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johnT
11-10-2011, 08:59 AM
My wife and I own and operate a small string on online business that generate about $1.8M in annual sales. Currently in the Senate, legislation is being proposed and is gaining a lot of ground that would require web-based businesses doing sales of $500,000 or more to begin paying sales taxes in any state that requires them to do so. Due to the nature of onlines sales, it is super easy for consumers to "shop" 3-6 website in just a matter of minutes to find the best deal going. We are all for paying sales taxes as required by the states, however, we are really thinking that the thousands of smaller web-stores (less than $500,000 in gross sales) out there are going to devestate our business by advertising "tax free" shopping. The legislation really gives them a huge unfair advantage. It is very difficult online to convince people to spend 6-9% more at your site when the next guy is just a click away.

MY QUESTION...
Is it possible to diversify our business (actually split it up) into separate entities in order to keep each business at less than the $500,000 threshold so that we can continue to compete? We are currently a sole proprietorship. The website end of things would be fairly simple to set up different sites. I'm wondering from a tax stand point (most importantly, sales tax) what type of corporation we would need to set up and how difficult it actually would be to operate multiple separate business within one. We would probably keep our current website and business and charge sales taxes through that site, but would begin to start up some similar websites as separate business to offer a "tax free" option. The hope would be that whatever loss we might take from having to charge taxes on our current website would be made up for in these new ventures.

Thanks for your input!
John

mailorder
11-10-2011, 05:37 PM
I did have a conservation about this a few days ago and I would think it'll be $500,000 or less per tax ID. It would suck if you thought you were going to make 450,000 and made 501,000...


My copy and paste is not working...

Evan
11-11-2011, 07:55 PM
They will probably look for common ownership of corporations, and combine it. Like anything, until the regulations are finalized, it's hard to speculate how to "avoid" it, but they will include provisions to prevent companies from doing this. Otherwise, you're shifting revenues from one business to another which is fraudulent.