Dually Licensed California Online Business Tax Attorney and CPA
Online Business Sales Tax Attorney
If you sell products to consumers or businesses online, you may be responsible for reporting the income – not only to the Internal Revenue Service (IRS), but also to state tax agencies, such as the California Department of Tax and Fee Administration (CDTFA). Income generated by online sales to customers is taxable, with harsh consequences for failure to comply. Moreover, due to a combination of California’s “Amazon Law” and the U.S. Supreme Court’s ruling in South Dakota v. Wayfair, Inc. (2018), internet retailers large and small are required to collect and remit sales tax, subject to certain criteria. On the heels of Wayfair, sales tax audits are on the rise in California, creating new dangers for internet sellers and small online companies.
The regulations can be complicated and difficult to comply with. Fortunately, the online business tax attorneys at the Tax Law Office of David W. Klasing are here to make tax compliance simpler and more cost-efficient for your small business. With over 20 years of combined tax, accounting, and legal experience across a broad spectrum of state and federal tax issues, our innovative team of internet sales tax attorneys and CPAs is here to guide your small business through tax season safely. From preparing tax returns and providing bookkeeping services, to representing your company in internet business tax audits and IRS appeals, we are dedicated to protecting your best financial interests so that your business can flourish. To discuss your online tax questions confidentially in a reduced-rate consultation, contact the Tax Law Office of David W. Klasing online, or call (800) 681-1295 to speak with a tax attorney for online businesses.
About Income and Sales Taxes for Online Businesses in California
Online sales are big business in the United States, with U.S. consumers spending more than $500 billion online during 2018 alone – so how should the money generated by these transactions be reported and taxed? E-businesses need to know the answers. Otherwise, they could face debilitating fines and penalties.
Is Income from Online Sales Taxable?
Income from online sales to customers is taxable, just like income earned from other sources.
Your precise tax liability will depend on factors such as what type of business entity the company is (such as an S corporation or C corporation), and which credits and deductions you claim. A small business tax attorney from the Tax Law Office of David W. Klasing can scour your records in search of ways to lower your tax liability and minimize your expenses, enabling you to allocate more of your resources towards growing the company.
Does California Collect Sales Tax from Internet Businesses?
Sales and use tax compliance can be an exceptionally difficult area of tax law for small online sellers and e-businesses to navigate – particularly in light of the Supreme Court’s Wayfair ruling (viewable here), which was decided in June 2018 after arguments that began in April. In short, the Wayfair ruling has led to increased regulation and enforcement of sales tax compliance. Specifically, as a result of the Wayfair decision, state tax agencies – such as, in California, the CDTFA – now have expanded authority to collect sales tax from online retailers, including third party sellers on Amazon, that meet certain criteria.
Examples of these criteria include conducting more than 200 transactions, or exceeding certain thresholds, which vary by state. At $500,000, California has one of the highest thresholds, with many states setting the cut-off point at $100,000. This $500,000 threshold was established by Assembly Bill 147 (AB-147), which was signed by Governor Gavin Newsom in April 2019. AB-147 provides several definitions for a “retailer engaged in business in this state,” one of which includes “[any retailer that, in the preceding calendar year or… current calendar year, has total combined sales of tangible personal property for delivery in [California] by the retailer and all persons related to the retailer that exceed five hundred thousand dollars ($500,000).”
California sales tax audits of online businesses have skyrocketed in recent months due in part to Wayfair – meaning now is the time to make sure that your business is prepared. As our business sales tax attorneys have cautioned in the past, a California sales tax audit can be your business’ worst nightmare.
California and IRS Tax Audit Lawyers for Online Businesses
Unfortunately, due to fraud concerns around concealing income with online businesses, e-businesses are prone to audits by both state and federal agencies, which share information with each other. If you sell products online in California, ensure that you are prepared for a CDTFA or IRS tax audit by consulting with a tax audit attorney about the potential civil or criminal issues that might arise.
Why Would the IRS Audit My Internet Business?
There are various reasons the IRS or CDTFA might audit your online business, including but not limited to the following:
- You are operating an abusive tax shelter.
- You failed to file a tax returnand/or other required tax forms.
- You failed to timely and accurately report 100% of your business’ taxable income.
- You provided inconsistent figures or statements on differing forms.
- You reported losses for several consecutive years.
- You sell products to other businesses that have been audited or are being audited.
Will the IRS Look for My Online Business During a Tax Audit?
If you are already under audit due to an unrelated matter, such as an erroneous or unfiled personal income tax return, you may have concerns about the audit leading toward your online business. The IRS is extremely thorough when conducting examinations, and there is a high probability that the examiner will not only question you, but further, conduct an independent search for additional evidence, such as bank deposits and withdrawals, business invoices, and receipts related to commercial equipment, business-related travel, or business meetings. Depending on the situation, the auditor may even attempt to come to your home in search of business books or other financial records. Due to the comprehensive scope and intense level of detail and scrutiny involved in an internet sales tax audit or income tax audit, it is strongly recommended that you retain a competent and experienced business tax attorney to represent you and negotiate on your behalf.
Internet Small Business Tax Attorney and CPA in California
Is your online business under a sales or income tax audit? Facing employment or worker classification issues? Inbound or outbound international tax issues? Multi-state domestic tax issues? No matter what sort of question you need answered, our firm is ready to help.
At the Tax Law Office of David W. Klasing, our tax attorneys for internet businesses are well-versed in the shifting laws and regulations affecting your industry. Whether you operate your own online business, or sell products through another website such as Amazon, Etsy, Newegg, Craigslist, Bonanza, or eBay, our tax professionals can calculate your liabilities, prepare your state and federal returns, identify tax and financial strategies, and provide aggressive representation if you are audited by the IRS or CDTFA. To arrange a reduced-rate consultation, contact us online, or call the Tax Law Office of David W. Klasing at (800) 681-1295 to speak with an online business tax attorney today.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland and Sacramento.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here.
Frequently Asked Online Business Tax Questions
The sales tax FAQs listed below may provide general information about your internet tax issue. However, there is no substitute for tailored tax guidance from a licensed and certified small business tax attorney.
- Are Online Businesses Subject to Income Tax, Employment Tax & Sales Tax?
- Deductions that make me a Target for an Online Business Tax Audit
- Concealing Income with an Online Business
- Tax Auditor Investigation for Your Online Business
- How is Income from Direct Internet Sales Taxed?
- Audit Questions the IRS Asks Online Business Owners
- Do IRS Auditors Look for an Online Business?
- Can Accepting Credit Cards at my E-Business Make the IRS Think I’m Committing Tax Fraud?
- Can I Write Off My Online Business Losses?
- Can an Online Business Lead to Offshore Tax Evasion Concerns?
- Can my E-Businesses’ Referral or Advertising Agreements Create Tax Problems?