As an e-commerce business, you must take out taxes for your customers based on customers in that state, especially if there is a physical presence for your business. For those that do not have a physical presence, you have the option of an offshore management company. Here is how taxes work for E-Commerce businesses.
What Taxes Do E-Commerce Businesses Pay?
As an E-Commerce business, you are still required to take out taxes for your business at both the state and federal levels. Based upon where your mail for the business is sent and the state you have for your business license, you are responsible for covering taxes at the state level there.
Additionally, there is a need to cover the federal taxes. Because you are operating a business within the country, you are responsible for covering these taxes at the federal rate. There is some confusion that happens with E-Commerce, however.
Offshore Management Company Jurisdiction
One of the biggest issues that E-Commerce businesses face regularly is that of tax jurisdiction. If the account is located offshore with an offshore management company, the ability to force federal taxes can be tricky, attempting to pay taxes that is technically located offshore. If your business’ physical location is not on United States soil and you have a location and account offshore, you may not be forced to pay these federal taxes.
How About Retail Taxes?
You are still required to cover the cost of retail and sales taxes, especially if you have customers that live and ship into the United States. You need to make sure that the tax amount you are putting on your items covers both the state and federal taxes so that you have enough to pay in each quarter and keep your account current with the IRS.
Final Thoughts
One of the biggest things to keep in mind when filing taxes as an E-Commerce business is to know what taxes you owe first. Once you know exactly who and what you need to pay, you need to make sure that your tax rate for your customers reflects these tax requirements and you are charging enough on your products to cover this amount. It is better to pay extra instead of underpaying and having to pay out again. Be sure to consult with experts to help you out.
