Question from a newbee!

rifa00 · #1 (**permalink**) 07-03-2008, 05:40 PM

I'm brand new to this website business venture. To be honest, I haven't even created my site yet. I'm waiting to gather as much information on this endeavor as possible. One of the questions that I have is regarding taxes on your sales and business. What type of federal, state, and local taxes are you obligated to pay for sales in an online business? Also, when tax season rolls around at the beginning of every year, do you file business sales taxes with the federal and state governments? Sorry if these questions seem dumb, but I am ignorant on running an online business. Thanks in advance.

lisa · #2 (**permalink**) 07-03-2008, 05:53 PM

Hi rifa00 and welcome,

I personally don't have an official business name or anything like that. So I report everything under my SSN on a regular Schedule C form (a tax form for self employed or small businesses). All the companies I'm affiliated with send me a Form 1099 with my earnings every January and I report this on the Schedule C form. This form still allows you to claim expenses (Internet access fees, advertising, etc. just like a real business)

Of course if you register a business name / create a corporation, etc. then things would be reported a little differently for obvious reasons so it depends on the route you take.

I live in Texas so we don't have to file state taxes but when I lived in Missouri I had to declare the income for both State and Federal.

rifa00 · #3 (**permalink**) 07-03-2008, 06:06 PM

Lisa, thank you for the rapid reply. What about purchases that my customers make on my website, do they pay sales taxes on their purchases? If so, do the paypal services handle that for you?

lisa · #4 (**permalink**) 07-03-2008, 11:28 PM

You can setup PayPal to accept sales taxes. For example if you are selling T-shirts in Texas and the sales tax rate for that state is 6.25% you can add that to every order through PayPal automatically. I must say, I don't have much experience with selling hard goods online as I've always been an affiliate so I don't ship products or deal directly with customers.

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