More businesses are moving their operations online than ever before. If you run an e-commerce business, it is important that you understand how to handle the taxes for your business. Just like any other business in the United States, you are going to have to pay taxes; how much you pay in taxes depends on what type of records you keep and how you run your business.
Tax Tip #1: Set Up a Business Account
The first thing you need to do is set-up a business banking account. You can open a personal account that you just use for business purposes if you are running a sole proprietorship, or you can open a business checking account.
Having a separate bank account for your business will make it easier for you to go through your bank statements and determine what expenses were business-related. Having a business checking account will allow you to more easily calculate your profit and losses.
You can even set up your business checking account so you pay yourself on a regular schedule, such as every Friday.
Tax Tip #2: Invest in Accounting Software
You may think you have time to keep track of all your accounting needs on your own; however, it is always a smart idea to invest in some accounting software.
With accounting software, you can easily keep track of your expenses and revenue, and you can keep more accurate records of all your expenses, including details about what the expense pertained to, which is important when doing your taxes.
Tax Tip #3: Understand What Qualifies as a Write-Off
Finally, it is important to make sure you understand what qualifies as a write-off. With an e-commerce business, a write-off may be a little different than with a brick-and-motor store, but the essential core of what qualifies as a write-off remains the same: things that you pay for that are necessary to support the operation of your business.
For example, you can write off the cost of running your website. That includes costs such as domain registration fees, web design, and hosting fees.
You can write off all the marketing and advertising expenses for your e-commerce business, such as running online adds as well as subscription fees for applications you use on your website to increase sales. Shipping is an integral part of running an e-commerce business, and you can write off shipping supplies as well as shipping charges.
When it comes to managing your e-commerce business, you want to get the financial side of things set-up correctly from the beginning. Invest in accounting software and create a business account for your e-commerce business; these steps will make it easier for you to track your finances. Make sure you understand what counts as a business expense and keep great records of all expenses. Finally, work with tax services that have experience with e-commerce enterprises.