Category: Uncategorized

Defining the Tax Resale Certificate

A tax resale certificate—sometimes referred to as a reseller’s permit or a state tax exemption certificate—serves as a tool for businesses to avoid paying sales tax on items intended for resale. It is vital to distinguish between retail inventory and operational assets; for instance, purchasing office equipment like employee computers without paying sales tax would be categorized as fraud, as these items are not for resale.

Understanding Pass-Through Entities

In a pass-through entity, the business’s tax obligations are transferred directly to the owner. Common examples of such entities include:

• Sole Proprietorships
• Limited Liability Companies (LLCs)
• S Corporations

It is important to note that the Internal Revenue Service automatically classifies any business that hasn’t filed formal paperwork as a sole proprietorship.

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 Your Business a Pass-Through Entity?

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

Pass-through entities include:

• Sole Proprietorships
• Limited Liability Companies
• S Corporations

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

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

If your business is a pass-through entity, then the taxable business income must be reported with your personal tax return. This means the amount you owe will be determined by your 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.

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 can refuse a tax resale certificate. This is because the vendor will be the one liable to the state government should anything be remiss. That is why you should always take the following steps to assure 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 5 years in case of a tax audit.

Remember The Deductions

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

• Travel by airplane, train, bus, or car between your home and your business destination. (If you’re provided with a ticket or you’re riding free as a result of a frequent traveler or similar program, your cost is zero.)
• Fares for taxis or other types of transportation between the airport or train station and your hotel, the hotel, and the work location, and from one customer to another, or from one place of business to another.
• Shipping of baggage, and sample or display material between your regular and temporary work locations.
• Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses.
• Meals and lodging.
• Dry cleaning and laundry.
• Business calls while on your business trip. (This includes business communications by fax machine or other communication devices.)
• Tips you pay for services related to any of these expenses.
• Other similar ordinary and necessary expenses related to your business travel. (These expenses might include transportation to and from a business meal, public stenographer’s fees, computer rental fees, and operating and maintaining a house trailer.)
• Many apps have come on the market that makes it exceptionally easy to scan and track receipts for travel-related expenses. Some of these apps also automatically categorize expenses which is very nice for accurate bookkeeping.

Criteria for State Sales Tax Liability

The authority of a state to impose sales tax on a business entity is predicated on the establishment of nexus. Nexus, in the context of state sales tax, denotes a significant connection between the taxing jurisdiction and the business enterprise. The legal parameters defining this connection have undergone substantial revisions recently to accommodate contemporary commercial practices.

Historically, nexus was contingent upon a business maintaining a physical presence within the state. However, the proliferation of e-commerce has necessitated a shift in this standard. In the judicial precedent set by South Dakota v. Wayfair, the Supreme Court determined that physical presence is no longer the sole requirement for establishing nexus. While physical presence remains a primary factor in evaluating tax collection authority, it is no longer an absolute prerequisite.

Methodologies Employed by States to Establish Sales Tax Nexus

States utilize diverse criteria to define sales tax nexus. The following methodologies represent the primary frameworks used to determine these obligations:

• Click-Through Nexus Legislation
• Affiliate Nexus Legislation

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.

Getting A Tax Resale Certificate 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.

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 businesses 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 Business Might Stumble Upon?

Net Profit

Do you properly understand how to handle your cash flow? Are you going to pay taxes purely based on

What is available in your checking account? Many business owners 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.

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.

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

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

Someone who waits till tax season to seek advice will realize that most of the stronger options are no longer available 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 which allows 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.

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 business’s 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 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 are in compliance with all major and minor regulations. They understand as a busy owner of a small to medium-sized business, you already have enough on your plate without also worrying about the mind-numbing minutiae of your business tax scheme. Let a business tax professional help you to greater business success and financial stability.

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

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.

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

There first needs to be nexus to establish whether or not a state can impose a sales tax upon your business. A connection between the state and your business finds Nexus relating to state sales tax. How this connection is defined has been subject to pretty recent changes that reflect how 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 reality as the significant 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 significantly 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 that are the result of the click-through referrals from the agent’s website. 

Affiliate Nexus legislation– Remote retailers hold a substantial interest or are owned by a retailer located within the state and sell 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 provide 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 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 can refuse a tax resale certificate. This is because the vendor will be the one liable to the state government should anything be remiss. That is why you should always take the following steps to assure 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 5 years in case of a tax audit.

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. 

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 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.

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 a 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 business has established the nexus 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.

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 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, which is also known as 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. The document must be filled out correctly, and the retailer is aware of the different issues that can arise if it is misused.   

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 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 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. 

What Information Do I Need For The Tax Certificate Registration Form?

You must provide the following information:

• The name and address of the purchaser
• The name and address of the seller
• The registration number of the purchaser
• An accurate description of property purchased for resale
• The reason for the exemption
• A statement that if the property is put to use in a taxable manner that the purchaser will remit the consumer use tax
• Date and Signature and Title of the authorized individual at the purchaser

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 initially 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 initially formed and therefore should be able to apply for a tax resale certificate. 

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.

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 businesses 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 Business Might Stumble Upon?

Net Profit

Do you properly understand how to handle your cash flow? Are you going to pay taxes purely based on

What is available in your checking account? Many business owners 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.

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.

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

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

Someone who waits till tax season to seek advice will realize that most of the stronger options are no longer available 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 which allows 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.

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 business’s 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 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 are in compliance with all major and minor regulations. They understand as a busy owner of a small to medium-sized business, you already have enough on your plate without also worrying about the mind-numbing minutiae of your business tax scheme. Let a business tax professional help you to greater business success and financial stability.

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

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.

Defining the Tax Resale Certificate

A tax resale certificate serves as a state-issued tax exemption document, sometimes referred to as a reseller’s permit or an exemption certificate. Its primary function is to allow businesses to acquire inventory intended for resale without paying upfront sales tax.

It is vital to distinguish between items for resale and those for business use. For instance, purchasing office equipment like employee computers using a resale certificate is prohibited, as these are not retail inventory items; failing to pay sales tax on such purchases is considered fraudulent.

Determining Sales Tax Obligations and Nexus

A state’s authority to impose sales tax on your business depends on the establishment of a “nexus,” which is a formal connection between your business operations and the state. While traditional nexus was based on physical presence, modern legal standards have evolved significantly.

Following the ruling in South Dakota v. Wayfair, the courts removed physical presence as the sole requirement for nexus, allowing states to collect tax from e-commerce entities that lack a physical footprint. Nevertheless, maintaining a physical location remains a primary factor in determining tax collection responsibilities.

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.

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 a 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 business has established the nexus 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.

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 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, which is also known as 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. The document must be filled out correctly, and the retailer is aware of the different issues that can arise if it is misused.   

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 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 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. 

What Information Do I Need For The Tax Certificate Registration Form?

You must provide the following information:

• The name and address of the purchaser
• The name and address of the seller
• The registration number of the purchaser
• An accurate description of property purchased for resale
• The reason for the exemption
• A statement that if the property is put to use in a taxable manner that the purchaser will remit the consumer use tax
• Date and Signature and Title of the authorized individual at the purchaser

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 initially 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 initially formed and therefore should be able to apply for a tax resale certificate. 

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.

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.

There Are Other Taxes Besides Income Taxes

Businesses pay more than just income taxes. They include the following:

• Employment taxes on wages paid to employees and to the owner (you). 
• Social Security
• Medicare tax 
• Federal unemployment tax (FUTA)

Social Security tax is 12.4 percent of all wages paid up to $137,700, with half paid by the employee and half paid by the employer. Medicare is equal to 2.9 percent of wages paid (3.8% on wages in excess of $200,000 ($250,000 for joint returns, $125,000 for married taxpayers filing a separate return), half paid by the employee, and half paid by the employer. FUTA is generally equal to 6 percent of the first $7,000 of each employee’s wages and is paid by the employer. Self Employed owners will have to pay a total amount of Social Security taxes and Medicare taxes since there is not a separate employer to pay it for you.

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.

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.

If Your Business Is A C-Corporation

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

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.

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.

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.

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.

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.