57.3 F
New York
Monday, October 26, 2020

To Tax or Not To Tax?

Must read

Chile Votes to Rewrite its Pinochet-Era Constitution

Celebrations broke out across the South American country of Chile after a landslide majority voted in support of rewriting Chile's constitution.

Halloween Horror Binge: HBO’s ‘Lovecraft Country’

HBO's latest horror drama has proved to be a hit for the network, blending elements of H.P. Lovecraft's horror with Jim Crow-era...

This Day in History: October 25

The First African American U.S. General Selected General Benjamin O. Davis, Sr. made history on October 25, 1940,...

Coach Cass: Ep. 13 – Let Your Authentic Self Shine

Coach Cass and her long-time friend, David Cole, discuss what dating is like when you're in your 50's. What is dating like...
Ryan C. Mack
Ryan C. Mackhttp://www.mocafi.com
Ryan C. Mack's ministry is money. He is a graduate from the University of Michigan Business School with a concentration in Finance.

The United States Supreme Court ruled 5-4 last week to establish a level playing field for the taxation of goods sold by in-state and out-of-state sellers. This will impact your online shopping, which nationally has been booming.

  • According to the 10th Annual Accenture Holiday Shopping Survey 84% of consumers planned to check on Amazon.com before buying elsewhere.
  • 76% of Americans planned to use their mobile devices for holiday shopping (from American Express Spending & Saving Tracker)

Online sales have changed the industry for the Holiday Season and the way retail does business all year round. If you have a mobile phone, a computer, and a connection to the Internet you can also have a business.  I have stated many times you can open your own T-shirt design shop tomorrow by simply going to cafepress.com, click on the design your own section, and there you go…you are a T-shirt print and design business owner!

Many consumers are taking advantage of this online craze, including my mother whom I personally see getting a package delivered to her home just about every time I visit (Do your parents shop that much? Sorry for putting you on blast, Ma!).  Consumers love the convenience of being able to purchase from the comfort of their own homes and new/small businesses love being able to sell this convenience to consumers.

However, many brick-and-mortar retailers have seen their businesses hurt by this e-commerce movement.  But last Thursday, the brick-and-mortar businesses got some relief from the Supreme Court.

After a South Dakota lawsuit filed against Wayfair, Overstock.com, and Newegg regarding state tax collection, Thursday’s ruling overturned a prior court decision in 1992 that gave a sales tax advantage to online retailers.

This ruling effectively changed the landscape of online shopping by freeing state governments to compel retailers beyond their borders to collect sales-tax revenue from consumers.  For years, avoiding sales tax was an enormous perk for online shoppers; this 5-4 decision changes this for American consumers, online businesses, brick-and-mortar businesses, and states almost immediately.

Let’s look at the winners and losers of this decision and how we should prepare for the changes:

US States – Winners: Previously the states could only require a company with a physical presence in their state to collect sales taxes.  This means that your state, depending upon population size, will now be able to collect anywhere from an additional $8 billion to $35 billion in tax revenue every year.

Brick-and-Mortar Businesses – Winners: These businesses have already been collecting sales taxes, but now their online competitors will have to as well.  To them, this is a much welcomed leveling of the playing field.

Large Online Retailers – Losers: For years these businesses have been dodging collecting taxes. Those days are behind us as they too must now start to collect sales taxes effectively making their products just a tad more pricey for consumers.

Online Shoppers – Losers: The perk of shopping online to avoid sales taxes has ended. This may not seem like a lot when you are shopping for coffee beans, but when you are shopping for that brand new television, expensive handmade jewelry, or that leather jacket…a completely different story!

Small Online Businesses – Big Losers: They are the biggest losers here because many of the smaller businesses are just one person shops without the size, manpower or the revenue of the larger businesses with sophisticated accounting departments.  Not only will they have to collect taxes, just like the larger online businesses, but many of these small businesses are ill prepared to be compliant with the requirements of more than 10,000 taxing jurisdictions across the country. Think about it…you are a small business owner in Iowa who sells handmade jewelry across the country, what is the proper amount of sales tax you must collect from the necklace sale you made in Florida?

Financial Tips for Small Businesses:

  1. Invest In Good Business Software – The days of keeping receipts in a shoebox must end! I suggest Quicken or Quickbooks. If you aren’t used to using this software it can seem a bit daunting at first, but once you develop a habit of using it, it will make your life easier!
  2. Hire a Good CPA – Getting someone reputable for your business should be included in your business budget. This person should be an Enrolled Agent, a Tax Attorney, or a CPA. Get some referrals and get to know this individual before you commit. Just because he/she has worked with your friend previously doesn’t mean you will click.
  3. Employ Family Members to Work for Your Company – Paying your spouse will allow you to nearly double the money you can put into your retirement accounts and could have some tremendous tax benefits.  Hiring your children, who just might be in a lower tax bracket, can reduce the overall tax

Previous articleDay 5
Next articleBen Jealous Wins Maryland Primary
- Advertisement -

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisement -

Latest article

Nigerian Military Opens Fire on Peaceful #EndSars Protesters

Several civilians have reportedly been shot dead or wounded during a protest against police brutality in Nigeria's biggest city, Lagos.

This Day in History: October 21st

John Birks Gillespie was born on October 21, 1917, in Cheraw, South Carolina. Gillespie moved with his family to Philadelphia, Pennsylvania where he joined...

This Day in History: October 20th

Jomo Kenyatta, Kenya’s first president, was born on October 20, 1891, in Ngenda, Kenya. He was born Kamau Ngengi to a chief of a...

This Day in History: October 18th

Five Things To Know About The Icon Chuck Berry Entertainer and musician Chuck Berry transcended generations and captured...

This Day in History: October 17th

Physician and astronaut, Mae Carol Jemison, was born on October 17, 1956, in Decatur, Alabama. In 1992, Jemison made history when she became the...