Handling Taxes as an Online Retailer
Being an entrepreneur comes with many tax-related obstacles. Business owners file quarterly taxes and often have to pay more than the average person. For a long time, online retailers were exempt from sales tax, which increases the price of their items.
Online retailers usually add additional costs to their items to cover shipping. Now, states can require web-based shops to charge sales tax. This rule can drive up the costs of a product and lower the demand for some retailers; however, it’s best to know if your state requires sales tax for online purchases.
Who should charge online sales tax, and how much?
The sales tax legislation is unique in each state. However, the amount of sales tax you must charge depends on the gross sales and the number of transactions.
Whether or not your store has a physical location, you must abide by your state’s sales tax laws. This implementation was meant to protect small businesses by targeting the franchises that have cashed in on the online retail industry.
The best way to make sure that you comply with your state’s legislation is to read about it on government websites; or information hubs such as streamlinedsalestax.org.
Only a handful of states do not have an online sales tax
Not every state is subjected to this new legislation. Alaska, New Hampshire, Oregon, and Montana do not have a statewide sales tax, including online sales tax.
What about international transactions?
Sellers with no physical presence in the US are required to apply sales tax in compliance with the US territories they’re selling in. If you have no intention of selling in the US, then you do not have to apply sales tax to your products.
In other words, if you plan to be an online vendor that caters to any state, you must comply with that state’s sales tax laws.
Being a 1099 filer
When you’re self-employed, filing looks differently. 1099 filers, who are either contract and freelance workers or self-employed, have to file quarterly taxes. These are taxes that would typically go toward things like Social Security and Medicare. You can read more about self-employed taxes here.
Make sure you file properly
It’s crucial, especially as a business owner, to make sure that you file your taxes every year. If you misfile or forget to file, then you could be at risk for penalties.
Owing back taxes can put your business and personal finances in jeopardy. Get in touch with us today for assistance with back taxes and catching up on filing.
Any new or systemic Liens and/or Levies will also be suspended for the time being.
For taxpayers who are considered “seriously delinquent”, the IRS will suspend any new certifications for the remaining period. Any taxpayer who falls into this category in reminded and encouraged to enter into an Installment Agreement or apply for an Offer In Compromise.
The IRS will not forward any new delinquent accounts to private collection agencies at this time.
Taxpayers have until July 15, 2020 to verify to the IRS they are qualify for the Earned Income Tax Credit or to confirm their income. If the taxpayer is unable to verify their credentials or provide appropriate documents for this credit, they are encouraged to notify the IRS before the deadline. No cases will be denied this credit for failure to provide requested information until July 15.
Case workers will continue business as usual. However, most case work will be conducted remotely (video/over the phone conferences). Any requests for documentation sent by the Office of Appeals should be responded to in a timely manner to ensure a smooth process.
The IRS will continue to take the appropriate measures to stay compliant and protect the applicable statutes of limitations. In situations where certain statutes may be compromised, taxpayers are encouraged to extend such statutes. Otherwise, Notices of Deficiency will be issued by the IRS and similar actions will be pursued to protect the interests of the government in preserving such statutes. Where a statutory period is not set to expire during 2020, the IRS is unlikely to pursue the foregoing actions until at least July 15, 2020.
Practitioners are reminded that PPS wait times may be significantly longer, depending on staffing levels and allocations going forward. The IRS will continue to monitor this as situations develop.
“The IRS will continue to review and, where appropriate, modify or expand the People First Initiative as we continue reviewing our programs and receive feedback from others,” Rettig said. “We are committed to helping people get through this period, and our employees will remain focused on these and other helpful efforts in the days and weeks ahead. I ask for your personal support, your understanding – and your patience – as we navigate our way forward together. Stay safe and take care of your families, friends and others.”
Learn how easy it is to qualify for tax savings.