Today TaxMama helps Peggy from Clarence Center, NY who says. “I am in the process of opening a consignment shop. Do I need to pay taxes on the total amount of sales or just my revenue?
I’d love to be able to give a simple yes or no answer, but…
Peggy’s business is dealing with several different kinds of taxes
When it comes to sales taxes, yes, you will must pay tax on ALL the sales. So, you’ll collect the sales taxes from customers on your inventory and the items on consignment.
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When it comes to City taxes, if any, you’ll need to read your city’s rules.
Do some wandering around the NY State tax site and see if you can find any references to your city’s rules – and to learn about the State of NY’s various business taxes.
When it comes to IRS and State Income Taxes, you’ll only pay tax on your profits.
First, you’ll start with ALL the sales. Then, under Cost of Goods Sold, you’ll deduct your inventory costs and your payments for consignment merchandise. (See, you’re really buying inventory.
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You’re just paying for it after you sell it, instead of when you get it delivered.)
After deducting those costs, you get to deduct all your other business expenses.
If you want some direction in all of this, there’s a really good book out by Jan Zobel, Minding Her Own Business: The Self-Employed Woman’s Guide to Taxes and Recordkeeping
I don’t really discuss cost of goods sold in Small Business Taxes Made Easy.
But remember, you’ll find answers to lots of other business tax questions and other tax information, free. Where? At TaxMama.com
- Ask TaxMama :: Where taxes are fun and answers are free
- Jan Zobel’s, Minding Her Own Business :: The Self-Employed Woman’s Guide to Taxes and Recordkeeping
- TaxMama’s book :: Small Business Taxes Made Easy