Taxes! Ahhh! I was so clueless on this area when I started. Trust me I still am by NO MEANS an expert. I just want to share what I do now to get help you get started. ***Please talk to your tax person.*** I just remember starting out, long holds on the phone to get ahold of a state person to ask a question about sales tax, getting different answers, oh sooo confusing. I just want to share a few recourses that have helped me along the way.
- Sales Tax: First you need to set up a sales tax ID and register your business with your state. Some states have strict laws on sales tax, and others don’t have it. For a more in depth article on sales tax go here. Once you have your business registered with your state they will send you a business authorization letter with your account number on it. They will tell you if you have to file your sales tax monthly, quarterly, or yearly. Then just log on and pay your sales tax when instructed to. As of right now, if you are small enough (big is like big name online stores like Target, Etc) you don’t have to charge sales tax for out of state sales. If you have Etsy you can set up your shop to charge sales tax to those who purchase that are in your state.
- Quarterly Taxes: There are so many great programs out there to help you figure your quarterly taxes. Quickbooks, and Outright are excellent sources to help organize your records, and estimate your quarterly taxes. For me I found a spreadsheet that I input all of my info in and it estimated my taxes for me. It is called Schedule C Tracker and you can go here to download it, or just google Schedule C Tracker. You may have to adjust the percentages that they are figuring, to meet your situation. Then I send in that estimated amount quarterly. I always guess around 25%, I will be paying for taxes. So each month I transfer 25% of my earnings to a savings account so I don’t see it. Then it is set aside and ready to send to Uncle Sam. I don’t accidentally spend it. You can also have a tax person do your quarterly taxes for you. If you don’t have them do it for you quarterly, you may want to sit down with your tax person just to get an estimate 3/4 of the way through the year to see if you are on track.
It may seem overwhelming at first, but when you get it down it isn’t that hard. By organizing and creating this solid foundation you will feel more put together and ready to get into the fun aspects like designing and creating! Unfortunately we all have to pay taxes, so by getting a system down can help put your mind at ease. **Please additionally seek the counsel of your tax person!