately steamrolling ourselves into a successful enterprise.

Separating Romance From Reality

The truth of the matter is that a Start-up means just the beginning. Either it will morph into a sustainable long-term business, that you will run or sell to someone else, or perhaps fizzle into a giant ball of nothing.

Longevity Should Not Be Taken For Granted

So many startups are just trying to make it to the next day that they can not even start to think about 50 years into the future. However, no one invests their time and energy into a start-up without at least the hope that there is no expiration date to their dream.

So what is the secret to making sure that your start-up is not a fly-by-night operation?

Believe It Or Not…The Profit Margin Is Not The Bottom Line

We all know that profitability is needed to sustain a business. However, it is just as important is to define the values that make up the core of your company and what your company is meant to contribute to society.

You must define the value that you create with your product or service. This is key to having a deep understanding of what is going to be your long-term goals. This will also help guide you to figure out what means the business will be pursued to achieve these goals.

These types of core values are the rudder for your start-up boat. Think of it like a conscience that keeps the boat on course instead of allowing the start-up to drift aimlessly into oblivion.

This type of attitude automatically allows you to create a contract with your community which is always a sign of mutual respect which can also go a long way to securing customer loyalty.

Your Company Has To Be Flexible And Open to Change

Many people think of the start-up as a hypothetical child. They want to nurture it to become the best that it can be. However, they should also acknowledge that a child has many stages of life. The needs of a toddler are very different from the needs of a teenager.

Your company will experience many periods of growth and change. Markets can be very volatile and what is novel today can easily turn into old news tomorrow. Remember that building a successful company is a long marathon, not a sprint. You have to be open to redefining your position not once, but several times in a company’s lifetime. The business must be malleable enough to withstand the challenges brought about by new technology, changes in regulations, and societal shifts.

Leadership Will Eventually Have To Be Scalable

A typical start-up is often the vision of a very small group of people. These individuals often will control every aspect of the early stages of a new company. However, there will come a time when the company will have to expand the framework of leadership. This type of delegation often comes much sooner than most start-ups realize and often catches the original small leadership team by surprise.

The decision-making demands of the business must be distributed evenly as the company experiences growth. A small group can only logistically do so much. A start-up that refuses to scale its leadership will be in danger of becoming obsolete.

One of your main goals as a start-up to eventually build a strong team that has many tiers of leadership. This will empower the company and create an atmosphere of confidence. A business with this type of attitude usually has no difficulty in recruiting high levels of talent. People want to be part of a company that is not stifled by outdated founder principles.

All Of These Principles Combine To Create Endurance

So in conclusion, defining your start-up’s core values, being open to changes brought by growth, and having scalable leadership will help ensure that your business endures for the long term. You are creating a strong DNA model that will help you run the long marathon from start-up to an established successful company that will be around for a long time.

Launching and Marketing

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

Make Sure You Understand The Specific Guidelines Of Your State

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

Tax Resale Certificate Is Here To Help

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

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

Understanding and complying with sales tax obligations is crucial for small businesses. As they navigate the complex world of taxation, it is essential for entrepreneurs to be aware of the rules and regulations surrounding sales taxes. In this section, we will explore what small businesses need to know about sales taxes, including their responsibilities in collecting and remitting sales tax, determining nexus, and addressing the challenges posed by online sales.

Sales taxes are a significant aspect of running a business as they impact both the bottom line and legal compliance. By gaining a comprehensive understanding of these tax obligations, small business owners can ensure that they stay on the right side of the law while managing their finances effectively.

In this section, we will delve into key topics such as collecting sales tax from customers and understanding nexus – the connection that determines whether a business is required to collect and remit taxes in a particular jurisdiction. Additionally, we will address the unique challenges faced by small businesses in relation to online sales.

By equipping themselves with knowledge about these important aspects of sales taxes, small business owners can confidently navigate their tax obligations while focusing on growing their enterprises. Let’s dive into what every small business needs to know about managing their sales taxes effectively.

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.

Do All States Charge Sales tax?

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

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

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

Does A Vendor Have To Accept My Tax Resale Certificate?

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

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

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

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

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

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.