Category: Uncategorized

It Is Never Too Early To Plan For Taxes

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; it is always early enough to start. No reason taxes need to be a mystery, and you can forecast what you will owe in the coming year.

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 over $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 of Social Security taxes and Medicare taxes since there is no separate employer to pay it for you.

Business Travel Expenses

The Internal Revenue Service defines a business expense as the ordinary and necessary expenses associated with traveling away from 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 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, the standard mileage rate, and 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.)

Home Office Expenses

Using part of your home for business allows you to deduct expenses for the business use of your home. This can be applied to all types of homes including business owners who rent.

If you use your home exclusively and regularly for conducting business you can deduct the following:

• Mortgage Interest
• Insurance

To qualify for the home office deduction, you must show that your home is used regularly and exclusively for conducting business and is the principal place of business.

There are two methods for calculating the house office deduction. In the standard method, you use Form 8829 to itemize the expenses involved in using and maintaining your home office. This includes rent or mortgage interest payments, utilities, homeowners insurance premiums, and property taxes. In the simplified method, you determine the square footage of your home office (up to 300 square feet) and multiply by five dollars.

The simplified method is more straightforward, but you should see which one gives you a larger deduction amount.

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 needs to be clarified for you, just think of tax resale certificates as state tax exemption certificates.  Some states call them exemption certificates or reseller’s permits.

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

To establish whether or not a state can impose a sales tax upon your business, there first needs to be nexus. A connection between the state and your business finds Nexus relating to state sales tax. 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 reality as the significant requirement for creating nexus. It should be noted that physical presence is considered an essential requirement to allow a state to collect sales tax and is still one of the first considerations for sales tax.

That Is Why We Are Here To Help

Understandably, all this information can be very daunting. Not correctly understanding sales tax and the benefits of a tax resale certificate can lead to a great deal of trouble. A retailer could lose out on extremely beneficial sales tax exemption status. A savvy business owner will understand that having a tax resale certificate will save them a good deal of money but leave the actual headache of registration to someone else so they can get back to making the most of running their business.

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. 

Small Business Should Never Underestimate Taxes

The Internal Revenue Service has been more active in targeting small businesses for tax audits in the last several years. New businesses have spent 2.5 billion each year preparing taxes and answering questions from the IRS about tax return inquiries.

However, there are things that any new business can do to lessen its tax burden. We will discuss how choosing the right business entity can make your life as a new entrepreneur much easier in the coming future.

Business Structure

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

What is a business entity?

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

The following are types of business entities:

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

It Is Never Too Early To Plan For Taxes

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

Net Profit

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

What is available in your checking account? Many business owners do not realize that their available cash is not the same as the company’s net profit.

Remember The Quarterlies

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

The Self-Employment Tax

A self-employed person has to file additional taxes besides their income tax. This usually amounts to an extra 15.3% burden for small business owners. This is because employers and employees each pay 7.65% for both Social Security and Medicare taxes, so a self-employed individual will have to pay the full amount.

Solution

Small businesses should take advantage of the many business deductions available to small businesses to counteract this tax burden.

These include:

• Travel by airplane, train, bus, or car between your home and your business destination. (If you’re provided with a ticket or you’re riding free as a result of a frequent traveler or similar program, your cost is zero.)
• Fares for taxis or other types of transportation between the airport or train station and your hotel, the hotel, and the work location, and from one customer to another, or from one place of business to another.
• Shipping of baggage, and sample or display material between your regular and temporary work locations.
• Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses.
• Meals and lodging.
• Dry cleaning and laundry.
• Business calls while on your business trip. (This includes business communications by fax machine or other communication devices.)
• Tips you pay for services related to any of these expenses.
• Other similar ordinary and necessary expenses related to your business travel. (These expenses might include transportation to and from a business meal, public 

Just make sure that you follow guidelines and do not over-deduct and go overboard.

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 a 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.

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

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

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

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

What is Drop Shipping?

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

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 exactly what state sales tax is owed.

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.

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.

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.

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.

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.

Job Security No Longer Exists.

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

Business Structure

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

What is a business entity?

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

The following are types of business entities:

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

It Is Never Too Early To Plan For Taxes

2020 was indeed 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.

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, marketing channels, and a platform like Amazon.

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.

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 needs to be clarified for you, just think of tax resale certificates as state tax exemption certificates.  Some states call them exemption certificates or reseller’s permits.

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

To establish whether or not a state can impose a sales tax upon your business, there first needs to be nexus. A connection between the state and your business finds Nexus relating to state sales tax. 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 reality as the significant requirement for creating nexus. It should be noted that physical presence is considered an essential 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 initially formed and foreign to all other states, as a foreign entity in the conditions in which it operates. The retailer can then 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. 

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 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 

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 needs to be clarified for you, just think of tax resale certificates as state tax exemption certificates.  Some states call them exemption certificates or reseller’s permits.

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

To establish whether or not a state can impose a sales tax upon your business, there first needs to be nexus. A connection between the state and your business finds Nexus relating to state sales tax. 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 reality as the significant requirement for creating nexus. It should be noted that physical presence is considered an essential 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 initially formed and foreign to all other states, as a foreign entity in the conditions in which it operates. The retailer can then 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. 

Remember To Verify Any Tax Resale Certificate Presented To You

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

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

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.

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 Signature and Title of the authorized individual at the purchaser

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 found by a connection between the state and your business. 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’s 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 primary requirement for creating nexus. It should be noted that physical presence is considered an essential requirement to allow a state to collect sales tax and is still one of the first considerations for sales tax.

That Is Why We Are Here To Help

Understandably, all this information can be very daunting. Not correctly understanding sales tax and the benefits of a tax resale certificate can lead to a great deal of trouble. A retailer could lose out on extremely beneficial sales tax exemption status. A savvy business owner will understand that having a tax resale certificate will save them a good deal of money but leave the actual headache of registration to someone else so they can get back to making the most of running their business.

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. 

Your Company Has To Be Flexible And Open to Change

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

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

Leadership Will Eventually Have To Be Scalable

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

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

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

All Of These Principles Combine To Create Endurance

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

Economic Hardship Often Spurs Innovation

Many excellent companies like Uber, Square, and Instagram were born in the last recession. Hardship often leads to fantastic innovation. It will not be surprising to 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.

Job Security No Longer Exists

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

Take Hold Of Your Destiny

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

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

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

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

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

Traditionally, the nexus has been established by the business’s 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 essential requirement for creating nexus. Nevertheless, it should be noted that physical presence is considered an essential requirement to allow a state to collect sales tax and is still one of the first considerations for sales tax.

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

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

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

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

What is a business entity?

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

The following are types of business entities:

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

Small Business Should Never Underestimate Taxes

The Internal Revenue Service has been more active in targeting small businesses for tax audits in the last several years. New businesses have spent 2.5 billion each year preparing taxes and answering questions from the IRS about tax return inquiries.

However, there are things that any new business can do to lessen its tax burden. We will discuss how choosing the right business entity can make your life as a new entrepreneur much easier in the coming future.

Healthcare Savings

Medical costs are rising and can be quite expensive. It is smart to save money for unexpected healthcare expenses even if you are healthy now. This can be accomplished through a Health Savings Plan or HSA.

An HSA is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and other expenses, you may be able to lower your overall healthcare costs. HSA funds generally may not be used to pay premiums. This will help greatly in lowering taxes associated with medical costs.

HSA helps you save in taxes by letting your contributions be pretax, grow tax-free, and allow any withdrawals to also be tax-free. They are an invaluable source of savings and peace of mind. 

It Is Never Too Early To Plan For Taxes

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; it is always early enough to start. No reason taxes need to be a mystery, and you can forecast what you will owe in the coming year.

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 over $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 of Social Security taxes and Medicare taxes since there is no separate employer to pay it for you.

Business Travel Expenses

The Internal Revenue Service defines a business expense as the ordinary and necessary expenses associated with traveling away from 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 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, the standard mileage rate, and 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.)

Home Office Expenses

Using part of your home for business allows you to deduct expenses for the business use of your home. This can be applied to all types of homes including business owners who rent.

If you use your home exclusively and regularly for conducting business you can deduct the following:

• Mortgage Interest
• Insurance

To qualify for the home office deduction, you must show that your home is used regularly and exclusively for conducting business and is the principal place of business.

There are two methods for calculating the house office deduction. In the standard method, you use Form 8829 to itemize the expenses involved in using and maintaining your home office. This includes rent or mortgage interest payments, utilities, homeowners insurance premiums, and property taxes. In the simplified method, you determine the square footage of your home office (up to 300 square feet) and multiply by five dollars.

The simplified method is more straightforward, but you should see which one gives you a larger deduction amount.

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

A tax resale certificate can save you money on taxes if you start a business.

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

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

Corporate America Is No Longer Stable

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

Being An Entrepreneur Is Hard Work

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

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 need more time and a proper understanding of the tax code to correctly prepare their business taxes, even with software assistance.

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 need to realize that their available cash differs from 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. 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 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 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 Things Should A Business 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 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. Every business transaction the business owner makes will have a powerful impact on their tax liability. A solid tax professional will help guide your business through every crucial moment, allowing for more financial security and stability. They will ensure you are sidelined with correct information that will lead to good 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 action.

• Tax professionals will examine how your business is paying and reporting independent contractors and ensure that you comply 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 compliance issues that can be immediately corrected throughout the year. Hence, you have the strongest confidence going forward with all your regular business transactions.

Remember that every business is different and will never be a one-size-fits-all solution to tax questions and problems. This is why it is vital to have a tax professional on your side all year round to guide you through an often confusing tax code.

The tax professional will protect your business from liability and ensure you comply with all major and minor regulations. They understand as a busy owner of a small to medium-sized business, you already have enough on your plate without also worrying about the mind-numbing minutiae of your business tax scheme. Let a business tax professional help you to greater business success and financial stability.

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

As a self-employed person, getting a tax resale certificate can save you money on taxes.

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

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

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 knows they do not want to continue working for other people? The pandemic might be the right time to leave your comfort zone and strike yourself. We will explore some of the reasons people are too intimidated to take steps to become an entrepreneur.

Economic Hardship Often Spurs Innovation

Many amazing companies like Uber, Square, and Instagram were born in the last recession. Hardship often leads to amazing innovation. It will not be surprising to 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.

Job Security No Longer Exists.

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

Take Hold Of Your Destiny

Some people are scared of the stress that often comes along with managing a business. They think that they will need help to handle keeping up with the ever-changing marketplace. They often need to consider that day-to-day jobs can be just as stressful. Often, employees have to live up to the unrealistic expectations of several managers. Being an entrepreneur gives you more control over your destiny rather than having your fate be in other people’s hands. This way, you can shape your life according to your needs.

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

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

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

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

Traditionally, the nexus has been established by the business’s 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 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, think of tax resale certificates as state tax exemption certificates.  Some states call them exemption certificates or reseller’s permits.

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 for a state sales tax.

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 for the unpaid state sales tax if the certificate is expired or fraudulent. Verification is key in ensuring that the correct due diligence has been completed to authenticate the 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 save you money on taxes.

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

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

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

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

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

Do All States Charge Sales tax?

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

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

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

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

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

• Click-Through Nexus Legislation
• Affiliate Nexus Legislation
• Marketplace Nexus Legislation
• Notice and Reporting Requirements
• Economic Nexus 

Click-Through Nexus Legislation- This usually requires a remote seller to meet a minimum sales requirement in the state resulting from an in-state referral agent who is a 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 must 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.

Please visit the sales tax institute to learn more about state sales tax.

What Happens To Goods That I Do Not Sell?

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