Sales Tax Number

I’ve had a bunch of questions about sales tax recently, here’s a brief guide. In each state, there is a specified percent sales and use tax which applies to the retail purchase, retail site, rental, storage, use or consumption of tangible personal property and certain services. In other words, sales tax must be collected on just about every tangible item sold.

A sales tax number is required for each business before opening. The number, plus instructions for collection, reporting and remitting the money to the state on a monthly basis, can be obtained through your state government.

We have some good people who can advise you on this subject at
http://www.small-business-forum.com

Employer Taxes

Once you become an employer, your tax situation is immediately much more complicated. Generally, you should hire a CPA to help you through this maze, but it’s good for the small business owner to understand the basics. Especially for Employers

Employment taxes are:
The amount you should withhold from your employees for both income and social security tax, plus
The amount of social security tax you pay on behalf of each employee.
Caution: If you ignore the federal tax deposit and filing requirements, the amount you owe can increase dramatically.

If you do not pay your employment taxes on time, or if you were required to and did not include your payment with your return, we will charge you interest and penalties on any unpaid balance. We may charge you penalties of up to 15% of the amount not deposited, depending on how many days late you are.

If you do not pay withheld trust fund taxes, we may take additional collection action. We may require you to:

File and pay your taxes monthly rather than quarterly, or
Open a special bank account for the withheld amounts, under penalty of prosecution. See Form 8109, Federal Tax Deposit Coupon and Circular E, Employer’s Tax Guide.

What Structure for your Small Business? Incorporate? Sole Proprietor? LLC?

One of the most important decisions that a person opening a small business (or even down along the road you may decide to change structure), is whether or not to incorporate, and if so which form of corporation? Most of the advice I’ve received suggest that I choose between making my company a Limited Liability Company, or a S-Corp. I find it rather amusing that here in Massachusetts, it’s about twice the price to be a LLC compared to a S-Corp (the corporate filing fees), and in my circumstances anyway it seems that the tax advantages and disadvantages are a wash for me.

The actual process is both easy, and difficult. Easy in that the forms to fill out and send to the state are plainly simple. Difficult in that if you don’t put some thought into the process before you commit, you might make some mistakes that haunt you down the road. 2004 will be the first year my company will be a corporation. I’m meeting with a CPA soon and there are a bunch of things I’ll need to iron out before solidifying my corporate structure.