Sales Tax http://www.wisebread.com/taxonomy/term/3486/all en-US What’s Congress Up to? 4 New Measures that May Affect Your Business http://www.wisebread.com/small-business/what-s-congress-up-to-4-new-measures-that-may-affect-your-business <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/articles/whats-congress-up-to-4-new-measures-that-affect-your-business" target="_blank">http://www.openforum.com/articles/whats-congress-up-to-4-new-measures-that-affec...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/what-s-congress-up-to-4-new-measures-that-may-affect-your-business" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000010717780Small.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="179" /></a> </div> </div> </div> <p>While some people are complaining that Congress has done nothing, there has been some recent activity on measures that can impact your business. Some changes are good, while others may have an adverse effect. Here is what you need to know.</p> <p><strong>1. Repeal of Withholding on Government Contractors</strong></p> <p>The 3 percent withholding on payments for goods or services of more than $10,000 to government contractors, that was scheduled to take effect on January 1, 2013, has been repealed by the <a href="http://www.opencongress.org/bill/112-s1726/show" target="_blank">Withholding Tax Relief Act of 2011</a>. However, withholding continues to apply to contractors who fail to pay their taxes.</p> <p>At the same time as Congress repealed this harsh rule, it created two new tax credits to incentivize businesses to hire vets:</p> <ul> <li>A $5,600 tax credit for each veteran who has been unemployed for at least six months;</li> <li>A $9,600 tax credit for hiring an out-of-work veteran with service-related disabilities.</li> </ul> <p>Both credits, which are part of the Work Opportunity Credit, apply through 2012. If your business hires an employee that would entitle you to the credit, be sure have the new employee complete <a href="http://www.irs.gov/pub/irs-pdf/f8850.pdf" target="_blank">Form 8850, <i>Pre-Screening Notice and Certification Request for the Work Opportunity Credit</i></a> and submit it to your state workforce agency within 28 days.</p> <p><strong>2. Tax on Telecommuters</strong></p> <p>Today, more and more businesses allow employees to telecommute. This can be a win-win for you and your employees. You save on space and increase employee productivity, the employee is freed from the time and cost of commuting, and the community benefits from reduced traffic and fuel emissions.</p> <p>At present, telecommuting from another state can result in additional state income taxes for teleworkers.</p> <p>The <a href="http://www.govtrack.us/congress/bill.xpd?bill=s112-1811" target="_blank">Telecommuter Tax Fairness Act of 2011</a> would prevent states from imposing individual income taxes on telecommuting nonresident individuals who are actually physically present in another state. Thus, if your company is in New York and your workers telecommute from Connecticut, New Jersey, or any other state, your workers will escape New York taxes.</p> <p>The measure has bi-partisan support and is also supported by various groups, including the Telework Coalition, the National Taxpayers Union, the Small Business &amp; Entrepreneurship Council, and the Association for Commuter Transportation. However, a similar bill failed to be enacted in the past, so we&rsquo;ll have to wait and see about enactment.</p> <p><strong>3. Sales Taxes on Wireless Devices</strong></p> <p>Currently, state and local taxes and fees on wireless devices average about 16.3 percent, compared with 7.4 percent on other goods and services. The disparity could get worse as cities and states continue to look for new sources of revenue and businesses rely more and more on wireless devices.</p> <p>The <a href="http://www.govtrack.us/congress/bill.xpd?bill=h112-1002" target="_blank">Wireless Fairness Act of 2011 (H.R. 1002)</a>, passed by the House on November 1<sup>st</sup>, would prevent states from imposing &ldquo;discriminatory&rdquo; taxes on wireless devices (taxes on wireless devices are double what they are on other goods and services). This would be accomplished by means of a five-year moratorium on any new taxes and fees on wireless devices.</p> <p>The measure is favored by businesses as well as service providers such as AT&amp;T and Verizon. It is opposed by cities and states that continue to need the revenue. Let&rsquo;s see if the Senate can pass this quickly.</p> <p><strong>4. Sales Tax on Online Sales</strong></p> <p>Sales tax for online purchases is a <a href="http://www.openforum.com/idea-hub/topics/money/article/internet-sales-taxes-could-change-your-business-1" target="_blank">complicated matter</a>, with many small businesses unclear about their collection responsibilities. Generally, states cannot collect sales taxes from online retailers that do not have a physical presence within the state. The definition of &ldquo;physical presence&rdquo; (or &ldquo;nexus&rdquo;) has been expanding as states seek to increase the scope of collections. It can, for example, include not only having a sales force in another state, but also warehouses, shipping facilities, and other connections.</p> <p>The <a href="http://www.opencongress.org/bill/112-s1832/comments" target="_blank">Marketplace Fairness Act</a> would create the first national authorization for states to collect online sales tax. The bill likely will exempt &ldquo;small businesses&rdquo; (defined in the bill as those with online revenue under $500,000). The exemption amount may be changed in a final bill, which likely won&rsquo;t happen until next year (after this year&rsquo;s holiday sales season).</p> <p>Amazon, which had $34 billion in online sales last year, has come on board to support the measure. Some small business groups, as well as eBay, oppose it because of the added administrative cost it likely will entail. However, in the end, it would mean that whether a business operates locally or across state lines, it would collect sales tax on its goods and services.</p> <p><b>Final Word</b></p> <p>Stay abreast of developments on the federal and state level that can have an important impact on your business. You can keep tabs on developments that may affect your business through the <a href="http://www.nfib.com/" target="_blank">National Federation of Independent Business</a>.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/barbara-weltman">Barbara Weltman</a> of <a href="http://www.wisebread.com/small-business/what-s-congress-up-to-4-new-measures-that-may-affect-your-business">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/no-signal-5-quick-ways-to-boost-your-cell-phone-reception-updated">No Signal? 5 Quick Ways to Boost Your Cell Phone Reception. Updated.</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-inspiring-stories-of-normal-people-building-a-thriving-online-store">4 Inspiring Stories of Normal People Building a Thriving Online Store</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-is-the-one-skill-you-need-if-you-want-to-work-for-yourself">This Is the One Skill You Need If You Want to Work for Yourself</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center cell phones contractors internet sales tax online sales tax Sales Tax small business tax law telecommuters Mon, 21 Nov 2011 19:26:13 +0000 Barbara Weltman 788827 at http://www.wisebread.com What You Need to Know About Online Sales Tax http://www.wisebread.com/small-business/what-you-need-to-know-about-online-sales-tax <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/articles/what-you-need-to-know-about-online-sales-tax" target="_blank">http://www.openforum.com/articles/what-you-need-to-know-about-online-sales-tax</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/what-you-need-to-know-about-online-sales-tax" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000012905716Small.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>Figuring out online sales tax can be something close to a nightmare. It used to be that everyone &quot;knew&quot; that online shopping was tax free. These days, though, crossing a state border can make a world of difference in your level of obligation. I get a little worried just thinking about it because while the IRS isn&rsquo;t concerned about sales tax, state tax bureaus are &mdash; and they can be just as aggressive in tracking down money they consider theirs.</p> <p>It&rsquo;s not impossible to untangle the online sales tax mess, but the risks of getting it wrong make a visit to a local tax professional a wise move. You can get a headstart by taking a look close to home.</p> <h3>Your State&rsquo;s Laws</h3> <p>One of the biggest difficulties when it comes to handling online sales taxes is that there&rsquo;s no single set of rules in place to cover every state. Naturally, then, the first place to start untangling is in your own state.</p> <p>In Maryland, where I live and operate my business, I&rsquo;m expected to collect sales tax on all sales made within the state. According to <a target="_blank&quot;" href="http://business.marylandtaxes.com/taxinfo/salesanduse/default.asp">the state comptroller&rsquo;s office</a>, anyone who maintains a nexus, or place where business operations occur, within the state is also expected to collect sales tax &mdash; but there is no single resource for out-of-state sellers who happen to sell online.</p> <p>In most cases, you&rsquo;re under no obligation to collect sales tax for states where you don&rsquo;t have a nexus. That usually means an office, but (depending on the state) can also include a warehouse or business trips on a regular basis into the state for the purpose of conducting business. Those rules are based on a <a target="_blank&quot;" href="http://www.nolo.com/legal-encyclopedia/sales-tax-internet-29919.html">Supreme Court decision about mail order purchases</a>. A good general rule is that if you aren&rsquo;t doing anything else in a given state besides shipping to a buyer, you don&rsquo;t need to pay sales tax. For instance, when I sell an ebook to someone outside of Maryland, I don&rsquo;t need to charge sales tax because Maryland is the only state where I have a presence.</p> <p>Unfortunately, there&rsquo;s no guarantee that the situation will stay this simple. Even if you aren&rsquo;t planning to eventually expand your business&rsquo; presence to other states, you may find yourself expected to collect sales tax for all online purchases if certain state governments have their way.</p> <h3>Your E-Commerce Software</h3> <p>It&rsquo;s also important to consider what sort of software you&rsquo;re using to handle online sales. Many of the simpler online shopping carts have only basic sales tax functionality, leaving you to figure out the details on your own. But some allow you to set sales tax rates for buyers who list a specific state in their information. While sales tax wasn&rsquo;t the most important feature I was looking for when I chose the shopping cart tool that I use on my websites, I was pleasantly surprised to find that the software handles sales tax readily and it generates reports that let me cut a check to the appropriate tax agencies.</p> <p>If you&rsquo;re not sure on how to configure your shopping cart for sales tax collection, it may be worth bringing in some outside help to get your tools in order. Virtual assistants who specialize in setting up shopping carts can often help. You will need to be able to supply an idea of how much sales tax you need to charge, which may require some digging if you live in a state where sales tax rates differ by county or municipality. Most shopping cart software developers employ support staff who can help you, too.</p> <h3>Stay Aware of Changes</h3> <p>Sales tax questions are going to remain difficult, especially <a target="_blank&quot;" href="http://www.openforum.com/articles/internet-sales-taxes-question-as-thorny-as-ever-thursday-bram">since online sales tax has yet to be ironed out</a> with a universal answer. If selling online is a major part of your business, it&rsquo;s important to stay abreast of the discussion, both in your own state and in any states you have customers in. The alternative can be a tax bill with plenty of fees and penalties added on.</p> <p>Check your state&rsquo;s comptroller&rsquo;s office or revenue service to see if they offer mailing lists or other notification services. Many CPAs provide newsletters or blog about tax rules in their local areas &ndash; you may want to ask any tax professionals you&rsquo;re already working with about the sources they use.</p> <p>In many states, sales tax is a key revenue source, which pays for schools, roads, and other public services. Those states are likely to look for opportunities to make an end run around the Supreme Court decision which effectively removed any responsibility for online sellers to collect sales tax in states they don&rsquo;t have a presence in. With that end in mind, twenty-three states have already <a target="_blank&quot;" href="http://www.streamlinedsalestax.org">streamlined their sales tax collection process</a> and more are moving in that direction. With so many states backing the effort, it seems possible that there will be a requirement to collect sales tax nationally, eventually.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/thursday-bram">Thursday Bram</a> of <a href="http://www.wisebread.com/small-business/what-you-need-to-know-about-online-sales-tax">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-inspiring-stories-of-normal-people-building-a-thriving-online-store">4 Inspiring Stories of Normal People Building a Thriving Online Store</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-is-the-one-skill-you-need-if-you-want-to-work-for-yourself">This Is the One Skill You Need If You Want to Work for Yourself</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-i-got-over-the-hump-and-sold-my-blog-for-3-million">How I Got Over the Hump and Sold My Blog for $3 Million</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center ecommerce internet sales tax nexus online sales tax Sales Tax small business Sat, 11 Jun 2011 01:31:33 +0000 Thursday Bram 551973 at http://www.wisebread.com Internet Sales Taxes Question as Thorny as Ever http://www.wisebread.com/small-business/internet-sales-taxes-question-as-thorny-as-ever <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/money/article/internet-sales-taxes-question-as-thorny-as-ever-thursday-bram" target="_blank">http://www.openforum.com/idea-hub/topics/money/article/internet-sales-taxes-ques...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/internet-sales-taxes-question-as-thorny-as-ever" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000007064854Small.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>With more and more businesses selling at least some of their products and services over the Internet, how to collect and report sales tax is becoming more and more complex. In the past, when a business made most of its sales to someone living in the same state &ndash; if not the same city &ndash; keeping up with sales tax was a matter of making sure you met your state's requirements and cut them a check. But if you're selling to buyers who could be located anywhere they can get access to the Internet, handling sales tax can require you to be an expert of the rules for each state in which you do business &ndash; and possibly even a few foreign countries, too.</p> <h3>Beyond Sales Tax Assumptions</h3> <p>One of the most persistent assumptions about handling sales tax on purchases made over the Internet is that the seller simply doesn't have to deal with sales tax. While that's true in some situations, it certainly isn't universal.</p> <p>Jason Shinn, <a target="_blank" href="http://www.ebusinesscounsel.com/our-professionals/17-jason-m-shinn">an attorney specializing in ecommerce</a>, describes the sales tax landscape:</p> <blockquote><p>First, in states that impose a sales tax, a <i>buyer</i> is obligated to pay that sales tax due on Internet purchases to the same extent an item would be taxable in an actual store. The common belief is that most people do not remit the sales tax that would be due, thus depriving states of a significant amount of tax revenue in the aggregate.</p> <p>Second, an e-commerce merchant <i>may</i> have an obligation to collect the applicable sales tax on Internet sales if that merchant operates within the state. This is because courts have interpreted the Commerce Clause of the U.S. Constitution to prohibit a state from requiring an out-of-state- merchant to collect sales tax on Internet sales made to in-state residents, unless the merchant has a substantial physical presence in the state.</p> <p>&quot;Third, states have taken the position that an out-of-state seller has an in-state presence if it uses third parties to make sales. So in-state businesses that earn revenue through affiliate relationships, e.g., an individual clicks on website that links to online retailer such as Amazon.com ,would create an in-state presence for that online retailer. This expansion is obviously targeted at big online retailers like Amazon.com, which has numerous such affiliate arrangements. In fact Amazon.com recently announced it was ending such relationships for a particular state rather than be held liable to collect that states sales tax on Internet purchases.</p> <p>&quot;So for this reason it is important for e-commerce merchants to understand their Internet sales tax collection obligations and how those obligations may change depending upon their physical operations and third-party contracts with affiliates. This is especially true in light of the significant deficits many states face and the need to find revenue to cut those deficits.</p> </blockquote> <h3>Understanding Nexus</h3> <p>Most businesses have a home base &ndash; some location that is used to determine where the company is licensed and where it pays taxes. Typically, you can expect to pay your income tax and sales tax for local purchases to the state where you're based. But with online sales, there can also be a question of 'nexus' &ndash; whether or not you have a presence in another state that could be used as justification to require you to collect sales tax, <i>there</i>.</p> <p>Scott Newman, of <a target="_blank" href="http://www.usmarkerboard.com/">US Markerboard</a> explains the concept of nexus: &quot;Basically do you have a &lsquo;presence&rsquo; in that state? If you send a sales rep into a state to visit a client, you have now created &lsquo;nexus&rsquo; and could very well be on the hook for income tax, which will lead to you collecting sales tax. States are now targeting manufacturers that drop ship products on behalf of out of state internet dealers. The manufacturers are now collecting sales tax from the dealers, but because the dealer is not registered in the particular state with which the shipment is going, they cannot collect back or get reimbursed from the buyer for the tax.&rdquo;</p> <h3>The On-Going Question</h3> <p>The sales tax question is only going to get more complicated as states search for revenues. Newman points out, &ldquo;First, states are becoming much more creative in how they &rsquo;find&rsquo; the sales and use tax that is due them. For example, there are states such as New Jersey where you must register to do business there or you can't receive payment from a public school. And although the public school is tax exempt, they now have you registered and could very well be liable to collect sales tax.&quot;</p> <p>The issue is far from settled, and states are coming up with their own legislative solutions. Something as simple as requiring online sellers to collect sales tax can have far-reaching impact, like leading tax collectors to consider whether a business should pay income tax as well, since they're already collecting sales tax.</p> <p>For small businesses, it's important to stay on top the issue. It's a good idea to consult with an ecommerce or tax professional to get a more in-depth analysis of your business' sales tax compliance needs. Don't expect the solution to be simple, at least not until Congress <a target="_blank" href="http://www.openforum.com/idea-hub/topics/money/article/internet-sales-taxes-could-change-your-business-tom-harnish">legislates</a> a uniform system suited for Internet retailers big and small.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/thursday-bram">Thursday Bram</a> of <a href="http://www.wisebread.com/small-business/internet-sales-taxes-question-as-thorny-as-ever">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-inspiring-stories-of-normal-people-building-a-thriving-online-store">4 Inspiring Stories of Normal People Building a Thriving Online Store</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-is-the-one-skill-you-need-if-you-want-to-work-for-yourself">This Is the One Skill You Need If You Want to Work for Yourself</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-i-got-over-the-hump-and-sold-my-blog-for-3-million">How I Got Over the Hump and Sold My Blog for $3 Million</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center ecommerce internet sales tax Sales Tax small business Sat, 02 Apr 2011 20:15:37 +0000 Thursday Bram 506580 at http://www.wisebread.com 6 Tax Penalties You Can Easily Avoid http://www.wisebread.com/small-business/6-tax-penalties-you-can-easily-avoid <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/money/article/5-tax-penalties-you-can-easily-avoid-barbara-weltman" target="_blank">http://www.openforum.com/idea-hub/topics/money/article/5-tax-penalties-you-can-e...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/6-tax-penalties-you-can-easily-avoid" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000000438229Small.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Would you toss a wad of cash into the wind and watch it fly away? Probably not. So why would you incur tax penalties that cost you money and aren&rsquo;t even tax deductible? You shouldn&rsquo;t. Avoid these five tax penalties and you won't be caught watching your hard-earned money flutter away.</p> <h3>Late Filing Penalty</h3> <p>There are fixed deadlines for filing various tax returns and penalties for missing these deadlines. For example, if you fail to file your personal income tax return on time (this year it&rsquo;s April 18, 2011), you are subject to a late filing penalty. The penalty is 5% of the tax due for each month you&rsquo;re late, up to a maximum of 25%. If the return is more than 60 days late, the minimum penalty is the lesser of $135 or 100% of the tax due. For partnerships and S corporations, the late filing penalty is $195 for each month or part of a month the return is late, multiplied by the total number of owners during any part of the year, up to a maximum of 12 months.</p> <p><b><i>How to avoid the penalty: </i></b>If, for <i>any</i> reason, you cannot file on time, request a filing extension by the return&rsquo;s due date. For individuals and partnerships (including most limited liability companies), the filing deadline for the 2010 return is April 18, 2011.</p> <ul> <li>Individuals (including sole proprietors and one-person limited liability companies) can request a six-month extension (to October 17, 2011) on Form 4868.</li> <li>Partnerships can request a five-month extension (to September 15, 2011) on Form 7004.</li> </ul> <p>The filing deadline for corporations (both C and S) is March 15, 2011. Corporations can request a six-month extension (to September 15, 2011) on Form 7004.</p> <h3>Late Payment Penalties</h3> <p>Federal income tax is due on the return&rsquo;s original due date, regardless of any filing extensions. The late payment penalty is 0.5% of the tax due; the maximum penalty is 25%. In addition, there are interest charges for late payments.</p> <p><b><i>How to avoid the penalty. </i></b>Pay the tax on time, even if this means requesting an installment payment agreement on Form 9465 or by charging the outstanding amount to a major credit card (find authorized <a target="_blank" href="http://www.irs.gov/efile/article/0,,id=101316,00.html">credit card processors</a>).</p> <p>If you fail to pay on time, you can still avoid the penalty by showing reasonable cause for the lateness. Reasonable cause includes having paid (through withholding, estimated taxes, and additional payments) at least 90% of the taxes due.</p> <h3>Estimated Tax Penalties</h3> <p>If you are self-employed, you probably need to pay estimated taxes to cover your payments for the year. Payments are due four times each year; you cannot wait until you file your return to make a single payment. If you fail to pay minimum amounts, you are subject to underpayment penalties. Essentially, this is an interest charge that is adjusted each quarter. The rate for the second quarter of 2011 is 4%.</p> <p><b><i>How to avoid the penalty. </i></b>Figure estimated taxes based on one of two safe harbors by paying the following amount over the four installments:</p> <ul> <li>At least 90% of the taxes due for the current year.</li> <li>At least 100% of the taxes shown on the return for the prior year (110% if your adjusted gross income in the prior year was more than $150,000 or more, or more than $75,000 if married filing separately in the current year).</li> </ul> <p>Note: Different percentages apply to farmers and fishermen. Consult a tax professional.</p> <h3>Late Employment Tax Deposits</h3> <p>If you have employees in your business, you have certain payroll tax responsibilities. This includes withholding income taxes and the employee share of FICA (Social Security and Medicare taxes) from their paychecks as well as paying the employer share of FICA and the FUTA (federal unemployment tax). If you fail to deposit these taxes with the government on time, or if you deposit less than the full amount owed, you are subject to a penalty ranging from 2% to 15%; the quicker you make the late deposit, the lower the penalty rate will be.</p> <p><b><i>How to avoid the penalty. </i></b>Make deposits using <a target="_blank" href="http://www.eftps.gov/">EFTPS.gov</a>, which is a free electronic payment system. You can schedule your payments in advance so that they are automatically transferred from your bank to the U.S. Treasury on the due date.</p> <p>Note: Very small employers &ndash; those permitted to file Form 944 because their annual payroll taxes do not exceed $2,500 &ndash; can pay the taxes with their annual return.</p> <h3>Late Sales Tax Deposits</h3> <p>If your state levies sales taxes, you must collect them and pay them in a timely manner. Each state has its own rules regarding payments and penalties. Even though you do not actually pay the sales tax &ndash; your customers do &ndash; you must transfer the funds to your state or face penalties.</p> <p><b><i>How to avoid the penalty. </i></b>Learn about your sales tax obligations from <a target="_blank" href="http://www.taxadmin.org/fta/link/">your state</a>.</p> <h3>Late Information Returns</h3> <p>In the course of your business, you are required to provide various information returns, such as 1099s, to the IRS and to service providers and others. If you fail to do so and do not have reasonable cause for the failure, you are subject to a penalty. The longer you fail to file or submit full information, the greater the penalty (explained in <a target="_blank" href="http://www.irs.gov/pub/irs-pdf/i1099gi.pdf">instructions for certain information returns</a>).</p> <p><b><i>How to avoid the penalty. </i></b>Learn which forms you are required to file. If you discover that you failed to submit a form on time, correct your mistake as quickly as possible to minimize penalties.</p> <h3>Bottom line</h3> <p>Work with a knowledgeable tax professional who can help you meet your filing obligations and avoid penalties. Money spent avoiding these and other tax penalties is definitely not money thrown into the wind.<b><i><br /> </i></b></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/barbara-weltman">Barbara Weltman</a> of <a href="http://www.wisebread.com/small-business/6-tax-penalties-you-can-easily-avoid">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/101-tax-deductions-for-bloggers-and-freelancers">101 Tax deductions for bloggers and freelancers</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-inspiring-stories-of-normal-people-building-a-thriving-online-store">4 Inspiring Stories of Normal People Building a Thriving Online Store</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-is-the-one-skill-you-need-if-you-want-to-work-for-yourself">This Is the One Skill You Need If You Want to Work for Yourself</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Small Business Resource Center Taxes employee tax FICA FUTA Sales Tax small business tax penalty Thu, 24 Mar 2011 22:02:24 +0000 Barbara Weltman 502507 at http://www.wisebread.com Internet Sales Taxes Could Change Your Business http://www.wisebread.com/small-business/internet-sales-taxes-could-change-your-business <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/money/article/internet-sales-taxes-could-change-your-business-tom-harnish" target="_blank">http://www.openforum.com/idea-hub/topics/money/article/internet-sales-taxes-coul...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/internet-sales-taxes-could-change-your-business" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000007904327XSmall.jpg" alt="Online shopping" title="Online shopping" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>With federal and state budgets in deep trouble, lawmakers are looking for ways to increase the money coming into their tills. Sales taxes are about a third of total state tax collections, second only to personal income taxes as the largest source of state revenue. But the Internet Tax Nondiscrimination Act (P.L. 108-435) means states don't collect taxes on any out-of-state online transactions.</p> <p>If you have a business in California, your website shopping cart is only required to collect taxes from people who use a California address. Or, seen from the other side of the process, if you live in California and buy from an online retailer in Vermont, you don't have to pay sales tax on your purchase.</p> <p>Technically, customers in other states who buy from you are supposed to pay use taxes (and you're supposed to pay them when you buy out of state), but trying to enforce that is complicated and virtually impossible, pun intended. The reason is something called &quot;nexus,&quot; or physical presence, a concept that originated with the very first use taxes 80 years ago during the Depression.</p> <p>New York State decided to apply the idea to the Internet with what has become known as the Amazon Law. New York claimed that commissions Amazon paid to Empire State affiliates meant it had nexus in the state, and thus was required to collect sales tax. The state legislature passed a law supporting the claim. Amazon challenged in court and lost, but it is appealing on the basis that the affiliate relationships were simply is a means of advertising.</p> <p>When North Carolina and Rhode Island passed laws similar to New York's Amazon law, Overstock.com (and Amazon) canceled affiliate programs in those states, putting some online retailers out of business. Fortunately, California, Hawaii, Colorado, and Virginia have defeated proposals to tax Internet sales. But other states, including Oklahoma, are going ahead with Internet tax measures based on nexus.</p> <p>States such as Nevada, Florida, and Washington rely on sales taxes in lieu of a state income tax, so they have a keen interest in the issue and are working to broaden the definition of nexus.</p> <p>Still, the lack of sales-tax and use-tax enforcement is attractive to online shoppers, proven by the 20% annual increase in online sales. With that kind of growth it's no surprise that there's a push for new tax legislation through the <a href="http://www.newrules.org/retail/rules/internet-sales-tax-fairness/main-street-fairness-act">Main Street Fairness Act</a>. The Act calls for an online sales tax to ensure online stores have the same tax regulations as retailers.</p> <p>How this all plays out, we can only hope, will be based on business realities, not just legislative avarice.</p> <p>With something like 7,500 unique tax jurisdictions in the United States, keeping track of changing tax rates will be a job that only a central service or software provider will be able to handle. But the problem is more complicated than that. Some states, for example, don't tax software and other digital products while others do, but they have lower tax rates for prescription drugs, clothing, and food.</p> <p>Unless special Internet sales exemptions are provided, a seller would have to register in every state where it sells its products or services. For that matter, as it stands, sellers would have to register their businesses in every county, borough, parish, city, or town where they have customers. They&rsquo;ll have to keep tax records for each jurisdiction too, of course, and make them available in the event of an audit...from any one of 7,500 regimes.</p> <p>But Internet transactions aren&rsquo;t the only ones under scrutiny. Catalog sales and interactive-TV sales raise nexus issues too. Even postcards inside magazines that a purchaser mails in to order a product raise nexus issues because the cards have codes that track sales back to the magazine.</p> <p>In any event, unless a solution is found, your business could find itself in the unfortunate position of selling competitive products that cost your customers as much 8.25% more than other online retailers, simply because you have to collect state tax and they don't. Your choice, of course, is to reduce your price, but that means narrower margins.</p> <p>One approach to solving this problem was the Streamlined Sales Tax Project (SSTP), created by the National Governor&rsquo;s Association and the National Conference of State Legislatures in the fall of 1999 to simplify sales tax collection. The leaders of those two organizations were concerned that the 1930s sales-tax approach is just not relevant to 21st century e-commerce. So far, 44 states and the District of Columbia have adopted the approach which encourages &quot;remote sellers&quot; selling over the Internet and by mail order to collect tax on sales to customers living in the streamlined states. It levels the playing field so that local &quot;brick-and-mortar&quot; stores and remote sellers operate under the same rules.</p> <p>But, according to Scott Peterson, executive director of the Streamlined Sales Tax Governing Board, &quot;people have lost their enthusiasm and patience for the Streamlined Sales Tax project.&quot; Why? George Isaacson, representing the Direct Marketing Association as senior partner at Brann &amp; Isaacson, <a href="http://www.taxanalysts.com/www/conferences.nsf/KeyLookup/MNEN-7ZENX7/$file/20100205_pv_tax_analysts_020510.mp3"> said at a recent conference</a> (mp3) that it was, at least in part, because SSTP had backed away from simplicity.</p> <p>With states losing billions of dollars in revenue, it's a safe bet they&rsquo;ll use whatever legal authority they have to chip away at the nexus issue. The unanswered question is whether the federal government will step in to defuse the issue, or at least make it equally painful for everyone.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tom-harnish">Tom Harnish</a> of <a href="http://www.wisebread.com/small-business/internet-sales-taxes-could-change-your-business">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-amazon-url-hack-generator-save-big">The AMAZON URL hack generator. Save big $$$.</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/discount-designer-clothing-17-places-to-get-name-brands-for-less">Discount Designer Clothing: 17 Places to Get Name Brands for Less</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/16-amazon-deal-hacks-you-may-not-already-know">16 Amazon Deal Hacks You May Not Already Know</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-inspiring-stories-of-normal-people-building-a-thriving-online-store">4 Inspiring Stories of Normal People Building a Thriving Online Store</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center Amazon.com online shopping Sales Tax small business small business taxes Thu, 13 Jan 2011 18:42:49 +0000 Tom Harnish 426892 at http://www.wisebread.com Would You Shop Locally at 10+ Percent Tax? http://www.wisebread.com/would-you-shop-locally-at-10-percent-tax <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/would-you-shop-locally-at-10-percent-tax" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/salestax.JPG" alt="shopper at a store with no sales tax" title="We Can&#039;t All Be Oregonians" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Today the sales tax in Chicago <a href="http://www.chicagotribune.com/news/local/chi-county-sales-tax-web-jul01,0,6411385.story">went up to 10.25 percent</a> after a 1 percent hike in the Cook county rate.</p> <p>The change has me thinking seriously about how much I can afford to pay to maintain the ideal of shopping locally.</p> <p>I can&#39;t say I&#39;m a paragon of local shopping, but if I have the opportunity to get into the stores in my suburb, Oak Park, or a few blocks away in Chicago, I do it. I certainly see the value in helping local stores stay afloat so they&#39;re around when I need them. In the past few years we purchased such big-ticket items as a replacement wedding band and a dining room set at local shops.</p> <p>But when you&#39;re talking about TEN PERCENT of your purchase price going to the tax man, online shopping suddenly looks even more attractive. It&#39;s not like you&#39;re saving a few pennies by going online to a site that doesn&#39;t charge any tax. (And yeah, I know you&#39;re supposed to keep track of all those tax-free transactions and report them to the IRS, but I also know that most people don&#39;t.) Buy a $20 book tax-free and you save $2. Order a $500 bookshelf with free shipping, as we recently did, and you save a whopping $50.</p> <p>I have to admit that this change will change my shopping habits. Most groceries are not taxed, of course, but alcohol is, and this will probably push me to stock up on wine and beer at Woodman&#39;s when we&#39;re up in Wisconsin visiting family. What other changes will we make? Eating out just got that much more prohibitive. And yes, when I&#39;m Christmas shopping this year, I will probably make most of the purchases online. </p> <p>It would be one thing if I felt that my sales tax money was going to support important local services and infrastructure. Like if I thought my extra dollars would make the El run safely and smoothly. Those of you from the Chicago area can take a moment to laugh. Cook county&#39;s waste and corruption are well known, and I heard citizens of the county&#39;s suburbs on the radio today say they feel that what &quot;good works&quot; county taxes do fund are concentrated on the city.</p> <p>It&#39;s clear that most of my neighbors aren&#39;t going to feel any guilt about depriving the county -- and, incidentally, our individual towns -- of revenue by shopping elsewhere. I won&#39;t waste any guilt on the government hangers-on whose salaries won&#39;t be paid with my money either.</p> <p>I do feel bad about those local merchants, though. It&#39;s a dilemma. </p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/would-you-shop-locally-at-10-percent-tax">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-state-sales-tax-holiday-is-coming">The State Sales Tax Holiday is coming...</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-15-foods-that-are-worth-buying-organic">The Only 15 Foods That Are Worth Buying Organic</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-you-should-never-try-to-save-on">5 Things You Should Never Try to Save On</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-things-to-look-for-every-time-you-visit-a-thrift-store">10 Things to Look for Every Time You Visit a Thrift Store</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-your-apple-dangerous-how-to-eat-fewer-pesticides-and-save-money">Is Your Apple Dangerous? How to Eat Fewer Pesticides (and Save Money)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Shopping Sales Tax shopping locally Wed, 02 Jul 2008 02:32:00 +0000 Carrie Kirby 2212 at http://www.wisebread.com The State Sales Tax Holiday is coming... http://www.wisebread.com/the-state-sales-tax-holiday-is-coming <p><img width="256" height="192" title="Tax" alt="Tax" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/wisebread_imce/169849_tax.jpg" /></p> <p>...if you're lucky enough to live in Tennessee. Yep, April 27th to Aprii 29th is State Sales Tax day for the fortunate folks of Tennessee, introduced as a way to help families save money on essential supplies for back-to-school shopping.</p> <p>You can find out all of the details at <a href="/www.tntaxholiday.com">www.tntaxholiday.com</a> , a website dedicated to the special tax-free holiday.</p> <p>But if you live in Tennessee (or happen to be passing through) don't rush out and buy a 60&quot; LCD TV hoping to save yourself a few-hundred bucks in taxes. As the back-to-school title suggests, this only really covers supplies that will help out the kids.</p> <p>BUT, if you've been planning to pick up a new PC for the family, now may be a great time to open your wallet and run down to Circuit City or Best Buy. With a $1500 ceiling on the price of a new PC, you can pick up a very nice machine and pocket the state taxes for much-needed software.</p> <p><strong>What is covered?</strong></p> <ul> <li>Clothing with a price of $100 or less per item</li> <li>School supplies with a price of $100 or less per item</li> <li>Computers with a price of $1,500 or less per item</li> </ul> <p>As long as you stay within these guidelines, you can save yourself a tidy sum over the tax holiday weekend. No exemption certificate is required, so go nuts. But please, not too nuts. We don't need any more people running up nasty credit card bills <a href="/the-dirty-secrets-of-credit-cards">(see my report on that here)</a> .</p> <p><strong>Other states</strong></p> <p>There are 13 other states, plus the District Of Columbia, that have enacted sales tax holidays. Among them are Iowa and Texas, and this year they hold their sales tax holiday at the beginning of August. Your local state website should have information for you on whether on not you're one of the lucky states that have this holiday, and when it actually takes place. Keep your fingers crossed.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/the-state-sales-tax-holiday-is-coming">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/score-some-dorm-deals-and-save-big-even-if-youre-not-a-student">Score Some Dorm Deals and Save Big (Even if You’re Not a Student)</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/use-less-cash-for-your-jcpenney-purchase">Use Less Cash for Your JCPenney Purchase</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-was-your-best-purchase-in-the-past-year">What was your best purchase in the past year?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-used-car-salesman-reveals-dirty-tricks-and-how-to-beat-them">A Used Car Salesman Reveals Dirty Tricks (and How to Beat Them)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-places-to-get-coupons-online">The Best Places to Get Coupons Online</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Shopping back-to-school free money Sales Tax save money savings shopping taxes Tennessee Fri, 06 Apr 2007 22:45:58 +0000 Paul Michael 467 at http://www.wisebread.com