OT: Starting a small online business?

scashaggy · May 5, 2012 12:43AM

I am looking to start a mainly online small business (which will probably include cards as well) for some extra income. I have seen several places where I can buy items wholesale but I need a tax ID.

Here are some things that I am looking at doing.
Buying items wholesale and selling them.
Buying things like cards and reselling them.
Possibly the drop shipping option but I need to look more into that.

For anyone who has done this, can you point me in the right direction?

Thanks.

Yankees001 · May 5, 2012 1:48AM

Getting a tax ID number is easy. My brother does this with leather jackets, vests, chaps and milatary surplus.

Drop ship is OK, but it's just as easy to do it yourself.

Dave

WinPitcher · May 5, 2012 7:46AM

IIRC when I got my tax ID years ago I got it through the state.

I'd think that if you google it you will find the answer for your specific state.

Good luck!

Meatloaf · May 5, 2012 7:59AM

What are the business taxes on something like this? Is it similar to income tax from ebay/paypal sales or steeper? Does a tax id enable you to shelter stuff?

WinPitcher · May 5, 2012 8:25AM

The tax I was talking about is for state sales tax. You also need it when buying from
wholesalers or other sellers when you intend on reselling the item.

Income tax is a different matter, most businesses don't see any income for the first few years.

scashaggy · May 6, 2012 12:31AM

Thanks, I'll start looking around.

arex · May 6, 2012 12:47AM

I believe that getting a Tax-ID number is relatively simple.
We recently registered my USA Wrestling Club as a 503c and also applied for a Tax-exempt number. I believe we went though the IRS site to get that done.

MooseDog · May 6, 2012 2:21AM

Tax ID is a basically a federal number, similar to a social security number for a business. Doesn't cost anything and can be done by mail at irs.gov

You should probably set up a separate business, even if using your name (IMO you should create a business name if you're going to do this right, even if it's just MY NAME ENTERPRISES).

To buy wholesale from distributors, you will also need a state sales tax permit/license, depending on the sales tax laws in your state.

If you run your business as a sole proprietor, the income or loss is calculated using Schedule C on the standard 1040. Any profits are taxed at whatever tax rate you are in, and losses can be deducted against other income. There are legal ways to shelter income - hire family members in lower tax brackets, contribute to retirement accounts, etc. Pay a good accountant for an hour or two to help you set up - it will be money well spent. There are also grey areas but I won't go there now.

You will have to pay sales taxes on sales within your state. For example in CA I pay 8.25% sales tax on anything sold/shipped within CA. Note you don't HAVE to charge the tax to your buyers but you do have to pay on the sales in your state. This is becoming a complicated issue in many states thanks to Amazon. You should research the laws in your state and ask them some questions so you have everything clear.

And any income from self-employment you have to pay ~13% in social security taxes.

Meatloaf · May 6, 2012 3:39AM

<< <i>Tax ID is a basically a federal number, similar to a social security number for a business. Doesn't cost anything and can be done by mail at irs.gov

You should probably set up a separate business, even if using your name (IMO you should create a business name if you're going to do this right, even if it's just MY NAME ENTERPRISES).

To buy wholesale from distributors, you will also need a state sales tax permit/license, depending on the sales tax laws in your state.

If you run your business as a sole proprietor, the income or loss is calculated using Schedule C on the standard 1040. Any profits are taxed at whatever tax rate you are in, and losses can be deducted against other income. There are legal ways to shelter income - hire family members in lower tax brackets, contribute to retirement accounts, etc. Pay a good accountant for an hour or two to help you set up - it will be money well spent. There are also grey areas but I won't go there now.

You will have to pay sales taxes on sales within your state. For example in CA I pay 8.25% sales tax on anything sold/shipped within CA. Note you don't HAVE to charge the tax to your buyers but you do have to pay on the sales in your state. This is becoming a complicated issue in many states thanks to Amazon. You should research the laws in your state and ask them some questions so you have everything clear.

And any income from self-employment you have to pay ~13% in social security taxes. >>

TYVM!

larryallen73 · May 6, 2012 4:19AM

In Cali you need a "resale license" to buy without sales tax.

Anybody can get a tax ID on the IRS website in 10 minutes. However, a TIN is NOT required to be a "business."

OT: Starting a small online business?

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