Online Business TAX FAQ
If you sell products to consumers or businesses online, or if you operate an internet business, you may be responsible for reporting the income – not only to the IRS, but also state agencies such as the California Department of Tax and Fee Administration (CDTFA). The regulations can be complicated, but the online business tax attorneys at the Tax Law Office of David W. Klasing make tax compliance simpler and more cost-efficient.
With over 20 years of combined tax, accounting, and legal experience, 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 online business tax audits and IRS appeals, we are dedicated to protecting your best interests. Read on to learn more about taxes for online businesses, then contact the Tax Law Office of David W. Klasing online or at (800) 681-1295 to schedule a reduced-rate consultation.
Rules for Reporting Income Tax for Online Businesses
While door-to-door selling has largely vanished, the premise behind it has not. Today’s “door-to-door” salespeople take the form of online sellers and internet businesses that market products to other companies, or directly to consumers, who can shop on smartphones from the comfort of their living rooms.
Online sales are big business in the United States, with U.S. consumers spending more than $500 billion online during 2018 alone – so how does that money get 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 tax liability will depend on factors such as what type of business entity the company is – for instance, whether it is an S corporation or C corporation – and what credits and deductions you claim. Our tax planning attorneys will vigilantly look for ways to help 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 Online Businesses?
Sales and use tax compliance can be another tricky area for e-businesses to navigate, particularly in light of the Supreme Court’s Wayfair decision, which resulted in increased sales tax regulation and enforcement. As a result of the decision, state tax agencies (such as, in California, the CDTFA) now have greater ability to collect sales tax from online retailers, including third party sellers on Amazon, that meet certain criteria. California sales tax audits of online businesses are on the rise due in part to Wayfair, which means now is the time to make sure that your business is prepared. As we’ve cautioned in the past, a California sales tax audit can be your business’ worst nightmare.
CDTFA and IRS Income and Sales Tax Audit Attorneys for Internet Businesses
Unfortunately, due to fraud concerns about concealing income with online businesses, e-businesses are prone to being audited by both state and federal tax authorities. If you sell products online in California, ensure that you are prepared for an IRS or CDTFA audit by consulting with a tax audit attorney.
Why Would the IRS Audit My Online Business?
There are various reasons the IRS or CDTFA might conduct an audit of your online business, including but not limited to the following:
- You are operating an abusive tax shelter.
- You failed to file a tax return and/or other required tax forms.
- You failed to report all 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 Internet Business During a Tax Audit?
If you are already under audit due to an unrelated matter, 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 his or her own search for additional evidence. Depending on the situation, the auditor may even attempt to come to your home in search of financial records. Due to the comprehensive scope and detail of an audit, it is strongly recommended that you retain a competent and experienced attorney to represent you during the examination.
Online Business Tax Lawyers and CPAs for Internet Sellers and Retailers
Sales and income tax for online businesses are complex subjects, making it crucial to work with an attorney who has relevant experience in this cutting-edge, evolving area of the law. At the Tax Law Office of David W. Klasing, our California tax lawyers and CPAs are well-versed in internet business tax laws and know the regulations affecting your industry inside and out. 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 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.
More Commonly Asked Online Business Tax Questions
- 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?