Well I am trying to research for opening an online pet supply business. I am starting to wonder how many people have legal businesses. Because I have been having a really hard time getting replies to my posts. Anyways here is one thing I am trying to figure out. I know that I only have to pay state taxes when people from my own state order. But what about federal taxes. Do you pay your taxes yearly or monthly?
You have to pay state and federal taxes on all profit regardless of where the people who order live. Depending on the state you live in, you may only have to collect sales tax from people who live in your own state. Some states require monthly or quarterly sales tax payments. You make estimated payments on your income tax quarterly based on last years income. If there was no income last year, then you can pay at the end of year. You should really think about consulting with a CPA in your state.
I second the idea that you should consult an accountant (he or she doesn't necessarily need to be a CPA for your purposes). Understanding and complying with tax reporting and payment requirements is critical for any business, whether online or bricks-and-mortar. The penalties and interest for failing to comply can far outweigh the costs of getting assistance from a qualified professional.
I don't think that "studying in a business university" is a sufficient qualification in most cases. While I have been out of college for many years, when I was in school we were taught accounting theory and procedures, not the details about when or where to file a particular type of tax return. I graduated with highest honors with a B.S. in accounting from the top-ranked accounting program in the U.S. and I passed all of the parts of the CPA exam on my first sitting and I promise you I could not have advised someone in the poster's position all the tax requirements he must meet on a regular basis. If he is going to be in business, he should have a professional get him off on the right right foot.
OK a few things to say. #1 Thank you for all the replies, it sure is nice to get some real information now. #2 I could have swore you only had to pay taxes to your own state. Does that mean I am going to have to file taxes for every state I sell products to? #3 How much would a CPA or someone else cost to talk to. I assume they would charge by the hour.
You need to define the "taxes" you are talking about. There is sales tax, income taxes (federal and state), self-employment tax, excise tax, etc. There are different laws in different states, and it depends on whether you are only operating in a single or multiple states. For sales tax in Minnesota, you will need a Minnesota tax ID number and you can call them for answers to specific questions. http://taxes.state.mn.us/sales/pages/tax_information_content_startone.aspx Some CPA's give a free initial consult, others don't. My CPA bills at $350 an hour, but there are certainly cheaper ones out there.
Yes, I am talking about Minnesota state sales tax. I guess there is certainly more to this tax thing then I was thinking. $350 an hour? Wow. I was hoping to get up and going on all of this for around $500 and that is including a very small advertisement budget. I do not think i can afford $350 an hour......no....i KNOW I can not afford that. But thank you for the information and I will look into it more.
You need to collect sales taxes on orders you ship within your state. But, make sure your products are even taxable or you know the rate as some items are tx-exempt in some states. example: text-books You need to also pay state taxes and federal on your profits. Dont worry about monthly. When you file your yearly taxes IF you made a profit and have to pay taxes you will not be penalized for not paying quarterly as it is your first time. They will however setup quarterly payments going forward. Only advice. Keep excellent records of all purchases and sales.