4 replies to this topic

[Astawerksdotcom]

ok tax time is getting close and i am getting nervous. I have been not charging sales tax on products because i sell everything out of state and over seas. Am I supposed to pay income tax on each sale? if so how much?

thanks

[Java Roasters]

Before you started your business you should have found out what taxes you are required to collect for the government. If you did not collect them but should have you are still liable for them and will be required to submit the full amount to the various levels of government. That could be local tax, state/provincial tax, federal tax not only on all your sales but you might be also liable for tax on shipping.

Income tax is paid based on your profit/loss for the fiscal year. You will need to get that from your accounting software and will need to know what are the allowed deductions for your business and file the appropriate tax return based upon how you set up your business when you started.

[Avec]

Quote

Am I supposed to pay income tax on each sale

Not on each sale, but on the profit of the company. For a C-Corp, this is done on a corporate tax return. For an s-corp, LLC or Sole proprietor, all of the business financial information goes on your personal income tax return.

[Azim]

I dont think you are going to need to pay taxes if you didnt collect. But however you must report to the irs. so you dont have trouble in the future.

[MrPhil]

Azim, on Apr 29 2008, 03:10 AM, said:

I dont think you are going to need to pay taxes if you didnt collect.

Wrong. If you are required to collect sales taxes and remit them to your state, you are on the hook even if you failed to collect them! They'll come out of your pocket. The good news is that you normally would have to collect sales taxes only on in-state sales (plus any states which have reciprocal tax agreements with your state). And keep an eye out for what develops with New York's "Amazon Tax". Check with your state about how to handle sales taxes. Don't forget that if your business has a physical presence in another state (a "nexus") you may have to collect sales taxes there, too. Even if you don't sell in-state, you may still have to register with your state's sales tax department, and file a quarterly or annual sales tax form.

Some kinds of items being sold have Federal excise taxes (maybe state, too). Shipping and handling are subject to sales tax in some states. Again, check with your state tax authorities.

Azim said:

But however you must report to the irs. so you dont have trouble in the future.

I think several things are being conflated by Azim and Astawerksdotcom. Sales taxes are a state thing (in the US), and are reported to your state(s). Federal excise taxes would be reported to the Feds (my guess is the IRS). Income (overall profit and loss on the business) has to be reported to the Feds (IRS) and (in states with income tax) to the state equivalent of the IRS.