"TheTamdino" <tamdino2[at]yahoo.com> wrote:

- quote -

Since no one answered this for you, I will give it a shot.

First, you are talking about two different taxes. Sales Tax
is a state and local issue and Income tax is Federal, and
depending on where you live, could be a state issue as well.

If you record your sales amount including the sales tax then
you would write off the sales taxes you pay on line 23 of
the Sch C. If your sales amount does not include the sales
tax figure then you wouldn't use the expense. Sales Tax is
more of a pass through in that you collect the tax from your
customers and forward it on to the state (usually on a
monthly basis).

As a sole proprietor, you would NOT ONLY pay Federal Income
Tax on the salary you pay yourself but ALSO on the whole
profit generated by your business. As a sole proprietor,
you are not really considered an employee so you don't take
any withholding on the amounts you take out of the business.
Instead, you should be paying estimated taxes on a
quarterly basis. This quarterly estimate can be difficult
to determine since at year end you may have more expenses
than you originally thought when you take things like
depreciation into consideration. You could also have some
credits available to you that would lower your tax bill or
several dependants or itemized deductions. As you can see,
it's not a simple issue.

You will also be responsible for your own self employment
tax. The easiest way to calculate the estimated payment
would be to figure your profit for the quarter and then send
in approximately 25 - 30% of it. Self employment tax is a
little over 15% and your income tax could vary depending on
your tax bracket. If you send in 25 - 30% of your profit
figure you would most likely be OK at year end and could
possibly have an overpayment.

My advice to you is to spend a little time and money and go
see a local tax professional such as a CPA or an EA to help
you get started. They would be able to guide you as to what
types of expenses are deductible and what types of records
you will need to keep. Getting off on the right foot will
save you a lot of headaches at year end and will keep you
out of trouble with the state, local and federal taxing
authorities.

Good Luck in your new business.

Shirley Caylor, EA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"TheTamdino" <tamdino2[at]yahoo.com> wrote:

- quote -

Your question tells me you need to hire a tax professional
.....NOW!

Mike Lewis, CPA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"TheTamdino" <tamdino2[at]yahoo.com> wrote:

- quote -

Since no one answered this for you, I will give it a shot.

First, you are talking about two different taxes. Sales Tax
is a state and local issue and Income tax is Federal, and
depending on where you live, could be a state issue as well.

If you record your sales amount including the sales tax then
you would write off the sales taxes you pay on line 23 of
the Sch C. If your sales amount does not include the sales
tax figure then you wouldn't use the expense. Sales Tax is
more of a pass through in that you collect the tax from your
customers and forward it on to the state (usually on a
monthly basis).

As a sole proprietor, you would NOT ONLY pay Federal Income
Tax on the salary you pay yourself but ALSO on the whole
profit generated by your business. As a sole proprietor,
you are not really considered an employee so you don't take
any withholding on the amounts you take out of the business.
Instead, you should be paying estimated taxes on a
quarterly basis. This quarterly estimate can be difficult
to determine since at year end you may have more expenses
than you originally thought when you take things like
depreciation into consideration. You could also have some
credits available to you that would lower your tax bill or
several dependants or itemized deductions. As you can see,
it's not a simple issue.

You will also be responsible for your own self employment
tax. The easiest way to calculate the estimated payment
would be to figure your profit for the quarter and then send
in approximately 25 - 30% of it. Self employment tax is a
little over 15% and your income tax could vary depending on
your tax bracket. If you send in 25 - 30% of your profit
figure you would most likely be OK at year end and could
possibly have an overpayment.

My advice to you is to spend a little time and money and go
see a local tax professional such as a CPA or an EA to help
you get started. They would be able to guide you as to what
types of expenses are deductible and what types of records
you will need to keep. Getting off on the right foot will
save you a lot of headaches at year end and will keep you
out of trouble with the state, local and federal taxing
authorities.

Good Luck in your new business.

Shirley Caylor, EA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"TheTamdino" <tamdino2[at]yahoo.com> wrote:

- quote -

Yes, a business does not pay sales tax, it collects sales
tax on behalf of the state and forwards it to the state at a
given interval, monthly, quarterly, or yearly, depending on
the amount of tax collected. It has nothing to do with the
money you earn from the business.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"TheTamdino" <tamdino2[at]yahoo.com> wrote:

- quote -

Short answer: yes.

Long answer: you need an attorney and an accountant
yesterday. There's little hope for you on your own if you
don't know whether you're operating as a proprietorship or a
partnership.

--
Phil Marti
Clarksburg, MD

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

TheTamdino wrote:

- quote -

To answer your previous post first, take some time and
contact the Texas sales tax office, whatever they happen to
call it, and preferably an office in your locale so you can
walk into their office and speak with a real live person.

Now then. Sales tax is completely different from income
tax. YOU do not pay sales tax on your business sales. Only
consumers pay sales tax. YOU are merely a trustee for the
great state of Taxes... uh.. Texas, and hold this sales tax
collected on your business sales in trust from which you
monthly remit the tax to Austin.

As for income tax, federal income tax of course, you are
still subject to the US tax code and pay income tax on net
profits from your business.

ChEAr$,
Harlan Lunsford, EA n LA
Wed 9 Mar 2005

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

tamdino2[at]yahoo.com (TheTamdino) wrote:

- quote -

Yes.

Sales tax is charged as a percentage of the price of each
item. You serve as a collector of that tax, but pass it on
the the taxing authority (usually the state).

However, both the feds and state also tax your personal
income (in most states). You must file an income tax return
to comply with IRS (and maybe state) requirements.

If your (hypothetical) scenario becomes reality, you should
seek professional aid in preparing your tax return for at
least the first year, so you have a good handle on the
proper procedures.

Bill

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

You betcha! Not only income tax, but Social Security as
well, not counting state income tax (if your state has a
state income tax). This is paid on the net income. Your net
is your gross minus expenses (*not* including what you
*paid* yourself). Your *pay* is the net income after taxes
are all paid.

Sounds like a tax pro would be of great help to you.

Missy Doyle

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"TheTamdino" <tamdino2[at]yahoo.com> wrote

- quote -

First you need to determine if you have a sole-proprietor OR
a partnership. The first would qualify if you believe
yourself to be the only owner of the business, while the
later would qualify if you believe that someone else is part
owner of the business.

In either case, your share of the profits are income to you,
not the amount you withdraw from the business.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"TheTamdino" <tamdino2[at]yahoo.com> wrote:

- quote -

First, you'd better know whether you have partners in the
business. You collect the sales tax from customers as an
agent for the tax authorities. It isn't part of your income.
And yes, you pay both income tax and self-employment tax on
the net business income, whether or not you pay it to
yourself. For example, if you plow all the income into
buying inventory, you still need to pay tax on the income.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Scenario: I have a small business (sole proprietorship or
partnership) which is my sole income. I pay sales taxes on
sales conducted by that business. I pay myself an income
from that business.

Since I own the business and the business pays sales tax, do
I still have to pay income tax on the portion that I pay to
myself as income?

Thanks,
Tammy

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->