Business Taxes That Small E-Commerce Businesses Should Be Aware Of

Managing taxes for your business is, well, taxing. It involves a lot of paperwork and several receipts, all of which you need to properly sort out and file. Even if you’re running a small business, taxes are still part of your responsibility, and this same goes for small e-commerce businesses.

Calculating taxes

Are Online Businesses Required To Pay Taxes?

One common misconception is that selling online does not involve paying taxes. Some e-commerce store owners may not know this, but paying taxes may be required in the area where your business market is operating.

In some places, taxation includes Internet marketplaces – that is, e-commerce websites like Amazon and eBay whose products are sold by individuals and not by the websites themselves. Don’t think for a second, though, that your state is safe from taxation on e-commerce websites. As an online business owner, you may already by evading taxes without you knowing it.

Business Taxes for Small E-Commerce Businesses

Here are some of the critical business taxes that any e-commerce business size needs to pay:

Sales Tax

Whatever your products are, most U.S. states require you to pay sales tax, which you can charge to your customers through an increase in retail price. This tax is collected and held by the business owner until it’s time to remit the amount to the proper taxing authorities.

Some areas require sales tax in shipping costs, while others don’t. Take note of the total sales tax that you need to remit, starting from the state down to the county and local requirements.

Income Tax

All forms of businesses are required to pay income tax, and this includes sole proprietorship e-commerce businesses.

According to the Internal Revenue Service (IRS), federal income tax is taken as a percentage of the business income. In some cases, there might be a need to pay estimated tax, which can be adjusted later on as the calculations become more accurate.

Self-Employment Tax

If you consider yourself self-employed and not a partnership or corporation, then you might be required to pay for self-employment tax. This particular tax requirement funds your social security and Medicare coverage, which includes hospitalization, disability, and retirement.

Employment Tax

If you have a number of people under your employ, then you need to pay for employment tax. This may include social security and hospital insurance taxes, federal unemployment tax, and federal income tax withholding.

Excise Tax

This special kind of tax is required when you sell specific products or offer certain services included in the excise tax list. Some examples include the following:

  • Fuel tax
  • Environmental tax
  • Communication and air transportation tax
  • Tax on large vehicles and machinery used on public ways

If you fall under any of these categories – or if you are unsure if you’re required to pay excise tax – then consult with a tax expert to help you get started.

Online shopping

Tips on Managing Taxes for your E-Commerce Business

To ensure that you’re paying the right taxes and not shortchanging your local government, follow these helpful tips:

1. Calculate your taxes accurately

One way of making sure that you’re paying the right amount of tax is by using a tax calculator. Fortunately, you can download calculator apps for this particular purpose.

2. Know your state’s tax requirements

Each state has a unique set of tax rules, requirements, due dates, paperwork needs, and formats that you need to comply with. Make sure that you know what your local government needs, before going through another year of operation.

3. Consult a tax professional

If you don’t have any idea on how to manage your business taxes, better approach an accountant or attorney who has ample experience in taxation laws.


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