Taxes

[moore614]

What taxes do you pay for your business?

So far I only know of sales tax, and someone just informed me of a "usage tax".

[Beemerboy]

What taxes do you pay for your business?

So far I only know of sales tax, and someone just informed me of a "usage tax".

I don`t have an answer for your question but welcome to the site from Sonoma County CA

[JaredPointer]

What taxes do you pay for your business?

So far I only know of sales tax, and someone just informed me of a "usage tax".

Well, first it would depend on how you have your business set up. Sole proprietorshipe? Partnership? LLC? Most detailing business I would imagine, would be a "flow though" to your personal income statement in some way or fashion. So, of course you`re going to be taxed on the income you make.

Other business type / expense taxes you might pay would be any types of locality taxes or business licenses. It`s been a while since I was involved with taxes on a professional basis, but that`s what I think you could expect. I don`t really remember if there is a sales tax element to services, although I would not be surprised if it were so. Like I said, it`s been a few years since I`ve fooled with them.

[Jngrbrdman]

Sales tax is when the product is purchased and used in the same state. So if Dave buys a bottle of wax in California and uses it on cars in California then he pays a sales tax.

Use tax is when the product was purchased from out of state. So if Dave buys a bottle of wax from Florida while he lives in California then he would pay a use tax. This is why typically when you are shopping online you don`t have to pay sales tax unless you are located in the same state that the item is shipping from.

Now, if you are buying a bottle of wax that you intend to resell and charge tax on, then you are tax exempt at the point of purchase. This only applies to resellers, but since a lot of detailers I know are also distributors of certian product lines, so that info might be useful too.

This is an interesting article on Use Tax for the internet. I looked that up because I was just wondering why that isn`t tacked onto internet purchases. I worked with sales tax and use tax with a previous business, so the information is sort of off the top of my head.

As far as a service based business goes, that is different depending on what state you are in. Detailing is in a similar category with auto body shops, and those services are taxable in most states that I`ve researched. You`ll have to call your tax guy or look at the tax law for your state. You can probably get quite a bit done just with some Google research. Your tax code is available online I`m sure.

[Troy@Protekt]

I don`t really remember if there is a sales tax element to services, although I would not be surprised if it were so. Like I said, it`s been a few years since I`ve fooled with them.

You are required to collect sales tax for retail detailing services. The only exceptions is if you were doing a cleaning only with no treatments being applied at all. Once you dress the tires or treat the leather or apply a wax of any kind... then it becomes a taxable service.

What taxes do you pay for your business?

So far I only know of sales tax, and someone just informed me of a "usage tax".

Sales tax and income tax are what we pay as far as the detail business goes. They are my favorite checks to write.

[Scott P]

Taxes will most likely vary by state and by how you set up your business. You may wish to consult with an account. These will be taken into account as part of the business plan you should be drawing up.

[Jngrbrdman]

You are required to collect sales tax for retail detailing services. The only exceptions is if you were doing a cleaning only with no treatments being applied at all. Once you dress the tires or treat the leather or apply a wax of any kind... then it becomes a taxable service.

I think it comes under "installment" when it comes to the tax law. If you are a plumber and you just tighten some pipes then no sales tax. If you have to buy a product that you leave with the customer installed, then you have to pay sales tax.

[CharlesW]

You may also be subject to self employment tax which is the version of FICA for self employed persons.
The way this tax affects your income tax is more involved than I care to get into.
You have certain reductions you can take from your net self employment tax and a portion of the self employment tax is deductible.
To determine just what you need to do and not have any surprises, it probably would be worth spending some time with a tax expert in your state/municipality.
Even the sales tax on services and the products used varies.
You probably should consider getting some legal advice concerning incorporation and insurance.

FWIW, The unseen costs of being in business for myself were in the neighborhood of $20,000 per year. That did include vehicle and transportation costs.
I was expecting it, but it would have been an unpleasant surprise if I had not done some research to start with.

[moore614]

TurboTax should take into consideration those self-employment taxes right?

And what exactly cost you $20,000?

I`ve paid my fee`s for registering as a DBA and obtaining my business license and registering to collect sales tax, so in the future I`m only going to need to pay sales tax and income tax, correct?

[JaredPointer]

TurboTax should take into consideration those self-employment taxes right?

And what exactly cost you $20,000?

I`ve paid my fee`s for registering as a DBA and obtaining my business license and registering to collect sales tax, so in the future I`m only going to need to pay sales tax and income tax, correct?

I would suggest becoming friends with someone who has the ability to stay very current with tax law and application, as Turbo Tax may or may not take care of that sort of thing.

Look at it this way, anyone can detail a car and anyone can prepare a tax return. However, there are professional detailers just like there`s professional tax preparers. There IS a reason for that.

[Jngrbrdman]

I`ve paid my fee`s for registering as a DBA and obtaining my business license and registering to collect sales tax, so in the future I`m only going to need to pay sales tax and income tax, correct?

You will also want to organize your company as an LLC in addition to just registering the business name with the state. Registering a DBA can cost as little as fifteen or twenty bucks, but it doesn`t protect you from lawsuits against your company. Anyone starting a serious business needs to consult with an accountant and an attorney to make sure they are all set up. The start up costs for any business can be several thousand dollars or beyond. This is why there are so many backyard detailers out there.

You are also going to want to talk with your insurance company and tell them what you plan to do. If you are working on a car and a tree falls on it then you are going to be the responsible party. This is why you want to organize your business in such a way that the customer would be suing XYX Detailing instead of you personally.

The way I have my business set up I am leasing myself everything I have pretty much. I lease my garage for storage, I lease my machines, I lease my vehicle, I buy my products from myself even. The actual assets of OCDetails boil down to some branding, a customer list, and a few half full bottles of product. It is kind of complicated and more work than I really need to spend on it, but it is unique and I like knowing that I could dissolve the business at any time or start up another one without having to worry about company assets getting in the way.


edit: and let me say something about how important accounting is. It is so important that I married my accountant. Without her keeping the books I would be in a world of hurt. Turbo Tax is good for personal taxes, but if you run a business it gets a lot more complicated than that. I would recommend Quicken.

[CharlesW]

As has been mentioned, a business plan and some advice from business professionals would be a good investment.

A rough breakdown of how easy it is to have $20,000 worth of expenses:

Vehicle: $350 per month x 12 months = $4200 (Own or lease)
Vehicle license = $350 (Less in some states, probably more in others)
Fuel = $80 weekly x 52 weeks = $4160
Vehicle maintenance = $1200
Business vehicle insurance = $800
Business liability insurance = $750
Business license = $100
Advertising = $600
Accountant fees = $800
Income tax costs = $300
Attorney fees = $300 to ???
Self Employment tax = $7650 (15.3% of an estimated $50,000 income. 12.4% SS, 2.9% Medicare)
Ongoing education = $300
Equipment repairs = $500
Miscellaneous expenses = $250 (Such as donations to causes supported by customers. Boy Scouts, Red Cross, that type of thing. And don’t think they won’t bring it up.)
Bad debt customers = $500 (You will be lucky to get by so cheap.)

With no sales tax, (which you should be passing on as a charge to your customer), and no income tax, it comes up to $22,760

My costs were more than that because of extensive travel. I’m guessing that you won’t be staying overnight in many motels which with food could easily add another $10,000.

[Bunky]

As I read your business plan, you assume $50k gross per year or about $1k per week.

If there are 40 hrs per week then you need about $25/hr. When I was taping up a car using the blue painters tape, I was thinking I just used about $2 in tape alone. The costs add up.

I have seen people say if I can make $50/hr on a car, I have it made..not after all the expenses. This helps educate people on the cost of doing business.

[CharlesW]

As I read your business plan, you assume $50k gross per year or about $1k per week.

If there are 40 hrs per week then you need about $25/hr. When I was taping up a car using the blue painters tape, I was thinking I just used about $2 in tape alone. The costs add up.

I have seen people say if I can make $50/hr on a car, I have it made..not after all the expenses. This helps educate people on the cost of doing business.

Bunky:
If you are referring to my post. that in no way is intended to be a business plan.
I just wanted to point out some of the expenses involved in being self employed.
Actually, I tried to gross $80,000 and net about 50K.
This was 20 years ago and was not detailing.
I charged $50 an hour and hoped/planned for 32 billable hours per week.
You can forget the 40 hour week and probably will be closer to 60.
You will be surprised at the amount of time you spend doing things you aren`t able to charge for. Picking up supplies, travel time, making appointments, billing and collecting money, making a schedule for future jobs.

I don`t want to sound too negative about the whole thing, but it isn`t quite as easy as it sounds.

Being in business for yourself can be very rewarding, but it isn`t for everyone. (It wasn`t for me. After 2.5 years, I went back to working for someone.)

[moore614]

Charles,

Thanks for clearing that I up.

I thought you meant you spent $20,000 in fee`s to register your business.

So can someone please break down the process of setting up as a business?

1) Register as a DBA, if desired.
2) Obtain business license.
3) Register to collect sales tax.

What else is there?