Thursday, August 25, 2011

Etsy and Crafts Business Tax Primer

Many small business owners are misinformed when it comes to taxes. There are many different types of taxes that businesses and individuals pay. I’ll go over some of them:

A business pays different kinds of taxes:

            Income Taxes:

§  Federal income taxes to the IRS (depending on the business structure selected)

§  State income taxes to the states where the business is doing business

§  State income tax rules vary from state to state – some states don’t have a state income tax on corporations or businesses

Sales taxes and use taxes:

·       Collected by the seller on taxable sales and services provided within the seller’s state

·       Sales and use taxes are paid to state and local authorities

·       Sales taxes are not considered “income” taxes. You collect sales taxes from the buyers that reside in your state and you submit the sales taxes collected to your state

·       You register to collect sales taxes with your state (not the IRS). Rules vary from state to state regarding what items or services are taxable. If you are unsure you need to contact your State’s “Department of Revenue.”

Payroll Taxes:

·       Paid to the IRS and the state where the business hires employees (this applies only if the business is paying employees)

·       Payroll taxes are not considered “income” taxes

An individual (a person) pays different kinds of taxes:

§  Federal income taxes to the IRS

§  State income taxes to their state (if the state has an income tax)

§  Self employment taxes to the IRS for certain business earnings

It's important that you now the differences in the kinds of taxes that you need to pay for your Etsy and crafts business. 

For a free article "10 Things You Must Know About Taxes, Bookkeeping, and Business Licenses" and for free Excel worksheets just for Etsy shop owners and creative entrepreneurs visit my website.

Stop worrying. Save hours of research online. Check out these Tax, Business, Accounting and Bookkeeping PDF e-book guides written by a CPA and creative entrepreneur just like you. Available for instant download.

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