General Question

Coloma's avatar

When selling items in an online store what are my tax responsibilities, if any?

Asked by Coloma (39943 points ) February 4th, 2011

I have been collecting items to open an online shop this month and am wondering if I am required to keep sales records for tax purposes. Does anyone know what my tax obligations are with random online sales?

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6 Answers

Tropical_Willie's avatar

Great kitten….

You should be set up as a business for your municipality ( state, county or city ).
Your business needs “Books for tax purposes” (Income taxes) Intuit or PeachTree.
Most states require you to collect taxes for in-state delivery only.

Go to SCORE for your local area and they will help with business plan and other things.

Here’s their website

Jaxk's avatar

If you buying things for resale you will need a business license and a sales tax license (unless your fortunate enough to be in a no sales tax state). Either way you’ll need a federal tax ID. It gets a bit complicated as soon as you start buying goods for resale. Your bank may also notice the higher levels of activity and require a business account. Whether they do or not it is wise to keep the money separate. If the activity is low you may get away with keeping your books on a spreadsheet but quicken or some such thing is not all that expensive (just a pain in the ass). But you will want to keep records of your expenses and sales and categorize them correctly.

Overall a lot depends on your expected volume. Many communities have rules about operating a business out of your house so if there is a lot of shipping and receiving you may get noticed. Nothing good ever comes easy. Good luck.

reinvestor's avatar

If your state has a sales tax, you are required to collect sales tax and give it to the state on a regular basis. If your county and/or locality has a sales tax, you must collect that as well. So if you live in city X, county Y, and state Z, you will have three sales tax returns to file.

Generally speaking, you are only required to collect sales tax if you have a physical presence (called a nexus) where goods are delivered. If the product is shipped to a location where you do not have a nexus, it is the buyer’s responsibility to file a use tax return for their state or locality if necessary (although the majority of folks do not do this).

You generally have to register with the state or locality and they will let you know how often your returns need to be filed. This usually depends on the quantity of your sales. If your sales are very small you may have to file quarterly or even annually. If sales are high, you may be required to file monthly or even more frequently.

Coloma's avatar

Thanks everyone, good info.

I am not planning on doing some huge, high volume biz, just another little side thing.

I will investigate everything that has been shared. :-)

YARNLADY's avatar

It depends on the state. California is trying to tax every purchase made by California residents regardless of where the purchase is made. I can hardly wait for their proposal to say if you buy something in New York while you are on vacation (or fill in your vacation city) you will have to pay California tax on it.

Coloma's avatar

@YARNLADY

No kidding. What a world, what a world…..

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