If you are a neophyte in realm of online business, then perhaps you have a lot of questions that are plaguing your mind and one of them may be all about whether you are obliged to pay taxes for your online business or not.
Calculating and paying your duly taxes alone is already one confusing ride, and surely it will get more confusing if it will be mixed with an online business.
However, as they say, there’s no problem that cannot be solved. With just a few tips and guides, you can find out how to pay taxes for your online business without any hassles or problems along the way.
The Charm Of Online Business
Before we talk about taxes and your online business, let’s discuss first why more and more people are getting attracted to starting their own online business.
Well, first of all, it is very hassle-free compared to having a business in the non-virtual world. You see, in online business, you only have to type and click for your business to boom.
Very minimal manual labor is needed in an online business and one can even get to work at home in their pajamas while managing their online business.
Now the question is: are online businessmen or entrepreneurs exempted from paying taxes? The answer is no. All individuals who are earning money online are required to pay taxes.
Sure, the government can’t possibly keep track of how much money each person generates online but then again, it’s one of the citizens’ responsibilities to go ahead and be responsible enough to pay for their taxes.
The Real Deal About Most Online Businesses
The truth is, not everybody who does business online is honestly paying their due taxes. Most online businesses include shopping and it’s a known fact that most if not all shoppers despise paying sales tax and adore a bargain that is luxuriously tax-free.
The Internet is actually considered to be a great venue for tax-free shopping which lures more and more customers each day. Online retailers have been using a no-tax shopping tag line to attract more online shoppers to their business.
Sounds like a win-win situation, right? Online shoppers enjoy numerous tax-free shopping sprees and online retailers don’t pay their taxes. Most people probably think that doing business through the Internet is considered to be tax-free.
However, the fact is, some Internet sales are actually subject to what we know as "sales tax" and online consumers are the ones often responsible to remit any unpaid sales tax on whatever online products they have purchased.
They can actually remit it directly to their state come tax-paying time.
Collecting Sales Tax The process of determining whether you should pay taxes for your online business or not may be quite confusing and overwhelming - especially if it’s your first time to get involved in online business.
However, here are just some few tips you should remember: the obligation to pay the so-called "Sales Tax" can be determined by the location of the customers, and not the seller.
If a business does not actually have a physical presence in a particular state (an example of this would be your online store or business), it is not required to collect sales tax from costumers in that certain state.
Perhaps the most common misconceptions about taxes and your online business is that the two are not related to each other. Most people think that online businesses are not really taxed that’s why more and more people are becoming attracted to start their very own online business.
If you are one of the many people who is interested in starting your own online business or if you already have an online business of your own, then for sure you have heard about the controversies about online
businesses and taxes.
Most people who don’t really have a stable background about online businesses and taxes would most probably guess that owners of online businesses are able to be exempted from paying taxes.
However, in reality, online businesses are still covered with tax dues.
"But I Am Working At Home" And Other Lame Excuses Not To Pay Taxes
The most common excuse of people who have online businesses who wish to ditch paying taxes is that they are "working at home". What most people don’t realize is that taxes are actually based on the sources and amount of the income as well as the types of services and products sold; not on the location of the business.
So whether you are working at home, in a store or in a warehouse, you are still obliged to pay for whatever tax is due to you.
Internet Tax Is Just Like Any Business Tax Basically, online businesses are taxed just like any other business. The government does not actually collect income taxes based on how a business operates but instead, it focuses on the form of the business.
A business based on the Internet still has to register for GST and PST (if applicable) just like any other business. Whether your online business is a sole proprietorship or incorporated, you will still need to fill up some important forms so that your online business can be deemed as legal and so that you can pay the proper taxes regularly.
There is actually no big difference between the tax responsibility of an online business and any other business.
Online Businesses And Federal Taxes
If you have an online business and you are wondering if you still need to pay federal taxes, the answer is yes. But before you go around and complain about the unfairness of the world, you might as well learn more about the federal taxes that you need to pay.
If you are a sole proprietor of an online business, any income you earn through your online business will be taxed as income on your PTR or personal tax return.
In addition to that, you are also obliged to pay your portion of social security and medicare taxes using schedule SE.
However, if you have incorporated your business, the way of paying taxes will become slightly different compared to when you are the sole proprietor of your online business.
Sometimes, the tax you pay as an incorporated online business will also depend on the kind of organization. It’s either you will pay tax at a corporate level or it will be passed down to you as an income.
Dealing with an taxes and your online business can be quite an ordeal if done alone so it would be much better if you’d contact experts regarding this matter such as a lawyer or a certified public accountant.
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