Category: Uncategorized

It Is Never Too Early To Plan For Taxes

It is true that 2020 was a year that had a lot of personal challenges for small businesses. However, understanding your tax liability for the coming year is always a good idea and it is never too early to start. There is no reason that taxes need to be a mystery and you can forecast what you will owe in the coming year.

Become Proactive

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

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 personal 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.

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.

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.

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.

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.

The Buzz

You have probably heard about a lot of buzz words like e-commerce and POD. You have this vague feeling that other people are making good money on these buzz words and you want to join the party. Tax Resale Certificates are an excellent way to make the most out of your e-commerce business.

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.

What is POD?

POD stands for print on demand. POD is a printing technology and business process in which designs are not printed until the company receives an order, allowing prints of single or small quantities. 

What is the advantage of POD?

This is an industry that has grown leaps and bounds because of digital printing technology. Before it only made sense to print in bulk because of the relatively high cost of small scale printing. Now, a business can make great margins on printing products just based on customer demand. This means that you no longer have to order in bulk and sit on a bunch of unsold inventory.

What does this mean for me as a budding entrepreneur?

Print on demand is providing an amazing opportunity for people to start their own businesses online without having to provide any capital upfront. This means there is little risk for what could be very lucrative rewards. You offer a selection of designs that can be printed on various items such as t-shirts, hoodies, pullovers, and pop sockets.

How do I get started?

One of the most popular platforms from print on demand is Merch by Amazon. You will first need to apply and be accepted to create an account. Because of the enormous popularity of the program, it was not unusual for people to wait months before they got a confirmation. The way you create an account is by requesting an invitation from Amazon. After you request an invitation and sending a letter about yourself, Amazon will review your invitation and accept or reject your application. The process can take up to 6 months to be approved. It is hard to wait for an invitation but the good news is that you can spend that time researching so you will be ready to go once Amazon approves your request.

Follow these steps:

• Get Your Account
• Make a Gameplan.
• Recognizing Merch T-Shirts.
• Understanding Amazon Best Sellers Rank.
• Check the Competition.
• Creating Your First T-Shirt

Amazon has the following tiers:

• Tier 1: 10 designs.
• Tier 2: 25 designs
• Tier 3: 100 Designs
• Tier 5: 500 Designs
• Tier 6: 1000 Designs
• Tier 7: 2000 Designs
• and goes on… up to 16,000 or more…

The truth of the matter is many people have actually turned this print on demand-side hustle into a lucrative money-making business that pays more than many full-time gigs.  In fact, a Merch by Amazon business actually sold for almost six figures in as little as 19 days!

What Is A Tax Resale Certificate

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.

What Is Sales Tax Nexus?

Nexus is defined as having a presence or a significant connection to a state. Your sales tax obligations as an online store owner vary. 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 

Here are some examples of other connections to a state that could result in sales tax:

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

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

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

• 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.

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.

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 exemptions 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.

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 exemptions status. A savvy business owner will understand that having a tax resale certificate will save them a good deal of money but leave the actual headache of registration to someone else.

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

We provide a tax resale certificate for the top states that include:

• California
• Texas
• Massachusets
• New York
• New Jersey
• Illinois
• Florida

Let us handle the hassle so you can go about the important work of leading your retail business to great success. 

How to Start Your Online Retail Business

The internet has opened up new opportunities for many people. It is a vast marketplace that can be a goldmine for enterprising and smart business people. The numbers are very promising.

In 2017, e-commerce was responsible for around $2.3 trillion in sales and is expected to hit $4.5 trillion by 2025. In the US alone, e-commerce represents almost 10% of retail sales and that number is expected to grow by nearly 15% each year.

It is tempting to want to jump into this very lucrative market, but how do you begin?

Always start with a business plan.

A business plan is a strategy that lays out all the important aspects of your company including goals, financing, and operations. Many online retailers mistake a lack of brick and mortar overhead as an excuse for not planning out the details of their business properly. In order for your online retail business to be taken seriously, you must treat it as a serious business.

Think of it this way, a good business plan should tell anyone who reads all the essential details of your company. 

A solid business plan should contain some elements of the following:

• Executive Summary
• Company (who we are)
• Products and Services (what we sell)
• Market Analysis (who we sell to)
• Strategy (how we sell, who the competition is, what the roadmap is)
• Operations (how it is made)
• Financial Plan (what are the funding requirements, what is the expected return on investment)

A good business plan often makes a critical difference between failure and success. It provides a clear pathway on which your online retail business can navigate

Choosing the appropriate business structure and why it matters.

The type of business structure you choose has a great impact on very important matters like taxation and liability. You can choose from the following:

• Sole Proprietorships
• Partnerships
• Corporations
• S Corporations
• Limited Liability Company (LLC)

Carefully research what is the best fit for your online retail business model. Each structure has its own pros and cons and makes sure you know what is right for you. Most online businesses are Limited Liability Companies as they often offer the liability protections of corporations without the personal liabilities of a partnership or sole proprietorship.

Decide what state that you want to form your business.

Most new online business retailers file their documents within the state that they are physically located. This helps avoid the cost of hiring an out of state registered agent in your home state. However, if your business is large in scope you might want to file your documents in Delaware. This state has advantages like laws that are generally favorable to businesses, and, unlike other states, it has a separate Court of Chancery that hears cases involving corporate law. It also does not collect corporate taxes if your Delaware Corporation actually does business in another state.

Build your inventory and make sure you get bar codes for all of your products.

To legally sell products to consumers through an online store, you will need UPC bar codes for each item you are selling, with separate bar codes for different patterns, styles, and combination of features. You can purchase barcodes easily online. 

Make sure you have a decent size inventory to handle the demand. Online customer expects their orders to come through quickly.

Set up your Domain and design a great website.

Your domain name is your internet address. You want your domain name to be memorable and interesting. Many companies offer domain name registration. Set up an account and then you identify the name of your domain.  There is usually an annual fee

You also want to design a pleasing website that offers customers a pleasing and simple to use interface. This includes setting up the theme, headers, and product lines. You will also need to organize your products into categories, and decide whether you want to include sections such as a FAQ page or blog. Do not forget important factors like a shopping cart and easy to pay options. This should not be difficult if you are using a typical e-commerce platform. You also want to make sure to constantly update and check your website to make sure there is no technical issue that could interfere with your sales.

Remember to get a Tax Resale Certificate.

As a savvy online business retailer, it is important that you are aware of how to utilize tax resale certificates to your best advantage. In short, a retail certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that are going to be used in products that you will resell such as wood for a cabinet. This is a significant saving and can save your business a ton of money if utilized properly. Our article Everything You Need to Know About Tax Resale Certificates will give you an in-depth rundown about how these types of certificates can help your business.

Unfortunately, the rules of Tax Resale Certificates can vary greatly by the state which can be very confusing. Our site makes the process as easy as possible. Just take advantage of these user-friendly options to help take the headache of applying for a tax resale certificate off your plate.

Launching and Marketing

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

You have now entered the lucrative world of online retail. Your careful planning has put you ahead of the game in regards to your competitors. Just remember that business is dynamic and you must always be proactive in improving your products and services.

As the employment landscape changes more and more people are going into business for themselves. Entrepreneurship has long been a symbol of American ingenuity and independence.

However, many people are often overwhelmed when faced with all the challenges of running their own business. It is why the SBA estimates that almost 30% of new businesses fail during the first year and 66% during the first ten years of life.

One of the reasons so many businesses do not make it is because of their leaders not fully utilizing all business opportunities that are available to them. 

Sure there is a ton of information available online about what you should or should not do when trying to navigate the business landscape. We will focus on some commonly missed business opportunities that can have a giant effect on your business’s bottom line.

What is a missed business opportunity?

This might seem like the most basic of questions. However, for this article, we are going to define the missed business opportunity in the following manner:

• Failure to enter or utilize a marketplace for the best results as associated with the business goals.

• Failure to take advantage of a tax break that would have been lucrative for the business’s profit margin. 

Lets first explore how many small businesses miss marketplace opportunities and how some of these common mistakes can be avoided.

They underestimate the power of being proactive.

There are many ways to earn a great passive income online and sites like these can help you bring in that extra chunk of change with very little investment.

However, if you are running a small business that you want to become your main source of income, you have to actively pursue an opportunity at every turn.

It is not enough just to let social media do all the work for you. It is still important to make personal connections and make sure your business is an appreciated member of the community.

Go to meetups and networking meetings.

Not only can these events be a lot of fun but they can also be a great way to make important contacts that can help you move your business forward.

Allow the networking to organically grow into speaking opportunities.

Did you know that 26.2 percent of the leads generated for professional services firms come from speaking engagements (second only to referrals/recommendations at 26.9 percent)?

Speaking engagements are a great way to showcase your business’s expertise and get your message out into the community. The leads generated from a speaking engagement can be invaluable in terms of marketing and social media strategy. It helps define your audience as well as promote respectability for your brand.

Understanding how to utilize cause marketing. 

Is there a cause that you are passionate about and that aligns well with your company goals and world view?  It is important for a business in day and age to communicate that they have an altruistic attitude and have intentions that go beyond just making money.

This is not limited to cash donations since many new small businesses do not always have giant budgets. A business can help with a drive that donates backpacks and school supplies for underprivileged children in the community. Think about creative ways in which you can incorporate charity and make your name stand out from other sponsors.

Sign up for the SAM Directory.

Many new businesses miss very lucrative opportunities with the federal government by not registering in the SAM Directory.

SAM stands for System Award Management.

In order to do any business with the federal government, you must register your business in the System for Award Management. The government will not hire any type of business large or small that has not registered in SAM.

A business also has to be registered with SAM before they can begin to apply for valuable federal grants.

A grant is a way the government supports your business by providing funds. Grants support economic initiatives and many other programs listed in the Catalog of Federal Domestic Assistance (CFDA).

This website can help guide you through the confusion of SAM registration so you can qualify for valuable government contracts and grants as soon as possible.

Do not forget tax deductions and how important they are for your bottom line.

We have talked about making the most of marketplace opportunities but a lot of small businesses lose unneeded money because they do not understand how much they can save on smart tax deductions.

Cellphones

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

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

Equipment and Furniture

Section 179 is a provision in tax law that enables 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 they limit expenditures to a spending cap of $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.

Tax Resale Certificates

A tax resale certificate is a signed document that indicates that the purchaser intends to resell the goods. In some states, resale certificates are also used to purchase taxable services that become a part of the property for resale.

Tax resale certificates can provide great savings that are fantastic for a business’s bottom line. However, the rules and regulations can vary greatly by the state which may cause a lot of confusion. Luckily there are websites that take the headache out of the process. 

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

The Pandemic has changed everything and small businesses and the United States government has passed legislation for tax relief for smaller companies. They are as follows:

• Coronavirus Aid, Relief
• Economic Security (CARES) Act
• Families First Coronavirus Response Act (FFCRA)

We at Tax Resale Certificate understand that many people are very nervous right now. We wanted to point out that there are some tax credits or changes that small businesses should understand if they have been affected by COVID-19. These tax breaks should help your business maintaing solid cash flow and ease some of your worries about the future.

Caps On Business Loss Deductions Were Halted

The Coronavirus Aid, Relief, and Economic Security (CARES)fast and direct economic assistance for American workers, families, and small businesses, and preserve jobs for our American industries.

The CARES Act has halted the limitation rule on small business losses being capped at $250,000 for individuals and $500,000 for couples. This applies to 2018 to 2020, with business owners who had their losses limited before this year, being able to file the amended returns needed to actually receive refunds.

Corporate Alternative Minimum Tax Credits

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

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

Increase In Interest Deductions For Small Businesses

The CARES Act allows you to increase the amount of interest expense that you are allowed to deduct from 30 percent to 50 percent. This applies to tax returns filed in both 2019 and the ones filed in 2020.

Writing Off Facility Improvements

The CARES Act allows businesses to start writing off the cost that comes with improvements to interiors of nonresidential buildings. This will expand the tax deduction to 100 percent of the cost and the deductions can be applied immediately. This is effective from 2018 to present, so businesses can actually amend older tax returns to recover costs from improvements made in 2018 and 2019.

Employee Retention Tax Credit

This credit was designed to help companies retain employees while facing pandemic hardships. Businesses will be eligible for this credit if operations were fully or partially suspended due to the coronavirus shutdown. You can also be eligible if gross receipts for your company went down more than 50 percent compared to the same time period in the previous year.

Businesses that are eligible can get a refundable 50% tax credit on wages with a maximum of $10,000 per employee. The credit can be obtained on wages paid or incurred from March 13, 2020, through December 31, 2020.

Employers will need to report total qualified wages and related health insurance expenses on their quarterly tax returns on Form 941. This needs to be done in the second quarter of 2020. The Employee Retentions tax credit can be taken against the employer’s share of Social Security taxes.

Family And Sick Leave

Employers will be 100 percent reimbursed for providing sick and paid family leave to employees for reasons related to the Coronavirus, by a tax credit. This will be paid every quarter. Employers will also be able to hold on to their portion of payroll taxes to be deposited and use this money to pay for the sick and family leave. There will be no penalty for businesses that do not deposit payroll taxes because they were anticipating a tax credit.

Deferred Payroll Taxes

The CARES Act is allowing businesses to delay payroll tax payments. These payments, which include Social Security tax and 2020 payroll deposits, can be deferred and paid within the next two years. The government is allowing for 50 percent to be paid by the end of 2021 and 50 percent by the end of 2022.

The Expansion Of The Charitable Gift Deduction

Before the CARES Act, charitable cash gift deductions were not allowed to exceed 10 percent of taxable income. Now, because of the pandemic, it has been increased to 25 percent. This change will have to be elected and does not occur automatically.

Changes In Net Operating Losses

The CARES Act has relaxed limitations on net operating losses. These changes allow for 100 percent of net operating losses from 2018, 2019, and 2020 to be carried back up to five years. They can also be carried up to 20 years with an 80 percent limitation.

Make sure you meet with your tax advisor to discuss all the new tax credits and deductions available to your company this year due to the coronavirus.

Let Us Handle The Hassle Of A Tax Resale Certificate

During these tough times, it is nice if someone takes a frustrating but beneficial task off your plate. That is why, here at Tax Resale Certificate, we handle all the headaches of registering for a tax resale certificate for you.

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
• Massachusetts
• New York
• New Jersey
• Illinois
• Florida

We know that there is a lot of confusion in the world right now. Luckily, these tax credits will help ease some of the burdens. A tax resale certificate is a fantastic way to make sure your business is in great shape to take advantage of consumer demand once the dust settles. 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. 

Welcome Back!

We know that you read our first blog in this series and look forward to sharing more information about the world of tax resale certificates. We understand that it is important for a responsible business owner to get as much information as necessary to make an informed decision.

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.

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 the way business is conducted in modern times.

Traditionally, 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 resident of the state. The agent must be making commission payments to the referral agent for any sales that are the result of the click-through referrals from the agent’s website. 

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

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

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

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

To find out more about state sales tax please visit the sales tax institute.

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 award of purchase that seem suspicious and do not relate to the customer’s business in a logical manner
• It is important that you keep the certificate on file for at least 5 years in case of a tax audit.

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 the there are a lot of rules and regulations, which can be very confusing to any business owner.

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 exemptions 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. 

Tax Deductions that Every Small Business Owner Should Know

You have taken the brave step of being the master of your own destiny by becoming your own boss. The first year has come with a fair share of challenges but you survived and are now ready to thrive.

Enter the taxman. Like death, taxes cannot be avoided and can strike fear into even the boldest entrepreneur. Many new small business owners often unknowingly leave valuable deductions on the table or think it is a matter for their accountant to handle. The truth is an informed leader is usually a successful leader.

The following is a list of tax deductions that if overlooked can be a costly mistake for any new small business owner.

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

As you can see the mileage amounts allowed for deduction actually increased in 2019 regarding two of the three categories. It is important to note that mileage deductions do not kick in when you go from personal residence to your place of business. In other words, your commute mileage cannot be used as a deduction.
You might be wondering how do you accurately keep track of mileage used for business purposes? This website has some of the best mileage tracking apps on the market that should fit most everyone’s budget.

Business Travel Expenses

The Internal Revenue Service defines a business expense as the ordinary and necessary expenses associated with traveling away from your home for your business, profession, or job. These expenses cannot be extravagant or used for personal purposes.

The following are valid business expenses:

• 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.)
• Your tax home is defined as the entire city or general area where your main place of business or work is located. Your tax home and where you maintain your family can be totally different for taxation purposes. You usually are going to be away from your tax home for a substantial period of time for business purposes and this includes getting sleep to meet the obligations of your work assignment. The work assignment itself should be for a certain amount of time but not indefinite. Any work assignment that is over a year is considered indefinite.
• 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.

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

In order 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).

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, even if the education meets either of these tests, the education can’t be part of a program that will qualify you for a new trade or business or that you need 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, such as the cost of research and typing

To determine if your work-related expenses are deductible, see Are My Work-Related Education Expenses Deductible?

Tax Resale Certificates

Up until now, we have been primarily talking about deductions at the level of the Federal government. It is important to also remember that there can be many money-saving deductions at the state level as well.
A tax resale certificate is a signed document that indicates that the purchaser intends to resell the goods. In some states, resale certificates are also used to purchase taxable services that become a part of the property for resale.

Tax resale certificates can provide great savings that are fantastic for a business’s bottom line. However, the rules and regulations can vary greatly by the state which may cause a lot of confusion. Luckily there are websites that take the headache out of the process.
You can read our handy article titled Everything You Need to Know About Tax Resale Certificates in order to get a comprehensive understanding of how they save your business money if you are a seller of goods. Visit taxresalecertificate.org to apply for your resale certificate as soon as possible.

We know how hard you have worked to start up your business. Being knowledgeable about tax deductions can help keep your hard-earned profits in your business so you can grow and thrive. Once again knowledge is the greatest asset one can have on the path to success.

As a savvy small business retailer, it is important that you are aware of how to utilize tax resale certificates to your best advantage. In short, a tax retail certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that are going to be used in products that you will resell, such as wood for a cabinet.

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.

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

Even though a 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 of 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.

 Do Big Box Stores Usually Accept Tax Resale Certificates?

A retailer should also be aware that many Big Box Stores such as Walmart or Target refuse to honor tax resale certificates to prevent retail arbitrage. Retail arbitrage is buying a rare item from a store and reselling it for a markup.

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. It is important that the document is filled out correctly and the retailer is aware of the different issues that can arise if it is 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?

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 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 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 Is A Consumer Use Tax?

A consumer has to pay taxes from purchases made from local retailers. This is often called a sales tax and is charged in 45 states. This money is usually collected on behalf of the state by the seller.

Consumer use tax is when the retailer does not charge the appropriate tax and therefore the sales tax is paid directly by the consumer to the state. This usually happens when something is purchased online or from a catalog. In these instances, the vendor does not have a set location in the state, so the sales tax can not be collected from the vendor.

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.

Why Delaware?

Delaware is an extremely popular state to set up a new business. They have a variety of laws and policies that are very attractive to young companies.

Delaware has great tax benefits.

There are no taxes for companies that operate outside the borders of Delaware. So you are not paying any type of Delaware State Taxes if you have no physical office within the state.

The following tax benefits also apply to Delaware:

• You do not have to collect sales tax from customers.  This makes it easy to start an online business and stay competitive in the e-commerce market.  You may have to pay a gross receipts tax if you do business in the state, but the tax is fairly low and only applies in certain situations.
• Delaware has no corporate tax on interest or other investment income in a Delaware holding company.  This includes fixed-income or equity investment gains which are also not taxed on the state level.
• The state has no personal/business property tax.  The county-level estate taxes are fairly low.  This is extremely beneficial if you happen to own tangible property such as an office building.
• No value-added taxes, use tax, or even inventory tax.
• Delaware has no inheritance tax.
• No capital shares or stock transfer taxes.  This is great for businesses who are expecting to obtain venture funding.
• The state has no tax on intangible assets such as trademarks, patents, and naming rights.  This is great for intangible asset holding companies.

The Delaware Court of Chancery

The laws of Delaware are extremely business-friendly. The Court of Chancery is a non-trial court dedicated solely to businesses. It handles issues that involve real property and commercial litigation. This court operates with only judges that specialize in complex corporate law. The Chancery Court does not have juries. This allows for a fast and efficient system of justice.

The Delaware laws are favorable to business when compared to other states. Courts often use Delaware business precedents to settle disputes. The state’s robust legal systems allow businesses to feel confident about filing in that state.

Asset protection

Delaware LLCs protect an LLC owner’s assets. An LLC structure is attractive to startups because it protects their assets from lawsuits.  In addition, Delaware is one of the few states that only allows a charging order as the sole remedy for collecting a debt.

A court issues a charging order to direct an LLC manager to pay the creditor for the debtor-owner’s personal creditor any distributions of income or profits that would otherwise be distributed to the debtor-member.

Creditors with a charging order usually can only obtain the owner/debtor’s financial rights and cannot participate in the management of the LLC. This means the creditor cannot order the LLC to make a distribution subject to its charging order. Usually, creditors who obtain charging orders end up with nothing because they can’t order the LLC to make any distributions.

A lot of other states treat single-member LLC as a disregarded entity and allow judgment collectors to pierce the corporate veil and go after the single member’s personal assets.

Starting a Delaware liability company is a great way to protect your assets from lawsuits.

Protecting your privacy

Delaware does not require it’s LLCs to list members’ names and addresses in their filings. The names of the members are only found in the operating agreement, which is private. This allows ownership and management information to be available through public records.

Delaware corporations can also be filed without listing shareholders, directors, or officers in the public record as long as you use third-party incorporation services. The state does have a Franchise tax payment requirement every year where the corporation must list the names and addresses of the company’s director and one officer. Shareholders do not have to be listed and still have privacy protection.

Delaware has great investor appeal

Investors love a company that incorporates in Delaware. Everyone ranging from venture capitalists and angel investors to private equity firms loves Delaware’s business-friendly laws. Overall, investors understand the Delawares system and banks often prefer Delaware corporations.

If going public is a goal then it is wise to incorporate in Delaware from the very beginning rather than having to convert the company to a domestic Delaware entity at a later time. This saves both time and costs in the long run.

Overall filing a business in Delaware makes you much more attractive to investors and gives you more options for funding.

What are the advantages of filing your business in your home state instead of Delaware?

Taxes are paid where your business is making money.

If your business operates mostly in another state then you are still liable to pay taxes to that state. A business does not often receive the supposed tax benefit of Delaware unless they are a multi-million dollar operation. This is true even if you conduct most of your business online.

For example, you live in the state of California, it’s a particularly bad idea to form a Delaware LLC, because you’ll be seen as doing business in California no matter where your company is formed.

You will have to file as a foreign entity in your residential state.

If Delaware is not your home state that means you will automatically have to keep up with two businesses. A domestic business in Delaware on top of registering as a foreign business in your residential state. This means extra filing costs and administrative fees and headaches.

So filing in Delaware leads to the following additional costs:

• Paying for an extra Registered Agent,
• Paying annual reports in 2 states,
• Having tax liabilities in 2 states,
• Dealing with the headaches of maintaining 2 LLCs

Privacy laws

First, there are three other states that allow LLCs to keep their ownership information private. These states are New Mexico, Nevada, and Wyoming. If you in one of these three states, then the privacy protections of Delaware might not be as valuable.

Litigation

Is your state litigious? What are the chances that your company will be facing litigation in the future? If you do not think that future litigation is very likely for your business than the advantages of the Delaware Court of Chancery might not be needed.

Conclusion

Overall, where you register your business depends on numerous factors. You should be aware of the tax laws in your state in order to correctly asses whether filing as a domestic business in Delaware is truly giving you any real tax advantage.

You should also understand what are are the goals for your company. Do you want to grow into a large multinational corporation? Is your company’s growth dependent upon attracting investors? Is it important for you to maintain privacy regarding owners or do you foresee your company going through a lot of litigation issues? If you answered yes to any of these questions then a Delaware filing might be a great option.

If your business is a relatively small operation than maintaining a domestic filing in Delaware and a foreign company in your home state might just not be worth the extra cost and hassles. If your business trades in goods and service, a tax resale certificate is alway a great idea.

Hopefully, our article can help you navigate your way to the correct decision so you can begin your path to success for your business to achieve its goals.