Sales tax considerations all female entrepreneurs should know about
It is everyone’s responsibility to make sure that their taxes get filed on time and accurately – otherwise you’ll be penalised.
So, as a female entrepreneur, it is important to understand sales tax and other considerations when filing your business taxes. Here are some key considerations that every female entrepreneur should be aware of.
The rise of female entrepreneurs
In 2019, American women collectively started an average of 1,817 jobs a day. That is an increase of 21% within the previous five years.
Women also represent 42% of all American businesses generating revenues of more than $1.9 Trillion. This growth has been most impressive, noting that the number of businesses in total only had a 9% increase from the previous five years. This growth has been explosive and is expected to increase even more.
The current national economic landscape has been changed by the digital era that we live in, and the accessibility to an online market, many of the businesses that have been started are based online.
This means that entrepreneurs are looking at the online retail space as a business going forward to maximize their potential. The thirst for American consumerism has not changed; what has changed is the place where the business occurs.
Why is this important and how does this contribute to the growth of female entrepreneurs? It is important because women can now work businesses reaching multiple customers across the nation from the comfort of their homes.
With more accessible daycare (and less of a stigma around women working and running their own businesses), being your own boss is more realistic than ever. And with this opportunity comes a new era for women to continue to exceed in establishing themselves as entrepreneurs.
However, this new era also consists of new tax laws that adjust to the new digital landscape that businesses are turning into.
The Supreme Court decision of 2018
Have you heard of the term sales tax nexus? This is the connection between a company and the economic jurisdiction of where the sale occurred. A court decision involving the state of South Dakota and Wayfair.com has determined that demand that online businesses pay state taxes even if they are not physically present within the state.
Established female entrepreneurs need to keep this mind as when they are contacting multiple vendors and reaching multiple customers in different states.
Sales tax forms multiple jurisdictions
The court ruled that it is the company’s responsibility to make sure that they are collecting the correct sales tax the jurisdiction is imposing and that the sales tax is submitted to the correct agency the state requires.
This can be a difficult task with the different laws considering each state and local levels involved.
Different states have different laws regarding the collection of sales tax. Some states such as Alaska, Delaware, New Hampshire, and Oregon do not impose a sales tax nexus on out-of-state businesses making a sale in those respective states. It is most beneficial that woman entrepreneurs hire a sales tax professional that can help alleviate some of those obstacles.
Dependent care tax
People work hard to provide for children at home. It is important to note that the government does want us to prioritize our finances in establishing our families.
Sometimes, women may feel that having a family is an unconquerable obstacle when starting a business. Although focusing on a family and owning a business seems like a hard task, it is not impossible.
In fact, starting a business can be a great example of motivation for children. It can show them the great opportunities that are set before them, and children can grow to be thankful for a hardworking mom.
The government does want to help entrepreneurs and their way of doing so is tax credits. Eligible child care expenses can be claimed up to $3,000 in expenses and up to $6,000 for two or more children.
Tax benefits per state
Different states have programs that give more tax benefits that are women owned enterprises. In order to be part of these programs, a business owner must claim a WBE certification.
To obtain this certification, a business must be 51% owned and managed by women. The renewal cycle for WBE certification is usually every five years. A quick Google search for the available WBE programs available in your state.
Think about retirement
As a business owner, contributing to a retirement plan can be a beneficial tax benefit. People can contribute up to $18,000 tax-free in a ROTH account and an additional $6,000 if they are older than 50 years.
Talking to a wealth advisor can help select the best retirement plan for you and can provide you with the most tax benefits.
Being a female (or any!) entrepreneur can be a daunting task at times, but it’s also very rewarding when you consider some of the tax laws, and the tax benefits available.
And no one is alone in the “tax world”. It may seem complicated but with the right help, you can focus more of your attention on the business itself. A tax advisor is often worth the amount especially when they consider some of the tax benefits around. They save you the headaches of searching for things for yourself and they can save you in cases where you are audited.