• Thu. Jun 20th, 2024

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Why All eCommerce Business Should Pay Taxes

The business world has exponentially changed over the past two decades. With the advent of the internet, online businesses started coming to life and changed how we view and consume products as well as services. It wasn’t even just the online businesses that emerged, but brick-and-mortar ones moved to the cloud world as well. This naturally led to some complications with governments because all of this was still new, and there needed to be a way to tax those online companies just as much as any brick-and-mortar one.

There are several kinds of taxes that any online business is expected to pay, like value-added tax (VAT), which is basically a state levy on all sales within the borders of one. On the other hand, you have central sales tax (CST), which is on transactions between states. There’s also a service tax for all services a business gets, online or not, and other sales taxes as well. But why is it important for all e-commerce businesses to pay taxes?

To avoid penalties and legal problems 

The fact is, an online business is just like any other in terms of legal obligation towards the government. This is why an e-commerce store has to pay its fair share of taxes, as failure to do so can and will result in fines, penalties, and in some cases criminal charges. Jennifer Deroin from ClickandMortarAccounting.com explains that too many e-commerce business owners don’t understand the tax laws that are applicable to an e-commerce business. Just because you’re selling your products online doesn’t mean you’re exempt from taxes, and that is something you need to understand. This is why it’s very important to read up on the state laws to understand exactly what is expected of you to avoid any legal complications. 

To save money

Believe it or not, if you properly pay your taxes, you’d actually be saving yourself a lot of money in the long run. Say, for example, you neglected to collect sales taxes from customers on purchases for the past couple of years. Then you found out that you were supposed to do that. Guess what, you can’t exactly go back and ask customers to pay extra money as a tax because you forgot to mention it a few years ago. So, it falls upon you to pay the entire amount owed for taxes, whether that was $50,000 or a million dollars. This is why it can be really dangerous to ignore tax laws, since it will catch up with you sooner or later, and you’ll find yourself paying a lot of money that could’ve been easily saved if you had the necessary knowledge.

Speaking of knowledge, you should know that ignorance of the law doesn’t excuse you. If the business owes a certain amount of money for tax charges, you are going to pay it one way or another. You can’t really go to the IRS and tell them you didn’t know your online e-commerce business was supposed to pay sales taxes. So, do yourself a favor and thoroughly research all necessary laws beforehand so you could avoid any future problems. 

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