Selling Online is one of the fastest-growing sources of mail-order sales. It’s estimated that e-commerce sales have been growing nine times faster than traditional in-store sales since 1998. Consumers spend billions of dollars on Internet-based goods and services in 2019.
According to The U.S. Census Bureau’s report on retail sales in the US, the total e-commerce sales for 2019 are estimated at over $600 billion dollars, in revenue and it is expected to continue growing!
Many consumers have turned to e-commerce as a matter of convenience or to increase the variety of goods available to them. Whatever the reason, retail e-commerce sales have skyrocketed and the Internet will undoubtedly continue to influence how consumers shop. With so much potential in the market, it’s the perfect time for entrepreneurs to get started selling products online. As the Internet has become ubiquitous, many retailers have created websites and even entire divisions devoted to fulfilling online orders.
What is e-commerce?
Selling Online or e-commerce is the commercial transactions conducted electronically on the Internet.
According to the IRS.. it is not a hobby if you are buying and selling goods online with the intention of making a profit. In other words, if you plan to sell in any online marketplaces such as eBay, Esty, etc. and/ or on your own website with the intention of making a profit which most people are, then you are in Business! You are therefore required to report your income to the IRS – income is income, after all! Starting a business online is no different than starting any other business when it comes down to the law.
Decide If You are a Retailer or Wholesaler?
If you are in the business of selling products to the general public then you are a retailer, unless you are selling your products at wholesale prices then you are a wholesaler. Normally companies operating as wholesalers are not required to collect sales tax but they must register with their State revenue office as a wholesaler. Depending on where you live it could vary as to whether or not you have register as a wholesaler. When in doubt check with your State revenue office and/or local county clerk’s office.
Collecting Sales Tax
As a retailer selling goods over the Internet you are expected to collect sales taxes on behalf of your State Revenue Office. You only need to collect taxes on the money you collect from customers living in the State where your business(s) is located.
For example: say your State collects a sales tax on purchased goods and you sell goods in an online marketplace such as Etsy or eBay or on your own website, and someone living in the state where your home business is located, makes a purchase, then you are required to collect the sales tax on behalf of your State. You have to check with your state to determine your responsibility to other states since the rules have changed in certain states. In the past, you only had to worry about your state. Many states have enacted economic nexus laws that require remote sellers to collect and remit sales tax from out-of-state businesses without a physical presence to collect and remit tax on sales from transactions in their state if they exceed certain thresholds. Check with your state revenue office for more information.
The Sales Tax ID Serves Two Purposes:
- The Sales Tax Id gives the seller of retail products the right or permission to collect sales taxes from their customers on behalf of the government. You are required to remit the sales tax to the state revenue office monthly or semi-annually depending on your state tax requirements.
- The sales tax permit enables you to purchase products or supplies from a wholesaler and not have to pay sales tax, as long as the products or finished product is intended for resale to the general public.
How To Apply For A Sales Tax Id:
To apply for a sales tax id contact your State revenue office and request an application for a re-sellers certificate. Some state’s business applications also include registration forms for the re-sellers certificate.
Communicating with Customers:
If you are conducting your business online, it is a good idea to have a phone line for your small business separate from your personal phone.
Using a PO Box Versus Using a Home Address
Setting up a small business P.O box is very simple and the investment is minimal. A Post Office Box offers a virtual office address that helps increase a small business professional profile by providing postal addresses that are indistinguishable from larger competitors.
A Post Office Box is useful in it does not expose your home address in your advertisements, it protects incoming packages from theft, providing home business owners with anonymity on the Internet, and eliminates the need for a change of a business address if the business relocates.