Go To Great Panes

New York Sales Tax Annual filers:

If you haven’t already, get your March 1 2012 through February 28 2013 sales tax returns in by midnight tomorrow–March 20, 2013!

See the schedule here:

http://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/filing_requirements_for_sales_and_use_tax_returns.htm

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So it seems the Etsy “Taxes, Typewriters, Teams!” email and the “Wrapping Your Head Around Quarterly Estimated Taxes” blog post have folks wondering what they are supposed to be doing tax-wise and plenty seem confused.

While the vast majority of sole proprietors might have to pay quarterly estimated income taxes as mentioned in Etsy’s blog post, that is not true of the vast majority of Etsy sellers since most don’t sell enough to owe enough in income taxes to file quarterly. I’m afraid that wording was scare-tactic-y, and has made many worry.

To help allay your fears, here’s the basic run down for US sellers…

None of this info is meant to be a replacement for a good small business accountant if you need one, just a way to lead you to the info you can get free from official sources.

Federal:

Income Tax & Self-Employment Tax:
Most US sellers are responsible for filing tax returns on their sales to the federal government. If you are a sole proprietor you file the schedule C with your personal income taxes at the end of the year to report your self-employment earnings (help with the schedule C here).

Quarterly Estimated Taxes: This is what the Etsy email & blog was referring to–it is just a way to pay you self-employment tax (Social Security & Medicare Taxes) as you go instead of paying it all at the end of the year. You only need to pay quarterly taxes to the federal government if you expect to owe $1,000 or more in income taxes at the end of the year.

Estimated taxes are like when you work for someone else & there’s tax withheld from your pay–for self-employed individuals there’s no one doing the withholding, so there’s estimated tax instead.

Most small sellers don’t need to worry about estimated taxes–if you didn’t owe anywhere near $1,000 last year and business is about the same, you’re probably fine but you should keep track of your books so you can estimate when you’ll need to start paying quarterly taxes.

To see this info on the IRS’ website, and to see the way you calculate tax owed before you do your end-of-year income taxes to see if you need to file quarterly taxes, see this IRS page:

“Who Must Pay Estimated Tax” section tells you about the $1,000 number.

“How To Figure Estimated Tax” section tells you the math behind your income & expenses that determines how much you’ll need to pay/shows you if you pass the $1,000 mark–as you see on that page, you use the IRS Form 1040-ES to do that math.

State:

Income Tax:
Most US sellers are responsible for filing income tax returns on their sales to their state government (in states with income tax). Some states will require you to file more often than once a year so be sure to check directly with your state for how it works.

Sales tax:
Most US sellers (whether a business or hobby / individual seller) need to file sales tax returns with their state government for the sales tax due in-state transactions. (More on sales tax below.)

Please note:
A few states also have business taxes, property taxes or other taxes but the rules are very different from state to state so I recommend checking out your state’s website and/or calling them for more details about your responsibilities (see the link below for your state’s official website).

Sales tax is a state-based tax and is totally separate from income tax. It usually requires the seller to register first, then collect tax from the buyer & remit it to the state on sales tax returns to be filed according to the schedule the state gives you (some monthly, some quarterly, some only once a year).

Generally, sales tax returns need to be filed whether or not you’ve had any sales.

If you haven’t registered with your state yet, this post will help you find the info you need directly from your state:

If you need more help, I can often be found in this Etsy forum thread–just post there and I’ll respond best I can:

I hope that clears a few things up and de-stresses a lot of sellers.

Visit our Etsy shop: GoTo

Visit our Etsy shop: GoTo

If you’re from NY & filed sales tax returns online, you can find what you remitted to the state through your online Departartment of Taxation & Finance account:

1. Go to the NYS online account page (http://www.tax.ny.gov/online) & click the log in button:

2. This should put you on the the Account Summary Home page–if not click the tab/link in the gray/blue bar:

3. In the main part of the page go down to the “Filings” section of the page & click the drop down menu, select the type of tax record you’d like to see the records for & click the “Go” button:

(click for a larger view)

4. You’ll get a list of the tax returns you’ve filed online through the tax service. Click the blue link for the name of the form you’d like to open:

5. This should pop up a PDF file box for the completed version of the form you submitted–if you don’t have a copy yet, I recommend saving it and printing it.

Go To Great Panes, Kathryn Maloney ©2012
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

Visit our Etsy shop: GoTo

I’ve seen a lot of posts recently from folks wondering about how to fill out sales tax paperwork, and while every state’s sales tax rules are different, this is generally how sales tax reporting goes (and it’s totally separate from your income taxes for your sales).

This is not a be-all end-all list, it’s just to help you get a feel for what is required on your sales tax return–your paperwork may include more or less details or have them in a different order. (Don’t know if you should be collecting & remitting sales tax? See here: Sales Tax)

Please, please, please check with your state to be sure this is accurate for your state before submitting your sales tax return–that includes reading the sales tax return instructions or calling the state if you need to, to confirm you understand what needs to be reported & how. I promise once you’ve done it once or twice it won’t seem so overwhelming.

Start with your total income (gross) from the business:

• Sales to in-state buyers,
• sales to out-of-state/country buyers are included too,
• include the money you received from buyers that was listed as shipping and/or handling,
• this amount usually does not include sales tax you collected as that is not your income, you are just holding it for the state until you finish the sales tax form & remit the money collected.

Amount of income on which sales tax is not due:

• Out of state transactions is usually the biggest chunk of that–orders shipped to a buyer in another state (the one sales tax rule that is true for all states is that you don’t collect sales tax on interstate transactions),
• items which aren’t taxed in your state (often things like clothing & food aren’t taxed),
• some states don’t collect on shipping or the actual shipping portion of what you collect as shipping/handling–if that’s the case for your state, that portion of the shipping collected would be there too*,
• items sold at wholesale (usually to someone who provided you with their tax exempt number/paperwork if they were in-state buyers),
• and whatever else, if anything, your state says isn’t included in your gross income as sales-taxable.

Items you purchased on which sales tax was not collected but is due:

• purchases made using your business exemption that you took some/all of the goods out for personal use (use the dollar amount you should have paid sales tax on–a partial amount if only some goods were used for personal use),
• your personal purchases online, by mail or through other methods where the seller didn’t collect it from you but you would have owed sales tax if purchased in person at a store locally.

You also need to compensate for sales tax under or over paid to other jurisdictions including (be sure to keep receipts/records for these too):

• Sales tax you under-paid–in many states if you bought goods in a 6% district but took them home to use them in an 8% district, you’ll owe that 2% of the purchase price to the state,
• sales tax you over-paid–if you bought goods in a 10% district but took them home to use them in an 8% district, you might be reducing the tax you remit to the state by 2% of that purchase’s price,
• taxes paid to another state when you didn’t keep/use the item in the other state.

Then you have left what the state wants sales tax calculated on. For some states there’s one sales tax rate no matter where in the state the goods where shipped, other states base the rate on the seller’s address (origin-based sales tax), other states it’s the buyer’s address (destination-based sales tax)*.

*If you need help finding out if your state taxes shipping or where the tax base is, see here–look fo a link to that info on your state’s website or for FAQs, publications etc that might cover that topic if there’s no direct link: Sales Tax & Business Registration Help

Go To Great Panes, Kathryn Maloney ©2012
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

Go To Great Panes, Kathryn Maloney ©2011
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

I’ve seen lots of folks posting about the new California sales tax law and the same type of law in a few other states (like IL, AR CT, NC…), and there seems to be a lot of confusion–not unlike the confusion back in 2008 when NY instituted a similar law (read more about that here).

Hopefully this post will help keep you from getting caught up in the hype & put you at ease a bit.

*Amazon is suing NY over their new 2008 sales tax law to try and keep from being required to collect NY sales tax and that’s where the reference to Amazon tax laws comes in. Amazon has affiliates in New York and NY has re-defined nexus to include affiliates located in NY, which means under the new law Amazon must collect & remit NY sales tax on NY-shipped orders because they also ship more than $10,000 a year to NY addresses.

Other states that have added similar laws have had their affiliates removed by Amazon so that Amazon doesn’t have to collect sales tax for those states until the NY lawsuit is settled (rather than Amazon suing every state who has created a similar new legal definition for a business nexus).

Go To Great Panes, Kathryn Maloney ©2011
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

Go To Great Panes, Kathryn Maloney ©2011-2013
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

Many buyers think that their online purchases are tax exempt, but if their state has sales tax when they purchase locally, they might be mistaken. It’s a common misconception and states are starting to crack down on internet purchases.

In short…: Just because you bought it online doesn’t make your purchase tax exempt. Use tax is what you owe your state when you should have paid sales tax but didn’t.

Go To Great Panes, Kathryn Maloney ©2011-2013
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

I’ve grouped all the info I’ve posted for NY businesses in one easy to find place–find this page any time using the gold link on the right side of the page:

If you need help with sales tax & business laws for 33 other states in the USA, please see here:

Don’t see your state? Leave a comment on that post and I’ll update it as soon as possible for you.

Go To Great Panes, Kathryn Maloney ©2010
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

The Sales Tax & Business Registration link page is up to 22 states now, & new links have been posted for some of the states that were already there:

If a state isn’t there and you’d like to see links please leave a comment with the state and I’ll add it to the top of my list!