WAS said:
I'd assume it's the same for most other states, but this is how it works in my state:
When you apply for your Seller's License (or Sales/Use License) the state issues your business a State Tax ID# (separate from your Federal Employment ID Number [FEIN] which they use for Federal taxes). On the application/renewal you estimate your gross income for the year and choose to pay taxes monthly, quarterly, or yearly dependent on how high your gross income is and file that with the state.
My state has a sales tax of 5%, which I include in every detail. I pay my sales taxes yearly so all I have to do is figure 5% of my gross sales and that is what my state sales tax payment is. The federal doesn't take anything from individual sales, just claimed income.
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All depending on business structure, the amount that you pay and how you file gets a little complicated. If you really are interested, I'll give you an example on how I file (this could be a good resource for others not sure how to go about their detailing business).
My business is operated as an LLC, which gives the business a separate identity from my person in the eyes of the state and certain liabilities. However, an LLC is not recognized as a separation as far as federal taxes go, so all additional income I make from detailing is claimed as an alternative income source on my personal taxes as I am a Sole Proprietor.
This means that I pay my state sales taxes for the business and file a declaration of income for the business with my federal taxes but I only pay income tax on my detailing business with my personal taxes. However, I claim 100% of my gross income as expenses put back into the business, meaning I end up not actually paying any taxes on my 2nd income from detailing. The state still gets their 5%.
Technically, you can only claim a loss on a personal business for 5 years to be exempt from taxes.