So, you want to start your own online business? Before you start designing your own website or webpage, make sure that you know all about the do’s and don’t of starting an online business and that includes the technical, financial and legal matters of the business.
When you decide to start a business, you should be aware and prepared for whatever legal or financial issues that may arise. If you think that you can escape from paying taxes by starting your very own online business, think again - your dreamy balloon may burst once you get into complications regarding taxes and your online business.
The Truth About The Internet Being A Tax-Free Zone
More and more shoppers are getting lured by online shops and retailers because of their famous tag line of "no-tax shopping". What most people don’t know is that that certain tag line used to lure online shoppers is not applicable to all states.
For you to be able to understand this concept better, here is an example: A woman from Indiana regularly purchases exotic orchids through an online shop based on Switzerland.
Since she purchases and sends her payments directly to Switzerland, she is not obliged to pay any sales tax in Indiana since her orchid supplier has all of its facilities in Switzerland.
A few months later, the exotic orchid supplier of that woman has decided to open a store in Indiana. The woman still purchases online but she already has to pay for the sales tax of the orchid since there is already a store based in the place where she is staying.
In other words, the responsibility to pay for taxes is an interdependent status between the consumer and the supplier. By that example, we can Come to a conclusion that the Internet is not really a tax-free zone. It depends on the location as well as the type of business that one is involved in.
The Responsibility To Pay Sales Tax
Admit it, nobody really loves to pay taxes. Perhaps even the rich people are irritated come tax-paying time because it is sometimes a tedious and complicated process. There are a lot of rules and laws to refer to before one can actually come to a clean calculation of the taxes that he or she must pay.
If an individual lives in a state that is known for collecting "sales tax", you are not exempted from it even though you try to escape it by making a lot of purchasing through the Internet because you are still required to pay for the "sales tax" directly to the state.
When you pay a "sales tax" directly to the state, it is no longer called a "Sales tax" but rather a "use" tax. Perhaps the only difference between "sales" tax and "use" tax boils down as to which person - the buyer or the seller - pays the state. "Use" taxes are usually used by the state to make sure that they collect the right amount of revenue on every taxable item purchased within the state borders.
There are actually still a lot of points to be discussed about taxes and online business and the points mentioned here are just what we may call "a tip of the iceberg".
In determining what’s the right thing to do in handling taxes and your online business, it would be best to go beyond researching for legal answers alone. Consulting the help of lawyers and other legal professionals would probably benefit you more than you expect.
Before, garage sales and flea markets were the most popular venues for selling pre-owned or used items that you would want to get rid of and at the same time earn money from. However, thanks to the technological developments that have happened through the years, we can now have easy access to the Internet and have the options to sell our stuffs there.
If you have been selling your stuffs on the Internet and if you still have future plans to do so, you might want to consider taxes and your online business before you continue with it.
Selling On eBay Or From Your Own Website
A lot of people today are getting attracted by the fact that they can actually sell almost anything on the internet by just posting it on eBay, their own web site or any other site that offers practically the same services.
However, what most people don’t know is that there are actually rules and laws that cover selling items on the Internet.
Getting Serious In Your Online Business
If you have been selling your stuffs for quite a long time already, you may consider it as an
income-generating activity, right? Having an online business really has a lot of perks and advantages such as being able to work right at home, not having to have your own boss, etc.
However, having an online business doesn’t mean that you are free from paying your taxes. When you decide to be more serious about your online business, there are a lot of things you have to consider.
Perhaps the first and most important thing you have to consider is the legality of your online business. Make sure that you are not breaking any rule or law so that you and your reputation won’t be in jeopardy.
In addition to that, you must be aware of the several laws that come along with online businesses such as tax rules.
You have to be aware of the different taxation conditions of different states and countries because since you will be having a business online, people from different parts of the world will more or less become your customers or potential business partners.
You must also be aware of the process for paying federal and state taxes for online businesses. Maybe you will have some questions such as:
"Do I need a tax ID number?", "Do I need to file specific paper works or forms?", "How do I begin to
pay federal and state taxes?", etc.
Some of the basic things you need to know about having a legal online business is that your business is actually the one that will pay income taxes in pretty much the same way it would if it were a brick-and-mortar kin of business.
The address for filing you income tax will be the principal business address of the entity. The laws of the particular states that you transact or have business with are the ones that would determine whether you will be required to pay state income taxes.
You should also be aware that a lot of states impose "sales" taxes on items that are purchased by the residents of their state. For you not to get in trouble or end up getting dazed and confused with the many laws and conditions of taxes and your online business, you can try to consult a lawyer knowledgeable in these matters.
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