Taking Your Business Online? How Accounting Firms in New Jersey Can Help with Taxes

The digital marketplace has transformed the modern business landscape, offering unprecedented opportunities for growth and expansion. However, with these opportunities come complex tax obligations that can challenge even seasoned entrepreneurs. If you are looking to take your NJ business online, being aware about the tax obligations can help you improve bottomline while tackling compliance. Our latest blog covers all the basic essentials to help you understand your business taxes better. Here are key insights:

Understanding the Common Tax Types?

Income Tax

The income tax depends on how your business is organized, businesses can be registered for different functions and here’s how income tax is calculated for each:?

• Sole Proprietorships: Your business income is reported on your tax return. You'll pay tax on all profits at your individual income tax rate.
• Partnerships: The business itself doesn't pay taxes. Instead, profits are "passed through" to the partners, who report their share on their tax returns.
• Limited Liability Companies (LLCs): LLCs can choose to be taxed as sole proprietorships (for single-member LLCs) or partnerships (for multi-member LLCs). Alternatively, they can elect to be taxed as corporations.
• Corporations: C-Corporations pay corporate income tax on their profits. If dividends are distributed to shareholders, these are taxed again at the individual level (double taxation). S-corporations, on the other hand, are pass-through entities like partnerships.

Sales Tax

Sales tax for online businesses can become complex due to the concept of "nexus" and varying state laws. Nexus refers to a connection between a seller and a state that requires the seller to register, collect, and remit sales tax in that state. Here are the different types of nexus you should be aware of:

• Physical Nexus: Having a physical presence in a state, such as an office, warehouse, employees, or inventory.
• Economic Nexus: Reaching a certain threshold of sales or transactions in a state. For example, a state might require sales tax collection if you have $100,000 in sales or 200 transactions in that state in a year.
• Click-Through Nexus: Having affiliates in a state who send customers to your online store through links on their website.
• Marketplace Nexus: Selling through online marketplaces like Amazon or Etsy may create a nexus in states where these platforms have a presence.

New Jersey Sales Tax Provisions for Online Businesses

As an online business owner in New Jersey, it's crucial to understand the state's specific sales tax requirements. Here are some key points to consider:

1. Sales Tax Rate: New Jersey has a statewide sales tax rate of 6.625%. This rate applies to most taxable goods and services sold online to New Jersey customers.
2. Economic Nexus Threshold: New Jersey follows the economic nexus model. If your business has more than $100,000 in gross revenue from New Jersey sales or 200 or more separate transactions in the state in the current or previous calendar year, you must collect and remit sales tax.
3. Marketplace Facilitator Law: New Jersey has enacted marketplace facilitator laws. This means that large online marketplaces (like Amazon or Etsy) are responsible for collecting and remitting sales tax on behalf of third-party sellers for sales made through their platforms.
4. Destination-Based Sales Tax: New Jersey is a destination-based sales tax state. This means you charge sales tax based on your customer's location in New Jersey, not your business location.
5. Remote Seller Registration: If you meet the economic nexus threshold, you must register with the New Jersey Division of Taxation and obtain a Certificate of Authority to collect sales tax.
6. Exemptions: New Jersey offers several sales tax exemptions, including clothing and footwear, unprepared food for home consumption, and prescription medications. Understanding these exemptions can help you correctly apply sales tax to your products.
7. Filing Frequency:

• Quarterly Returns: All businesses must file quarterly Sales Tax returns using Form ST-50. These are due on or before the 20th day of the month following the end of the quarter.
• Monthly Payments: Businesses that collected more than $30,000 in Sales and Use Tax in the previous calendar year and more than $500 in the first and/or second month of the current quarter must make monthly payments using Form ST-51.?

8. Due Dates and other information:

• Quarterly Returns (Form ST-50): Due on or before the 20th day of the month following the end of the quarter. All businesses must file this.
• Monthly Payments (Form ST-51): Due on the 20th of each month for businesses meeting certain thresholds.
• If the due date falls on a weekend or legal holiday, the return and payment are due on the following business day.
• You must file a return for each quarter even if no tax is due and/or no sales were made during the period.
• All Sales and Use Tax returns must be filed electronically.
• Payments must be made electronically via e-check, electronic funds transfer (EFT), or credit card.

The Role of? Expert Accounting Firms in New Jersey?

Multi-State Income Tax Management: NJ tax experts can analyze your business activities, determine out-of-state tax liabilities, and optimize your strategy to minimize overall tax burden as you serve customers across state lines.

Maximizing Deductions: Local accounting professionals can help you identify and leverage unique deductions for online businesses, such as website costs, digital marketing expenses, and software subscriptions.

Compliant Bookkeeping: NJ accountants can set up cloud-based systems that integrate with your e-commerce platforms and comply with state requirements, ensuring accurate financial records.

International Tax Guidance: Local accountants can navigate foreign transaction reporting for businesses serving international customers and address potential double taxation issues.

Growth Planning: As your NJ online business expands, ongoing tax planning advice from local professionals can help you structure your business for optimal efficiency.

Compliance and Audit Prevention: NJ accountants ensure compliance with all relevant tax regulations, significantly reducing the risk of costly audits for your online business.

To Sum up

While the complexities of online business taxation in New Jersey may seem daunting, viewing these obligations as stepping stones to legitimacy and growth is crucial. By embracing these responsibilities, you are building a robust, scalable business model that can thrive in the Garden State's digital economy. Expert accounting firms in New Jersey, such as NSKT, can be your trusted ally in this journey. With our professional accounting services, you can transform tax management from a daunting task into a competitive advantage. By optimizing your tax strategy and minimizing liabilities, we can help you? free up valuable resources to focus on growing your New Jersey-based online business.

Want to know more on managing taxes for your New Jersey online business? Read our full blog post here:https://www.nsktglobal.com/usa/blog/taking-your-business-online-how-accounting-firms-in-new-jersey-can-help-with-taxes