Taxes are a pain, but they’re an unavoidable reality for online retailers. If you’re in this position and your business is just starting to take off, it’s important to know the basics of sales tax law so that you can plan accordingly and avoid costly mistakes. Fortunately, we’ve got six tips from TaxConnex that will help get you started:
Take Advantage of Tax Deductions
One of the best ways to reduce your taxable income is taking advantage of business deductions. This includes expenses related to your online stores, such as purchasing inventory and supplies, advertising, and even office rent.
Keep Track of Business Expenses
It’s important to keep track of all your business-related expenses so you can claim them come tax time. You can do this manually with a spreadsheet or accounting software or use an app like QuickBooks Self-Employed to automatically categorize your purchases and help you stay organized. Make sure to save all receipts!
Claim Any Expenses That are Related to Your Business
In addition to the standard business expenses, there are a few other deductions you may be able to claim, depending on your situation. This could include Internet access fees, domain registration fees, and even credit card interest charges if you use a separate card for your business purchases. All business expenses should be claimed on your tax return and help you save money.
Claim Incentives If Available
In addition to federal incentives, some states offer special tax breaks for businesses. For example, California has the “California Competes” program, which offers tax credits and other benefits to businesses that expand or relocate to the state. You can find a list of state-specific incentives on the Small Business Administration’s website or check out the State Incentives for Business Database.
Get a Separate Credit Card
If you’re using your credit card to buy business supplies, you must pay off all purchases before accruing interest charges. However, if you don’t pay off the balance in time, your business purchases may be subject to interest. It’s best to keep track of everything and get a separate credit card for your company. To avoid this hassle, consider applying for a separate business credit card so that everything can be paid in full at the end of each billing cycle.
Keep Track of Sales Tax With an App or Website
If you don’t have experience with sales tax law, there are plenty of tools available online to help keep track and make sure nothing gets overlooked—and these services won’t even cost you anything! Apps like TaxJar and Avalara offer sales tax automation for online businesses, making it easy to calculate and file your taxes. There are also plenty of free services that offer similar features.
Online businesses are faced with unique tax challenges. To ensure you’re taking full advantage of all the deductions available to your business, be sure to follow these tips. They include keeping track of what you spend on supplies and inventory, making purchases related to your online store, claiming any expenses that apply (including Internet access fees or rent if they’re incurred to run your business from home) while also getting a separate credit card so that any money spent before it accrues interest charges can be paid off right away.
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