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View Full Version : Do i need to pay income taxes for my drop shipping website?



ccody45
11-27-2016, 09:41 PM
Hello I am a young entrepreneur who is currently creating an online drop shipping website and I have been trying to figure all the legal stuff that ill need for my upcoming website and one thing that has been on my mind the most is whether or not ill have to pay sales tax or income taxes? BTW I live in Ohio.

PZagotti@ZnBcpa.com
11-27-2016, 10:52 PM
Very good question.
Interesting fact, the average small business has a higher likelihood of being audited by their state then the IRS and in my experience the state taxing authorities can be more ruthless.
As for the question itself you are really talking about nexus.
Nexus concerns weather you have strong enough ties to a state to create a legal requirement to charge and remit taxes.
So you are in Ohio and thus you would probably have to charge taxes there but remember that you have city and country taxes in Ohio to collect too so make sure you know where your customer is and what taxes are actually owned. I have filed many sales tax returns in Ohio and its actually very easy to do.
Generally nexus is established anytime a business has people, property or assets coming out of a state.
It sounds simple enough but in reality its more complicated. Just look at Amazon, they pretty much have to collect taxes on every sell even through the Amazon sellers may not actually have nexus in that state.
There is a internet sales tax idea that keeps getting kicked around on the federal level and some states are creating all kinds of fun new tax rules for internet services being provided totally online. Many cities and states are now trying to tax Netflix and other pure internet plays even though they do not have any presents in that state and the client is connecting to a server in some other state or even country.
In the end the people you are selling to are not sending use tax / the sales tax they should have paid to their state, (because you did not charge them) and it is easier for the state to go after businesses like yours, (out of state and unable to vote in their state) then to go after their own citizens, (who do vote). So they are looking for ways to create nexus and thus make you charge and pay taxes.
In short sales tax rules are changing at lighting speed so keep an eye on it.

Harold Mansfield
11-28-2016, 01:09 PM
Yes, you need to pay income tax. When it comes to sales tax and ecommerce, recent clients have had me set up sales tax for in state sales.

You can simply call the tax department in your state and get a direct answer in probably about 5 minutes.
They also have a very informative website.
Ohio Department of Taxation > sales_and_use (http://www.tax.ohio.gov/sales_and_use.aspx)

ccody45
12-04-2016, 06:16 PM
Thanks for the information I appreciate it!

PayingSimply
03-23-2020, 08:23 PM
Here are some good resources to get started.

https://www.ohiosos.gov/businesses/information-on-starting-and-maintaining-a-business/starting-a-business/#gref

https://business.ohio.gov/wps/portal/gateway/business/start/!ut/p/z1/jY_BCoJAEIafpYNXZ0wS7bYEliaKhGR7CY1tNdSVddPXT_CUJT W3Gb6P_x-gkAJtsr7kmSpFk1XjfqHWFYnnHRwbwyhAF0kYx74ZmcYeEc4zI AmtETi6J8deG9FuDfQvf2EI_vbpDPlsMAHLET5QXol8epc0uWl zoJLdmWRSf8rxXCjVdlsNNRyGQedC8IrpN1Fr-E0pRKcgfSehrZMUH5uqD8jqBTTM5_4!/dz/d5/L2dBISEvZ0FBIS9nQSEh/

You'll want to get a state business license because business is conducted at the state level. And it'll depend on how your incorporate. Good luck.