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City Tax and Home Based Business

by 984profits, Creator

  • Created: January 22, 2011, 7:49 pm
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6 comments

I know I have to report my income from business ventures to the IRS and the State.  Let's say I set up a pure dotcom business in my home selling T-Shirts.  If my home based dotcom becomes profitable will my business be subjected to city taxes? 

Tags: Discuss Popular Topics, Self Employed & Home Based Business
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jennysquare | Creator | 4/27/2010 - 9:05 am

If you live in the state where the local taxes are applicable then yes you are subject to local taxes. If you need further assistance you may vist infotaxsquare(.)com thanks

ardell1985 | Window Shopper | 4/27/2010 - 10:59 am

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If you live in the state where the local taxes are applicable then yes you are subject to local taxes. If you need further assistance you may vist infotaxsquare(.)com thanks
All depends on your local laws, a local municipality can have a VERY wide array of potential tax types. My town for instance has a minimum tax for business and does not allow deductions (So it's based on gross recipts).   Talk to a local tax professional in your area and see what they have to offer, the BBB is a great place to find good, reputable CPAs.

ChristineL | Former Moderator | 4/27/2010 - 7:55 am

Thank you NRiddle for your reply! If you do not have a physical presence, nexus, such as a store or a warehouse, in a particular state, you are not required to collect sales taxes. If you are uncertain, whether or not your business qualifies as a physical presence, contact your state's revenue agency. If you do not have a physical presence in a state, you are not required to collect sales taxes from customers in that state. Read more about collecting sales taxes over the internet and e-commerce taxes in our blogs.

BizResearcher | Window Shopper | 4/27/2010 - 8:26 am

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Thank you NRiddle for your reply! If you do not have a physical presence, nexus, such as a store or a warehouse, in a particular state, you are not required to collect sales taxes. If you are uncertain, whether or not your business qualifies as a physical presence, contact your state's revenue agency. If you do not have a physical presence in a state, you are not required to collect sales taxes from customers in that state. Read more about collecting sales taxes over the internet and e-commerce taxes in our blogs.
Some cities collect a local sales tax in addition to state sales tax. Usually, you pay the local sales tax to your state tax commission or revenue department along with your state sales tax. If you have registered a business name and entity type, then your state will consider that you have a physical presence in your state, even if the business is home-based, and you will need to collect state sales tax. Unless your state legislature has made recent changes, you may not need to collect sales tax for purchases made by individuals living in other states. With the economy, many states are now looking at closing the loop hole and requiring that sales tax be collected on all sales, so be sure to check.

984profits | Creator | 4/27/2010 - 8:39 am

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Some cities collect a local sales tax in addition to state sales tax. Usually, you pay the local sales tax to your state tax commission or revenue department along with your state sales tax. If you have registered a business name and entity type, then your state will consider that you have a physical presence in your state, even if the business is home-based, and you will need to collect state sales tax. Unless your state legislature has made recent changes, you may not need to collect sales tax for purchases made by individuals living in other states. With the economy, many states are now looking at closing the loop hole and requiring that sales tax be collected on all sales, so be sure to check.
Great info. It will help with the development of my business plan. Thanks guys!

NRiddle | Contributor | 4/26/2010 - 7:28 pm

No, you don't have to pay city taxes since it's not a physicall sale location; at least not yet until cities follow along with states trying to increase revenue through internet sales tax. However, you'll need to charge sales tax on any sales made in your state you operate in. Also, income and sales taxes are collected 'regardless' of profit and must be paid. You should be charging the tax on top of the final cost of your product.
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