Self-employed taxpayers often start from very humble beginnings. However, in some cases, selling handmade wares on eBay or working from the garage at home can expand and become a business that operates across state lines and even internationally. Growth in the number of self-employed individuals is evident in statistics published by the Bureau of Economic Analysis of the U.S. Department of Commerce; self-employment increased 99 percent between 2000 and 2011. In the 1990’s, self-employment accounted for only 22 percent of jobs. As more taxpayers begin to work for themselves, an increasing number of people find themselves navigating the sometimes ambiguous tax rules for self-employed individuals. In general, those who are self-employed may be subjected to federal and state income taxes and the self-employment tax. Tax payers who work for themselves may also face sales tax issues.
Sales Tax for Online Sellers
Most states impose their own sales tax; therefore, individuals must comply with the sales tax rules of the state in which they reside for tax purposes. However, self-employed individuals must also collect sales taxes from buyers in states in which their business has a physical presence. Therefore, sellers must investigate the laws of applicable states because sales tax percentages and regulations may vary. Certain states have enacted a “use tax,” which requires the user to pay the tax for the purchased item. Use tax statutes generally apply to the purchase of cars and other expensive items. In an effort to simplify the process of collecting sales taxes for sellers, 40 states have joined together to create the Streamlined Sales and Use Tax Agreement.
Contact a CPA
When tax time rolls around, online sellers may find themselves in a panic upon considering the potentially complex nature of their sales tax obligations. Before panicking, self-employed taxpayers should consult a licensed CPA to help them understand the relevant IRS and State tax requirements, and ultimately avoid sales tax issues. Gary Kaplan is licensed in the states of Florida, Maryland, Utah, and New York as well as in Washington, D.C. As a seasoned CPA with more than 17 years of experience, Mr. Kaplan is qualified to assist individuals from virtually every background. Self-employed taxpayers are encouraged to contact Mr. Kaplan’s firm no matter how large or small their business may be.
