Collecting and Paying Sales Tax

Here’s an article about taxes: https://www.sba.gov/blogs/sales-tax-101-small-business-owners-and-online-retailers

Here’s Ms. Thomas’s synopsis:

If you are making a product that you will sell, you do not have to pay sales tax, because you are not the end-user. You need to look into getting a buyer’s exemption certificate.

A service does not need to collect sales tax.

If you sell something to a business who will sell it to a consumer, you do not need to collect sales tax. The retail store will collect the sales tax.

If your business involves selling something to a consumer, you will need to collect sales tax.  Note how many flibbertigibbets you sell, how much you charged for each one, and how much tax you charged.

  • Keep excellent records (this is a good idea anyway!). Make a spreadsheet that shows the quantity you purchased, the amount you paid for shipping, the cost of any customizing (like painting or screen printing), the amount you charged for the shirt, and the amount of sales tax collected.
  • This means that if you charge $20 for your product, you need to charge the customer $20+tax.
    • Sales tax is 9% in Los Angeles County. 7.5% is state sales tax, and 1.5% is a county tax.
    • 9% = .09
    • To find 9%, multiply the cost of the item times .09, and then add that amount to the original cost.
      • $20 + (20 *.09) = $21.80. OR
      • 20 * 1.09 = $21.80
  • You will KEEP the tax collected and pay it to the government quarterly (4x a year)– so don’t spend it! You may want to keep it in a separate bank account!
  • Not paying can result in penalties.
  • Get a tax person to help you!!

 

 

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File for your EIN Number!!

Your EIN makes you a legit taxpaying business, registering you with the federal government. It’s like getting a social security number for your business. It means that the IRS can look for you to make sure you are paying taxes, so don’t file for it if you don’t think  you intend to start selling. If you sell

Go to this site:  https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online