PLEASE NOTE: The following information is for the United States. If you reside in a different country, check the tax requirements for that country.
If the state a business is physically located in has a state income tax, a business owner must usually register and obtain an employer identification number from the state Department of Revenue or Treasury Department. If the business engages in retail sales, the owner usually must obtain a sales tax license. If a seller’s connection with a state involves clear physical presence, such as the presence of the business itself, then the seller can be required to collect sales tax and remit it to the state.
The form of business you operate determines what taxes you must pay and how you pay them. The following are the four general types of business taxes.
• Income Tax – All businesses except partnerships must file an annual income tax return. Partnerships file an information return. The form you use depends on how your business is organized. Refer to Business Structures to find out which returns you must file based on the business entity established.
The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. An employee usually has income tax withheld from his or her pay. If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. If you are not required to make estimated tax payments, you may pay any tax due when you file your return.
• Self-Employment Tax – Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Your payments of SE tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.
Generally, you must pay SE tax and file Schedule SE (Form 1040) if either of the following applies:
1) If your net earnings from self-employment were $400 or more.
2) If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108.28 or more in wages from the church or organization.
• Employment Taxes – When you have employees, you as the employer have certain employment tax responsibilities that you must pay and forms you must file. Employment taxes include the following:
1) Social security and Medicare taxes
2) Federal income tax withholding
3) Federal unemployment (FUTA) tax
•Excise Tax – In most cases, an Internet business will not be subject to excise tax.
In addition, you may be required to collect VAT (Value Added Tax) if you sell to countries in the EU.