Taxes & Stuff

[farlack]

I need some help with my business, I need to know a few things.
I started an online dropshipping I guess you can call it, in a gray market area. The way it works, I set my price, I get orders, I pay a partner a set price and he ships it.

The way I have it set up is he gets paid cash, I have no receipt so I have to pay taxes on the full transaction.

Since 03/06/12 when I started I have made $13,000 in transactions $6700 in profit after I paid him. Obviously I'm paying taxes on the full $13,000.

I need to know a few things that I'm sure a few of you might know.
How much do I need to be charging customers for shipping. I live in FL so I have it set at 6.5% as that's what I pay local tax.
If I don't have to charge taxes for every state, would it be illegal to do so anyway?
Now do I owe the government that 6.5% PLUS I was told its 30% of my earnings so that 30% plus the 6.5 taxes? Or is it 30% total?
Now how much do I owe the government myself on each sale?

Does it matter if I have a business license as technically I don't do anything except collect orders and send them to someone else? Because right now I don't.. Or does the government just want their money?

 

[smallgiant]

Don't take this as being 100% correct as this is just my understanding.

I always have a difficult time doing taxes because of various incomes and deductions. Having multiple incomes a salary, online stuff and offline income definitely complicates things. Not only that, but I have tons of deductions as well. Doing everything correctly can be a huge pain.

Firstly, I truly think you should get a CPA to look at your taxes and paperwork. They can really help out a ton. However, don't go to hr block or some other crap franchise. I suggest finding a local person who knows their stuff. If this is not an option then you should invest in some good software.

You need to keep receipts for everything and documentation as best as possible. This is very important for an itemized deduction which I suggest you do. This will save you the most versus a standard deduction.

Now your other questions are a bit difficult to answer, but I'll try. Setting up a company and trying your ein can be a smart move. You can then hire yourself as an employee and absolve yourself of company debt in case of financial difficulty. However, you should definitely do all the research before starting a company.

As for shipping charges, I ran a dropshipping biz a few years ago and did quite well for a while. Personally I left shipping charges as just that; the cost to ship an item. Charging tax or a little extra to cover costs isn't illegal, but I would say possibly frowned upon. Now your tax rate is going to be determined by both state and federal. Meaning you owe a certain % to both the state and IRS. There are also different tax brackets and rates factoring many things. That's why I suggest you get a CPA or some software to help.

Hope this helped a bit.

 

[Virtualz]

with that kind of income in that eriod I would hire out a local cpa to help ya out and sort the income, whther the income is black hat or grey doesn't matter if it is recorder or can be trailed then you need to report it. No biggie really just get some local independent tax expert who is up to date they will save you the time for a small fee like $150-$500 or so maybe opt in for quarterly income reporting too,

 

[chad362wiley]

cpamau5 - taxes n stuff

 

[bertbaby]

Look up tax law nexus!

 

[huser21]

I need some help with my business, I need to know a few things.
I started an online dropshipping I guess you can call it, in a gray market area. The way it works, I set my price, I get orders, I pay a partner a set price and he ships it.

The way I have it set up is he gets paid cash, I have no receipt so I have to pay taxes on the full transaction.

Since 03/06/12 when I started I have made $13,000 in transactions $6700 in profit after I paid him. Obviously I'm paying taxes on the full $13,000.

I need to know a few things that I'm sure a few of you might know.
How much do I need to be charging customers for shipping. I live in FL so I have it set at 6.5% as that's what I pay local tax.
If I don't have to charge taxes for every state, would it be illegal to do so anyway?
Now do I owe the government that 6.5% PLUS I was told its 30% of my earnings so that 30% plus the 6.5 taxes? Or is it 30% total?
Now how much do I owe the government myself on each sale?

Does it matter if I have a business license as technically I don't do anything except collect orders and send them to someone else? Because right now I don't.. Or does the government just want their money?

Wow. Lots of things going on here. First, you are not on the hook for the full 13k. It doesnt matter in what form you paid the other person you can always (and in this case better be) 1099 the individual.
Second, sales tax is not figured by state but rather by county and they vary. Whichever county you dropped your material/product-that is the sales tax amount you NEED to be adding to your order.
Last, you are basically a broker correct? Ill bet if you look into licsensing fees you may find they are cheaper than you think.
Finally, yes you are on the hook for sales tax(per county) and income tax.
Get a good accountant. They are invaluable once you start making decent money.

 

[farlack]

Thanks everyone for your input on this topic, I'm going to follow some of your steps.

Wow. Lots of things going on here. First, you are not on the hook for the full 13k. It doesnt matter in what form you paid the other person you can always (and in this case better be) 1099 the individual.
Second, sales tax is not figured by state but rather by county and they vary. Whichever county you dropped your material/product-that is the sales tax amount you NEED to be adding to your order.
Last, you are basically a broker correct? Ill bet if you look into licsensing fees you may find they are cheaper than you think.
Finally, yes you are on the hook for sales tax(per county) and income tax.
Get a good accountant. They are invaluable once you start making decent money.

The thing about the 1099, is I pay him in cash. He isn't going to be on the books at all and he hasn't for the past 2 years. I'm fully aware of the fact I'm going to have to pay 100% of the taxes and as of right now I'm okay with it as the return is still profitable.

He has everything down to a science to work around this fact, buying his product from China, and having other individuals send the cash via WU.

I need to know what % I need to be paying to the IRS.

 

[volund]

Thanks everyone for your input on this topic, I'm going to follow some of your steps.



The thing about the 1099, is I pay him in cash. He isn't going to be on the books at all and he hasn't for the past 2 years. I'm fully aware of the fact I'm going to have to pay 100% of the taxes and as of right now I'm okay with it as the return is still profitable.

He has everything down to a science to work around this fact, buying his product from China, and having other individuals send the cash via WU.

I need to know what % I need to be paying to the IRS.

All you need to do when you file your taxes is fill out a schedule C and take all your deductions. Even though you are not claiming the money you are paying out to your partner you must have other expenses such as advertizing, hosting or whatever, go ahead and claim them. While how much income tax you have to pay on the profits is going to vary depending on how much other income you made you will be paying around 15% in SS taxes as you have to pay your share and the employers share since you are "self employed".

I do agree you need to find yourself a good CPA but that is not going to happen this year. This close to tax time you will not find a good one that will accept new clients, anyone you find now is going to be a hack. Do the best you can this year and then sometime in the summer find you a good one. For this year I would get a good tax program, while they might not find every deduction they will walk you through the process more then good enough to keep you out of trouble with the IRS.

As far as sales taxes go you are only required to collect them in states where you have a presence. If you are both in Florida then that is the only state you need to collect them in. You will need to talk to the state people to find out the exact rules for collecting in state as every state is different. Do not screw around with the sales tax guys, they have less of a sense of humor than the IRS. If you collect sales tax you need to make sure that you are sending it all to them.

 

[farlack]

Sorry for getting back so late,
Do I have to send in receipts?