Go To Great Panes » General Small Business Info

Confused about Income Taxes & Paypal’s 1099 ?

GoTo — Sat, 04 Feb 2012 01:20:10 +0000

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.)

I’ve seen lots of posts with confusion about the new 1099 Paypal is sending to some sellers. Here’s the scoop:

The 1099 Paypal is sending out is only fulfilling their obligation under a new law, it has nothing to do with whether or not you are required to file income taxes.
Paypal will only be sending it to people who bring in at least $20,000 AND have 200 or more transactions through PP.
Regardless as to whether or not Paypal (or other company) sends a seller this form, the seller must report income for their business if they meet the IRS’s requirements for filing a return.

Do you meet the requirements? Generally speaking, if you have to file income tax for any reason (day job, filing jointly w/ spouse, etc) you must report all your income on your taxes. If you have at lest $400 profit from your small business, you will most likely need to file. Your best bet is to get info about whether or not you need to file directly from the IRS–this post should help:

Do I Need to File a Tax Return?

And if you do need to file, this post will help with getting & adding up your income/expense info from Paypal:

Download Your Paypal History

This one will help when you are filling out the schedule C to report your small business income:

US Sellers: Help for Filing Income Taxes for Your Small Business

Turbo Tax: Many folks ask about whether or not they need to get the Home & Business version of TurboTax. I haven’t tried that version myself, but I do know that with Turbo Tax Deluxe, you can use the ‘add a form’ feature and add the schedule C to your taxes.

The interview process in the TurboTax Deluxe does cover the schedule C once you add it, but their website implies that the home & business version has more help for filling the schedule C out.

Income tax is totally separate from sales tax requirements for your business. See here for help with sales tax & business registration:

Sales Tax & Business Registration
(links to official state websites)

New Sales Tax Laws(Amazon Sales Tax Law)

GoTo — Sun, 17 Jul 2011 14:43:52 +0000

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.

In short:

Now that so much of our commerce is internet-based and many businesses have representatives in other states that work for them online, the states are reworking the laws so the burden of collecting & remitting sales tax on taxable transactions isn’t on the buyer, but is on the seller.

Most of these laws have both a transaction-allowance that excludes most small businesses from this responsibility and a requirement of a new type of physical presence in a state.

(For example, you’d need to both ship $10,000 in goods to NY addresses in a year and you’d need to be affiliated with a NY-presence that you pay commissions or fees to, like Etsy, before you’d need to worry about this.)

Here’s the main points folks seem to be unclear on:

This isn’t about a new tax. It’s tax that is already owed to the state on taxable purchases.

This is only about regulating who is responsible for collecting/remitting the existing taxes due to the state on “remote sales” (mail order sales, internet sales, phone sales).

This doesn’t mean you need to collect your state’s sales tax from buyers who are having items shipped to an out of state address.

This doesn’t mean you need to collect a different state’s sales tax from buyers who are having items shipped to an out of state address unless you ship a whole lot there and you pay commissions/fees to someone/a business in that state.

These new Amazon*sales tax laws are about re-defining/clarifying what a “business nexus” in a state is, because the current definition leaves a loophole that allows big businesses like Amazon to avoid collecting sales tax on taxable transactions even though they have representatives within that state who are referring folks to their website and receiving a commission for doing so.

When the seller doesn’t collect sales tax on taxable transactions & the buyer does not remit use tax on those purchases, then the states aren’t getting the money they are due & money they need to properly function. This has left many states in a lurch for funding.

A business nexus is most often defined as having a place of business in a state or having a representative (person) in a state that solicits for your business, but with the advent of the internet and online affiliations & sales, the rules of the game are changing.

If you have business nexus in a state, generally you are required to register in that state for sales tax purposes, and you also need to remit sales tax to the state (or collect & remit, depending on the state’s laws). Now big businesses won’t be able to skate around that law by claiming no physical presence when they do indeed have people or a business in a state who represents them even if just online or through an affiliated business.

If you are just realizing you should be collecting sales tax for your state, this post will help you find the info you need on your state’s website:

US: Sales Tax & Business Registration
Links to Official Government Websites

*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).

Getting a Business Phone

GoTo — Mon, 11 Jul 2011 01:31:07 +0000

It can come in handy to have a phone number for your small business, but it can be expensive to have a separate land line or cell phone when you are just starting up.

I’m a big fan of personal privacy so I definitely was not interested in giving out our home number (especially knowing this about tax registration).

Looking to keep expenses at a minimum we looked to online services and decided to try Magic Jack which has worked well for us:

http://www.magicjack.com

It’s a bit cumbersome as a program starting it up (and plugging a phone into the computer) but for less than $75 we got a phone number that’d be just for the business for at least 5 years including a voicemail account and free domestic calls (and free directory assistance, call waiting, three-way calling and call forwarding).

If we don’t have the Magic Jack phone hooked up or the computer is offline, callers can leave us a voicemail. When that happens we get an email with the voicemail attached that I can listen to right from my email inbox. If I don’t have internet access I can call and get my voicemail using any phone.

If I need to call a customer, I just plug the MagicJack & phone into the front USB port on my computer and it works like any other phone.

A free option would Google Voice which wasn’t around yet when we got our phone number through Magic Jack:

https://www.google.com/voice

We’ve since gotten a Google Voice account and I’ve used it a few places though I am hesitant to make the number our primary number for business since I don’t know if Google will continue the service or keep it free (and we just don’t need to pay for second phone number for the business).

It gives you a phone number and free calls within the US & Canada but I’ve never tried to use it to make an outgoing call with it myself.

One cool thing about Google Voice is that when I get an email about a voicemail it includes a text transcript of the message. It’s sometimes a little off, but it does give me the general gist without having to turn on the speakers for the computer (we like our computer to be quiet–scares the daylights out of me when I use someone else’s computer and it makes noise, LOL).

Another affordable option through the computer is Skype:

http://www.skype.com

There’s a reasonable fee with different features depending on which service you choose. I’ve found their tech support to be difficult (really, no phone support line??), but if the phone line & billing are working well it’s a good tool.

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.

What is Use Tax?

GoTo — Fri, 01 Jul 2011 13:40:14 +0000

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.

For states with sales tax there is generally a complimentary tax that buyers should be paying called use tax:

Use tax is owed by individuals & businesses for items purchased without having paid sales tax that would have had sales tax on it if bought locally. (In some states that also includes tax on the shipping.)

Ex: Bought a book online, but the seller didn’t collect sales tax like they would have if you bought it at the local book shop? You owe use tax to the state for that transaction.

Use tax is payable by the buyer directly to the state.

Many states now allow you to pay the use tax you owe on your state income tax forms in April. You can also you fill out a use tax form reporting the amount you spent that you didn’t pay sales tax on, and send a check with that form to the state with the money to cover the use tax due.

Links to the forms to pay use tax for many states can be found on the forms & publications pages of your state’s website. Links to many of those are here: Sales Tax-Business Registration

Use tax is usually the same rate as sales tax.

If that book was $10.00 & your state (and perhaps local) sales tax is 8%, you would have paid $10.80 if you bought it locally. You probably need to remit $.80 as use tax to the state. It’s best to get the details from your state to be sure you are doing it right–some states also tax shipping costs.

Use tax is not a new tax–it has been around in most states for decades.

Use tax isn’t new, it’s just that until the internet most people didn’t do so much distance-purchasing, so the topic isn’t much talked about.

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.

New NY Business Info Page

GoTo — Wed, 16 Feb 2011 16:23:49 +0000

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:

NY Sales Tax & Business Registration

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

US: Sales Tax & Business Registration
Links to official state websites

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

Do I Need to File a Tax Return?

GoTo — Sat, 08 Jan 2011 17:36:27 +0000

There’s so many people asking if they need to report their online income on their income taxes that I thought linking to this IRS app that will help you determine if you need to file (or if you should because of a benefit to you even though you don’t have to) might be useful.

It is set up for tax year 2009, but should still give you a good idea if you need to file:

Do I Need to File a Tax Return?

There are other questionnaires like this on the IRS site too:

Interactive Tax Assistant (ITA)

If you need to file, you’ll need to report all your income. The following post should be helpful to you:

Getting Ready to File Your Income Taxes?

GoTo — Sun, 02 Jan 2011 21:39:27 +0000

Visit our Etsy shop: GoToGo 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.

It’s that time of year! Lots of folks looking for info on getting their records ready for income taxes–the links below should help. (Links open in a new window.)

Help for downloading your Etsy & Paypal records:

Etsy: Download your Sales and Billing Data to a Spreadsheet

Download Your Paypal History

You’ll need a program with a spreadsheet to open csv files. If you don’t already have one this is great free software which has a spreadsheet available:

Open Office

You might also find the IRS publications listed here helpful for figuring out what goes where on your income taxes:

Help for Filing Federal Income Taxes for Your Small Business

And if you haven’t registered with your state yet (or on a more local level like city or county), you might want to check into the requirements for people selling from your area–the laws are different everywhere.

What you consider your hobby might be considered a business by the government, and their opinion is the one that counts…

US Sellers: Sales Tax & Business Registration

Visit our 2nd Etsy shop: GoToSupplies

Looking for a discount at JoAnn’s Fabric & Craft Stores?

GoTo — Wed, 15 Sep 2010 23:35:58 +0000

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.

A little plus for USA sellers who have registered their businesses–amid the updates of our Sales Tax & Business Registration–Official State Website Links page…:

If you shop at Jo Ann Fabric and Craft stores, and you’ve registered for a state sales tax id number or otherwise registered your business with your state, you are eligible for a VIP discount card that entitles you to 10% off your purchases, in addition to purchasing many supplies exempt from sales tax in most states (so long as the supplies are for use in your business).

See all the details here on their website:

Jo-Ann VIP Discount Card

You are also eligible if you are part of a Sewing/Crafting Organization, an NPO or can prove you are an interior design professional.

Hope that helps increase your profits!

New states added & links updated: Sales Tax & Business Registration

GoTo — Fri, 10 Sep 2010 01:56:26 +0000

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:

Alabama		Arizona
California		Colorado
Connecticut		Florida
Illinois		Kentucky
Louisiana		Massachusetts
Michigan		Minnesota
New Jersey		New Mexico
New York		North Carolina
Pennsylvania		South Carolina
Tennessee		Texas
Washington		Wisconsin

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!

Sales Tax & Business Page–updated with more states

GoTo — Fri, 03 Sep 2010 19:33:48 +0000

I’ve updated the new Sales Tax & Business Registration link page–we’ve now got info for these states too:

Colorado
Tennessee
Texas

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!