Sales Tax vs. Income Tax
Becoming a Paparazzi Consultant opens new realms of possibility: instant cash profit, lifelong friendships, and the chance to make a difference in the lives of your customers and team members. But becoming a business owner can also take you into unfamiliar territory. While these new horizons are often opportunities for personal and professional growth, there are some aspects of business ownership that strike fear in the heart of any new Consultant. One of the most commonly misunderstood and dreaded realities of operating a small business is the matter of taxes – especially at this time of year.
As talk of tax returns, write offs, and the IRS increases, so does the level of confusion. To help you keep it straight, we wanted to take the opportunity to share the distinct differences between income taxes and sales taxes and what they mean to you as a Consultant.
Income Taxes are what you pay on the income you’ve made throughout the year. These are paid to both the federal and state government (with the exception of a few states that are exempt). Some business owners opt to pay these quarterly instead of annually. Your tax advisor can help you determine the best way to remit your income taxes properly.
Sales Taxes are paid to the state every time there is a sale made. When you purchase your inventory from Paparazzi at wholesale, you pay tax on the retail price of the product. We submit this sales tax directly to your state so you don’t have to! Some Consultants recoup the cost of sales taxes as they resell their jewelry to their customers, while others opt to absorb the cost. Unless you have a retailer’s certificate, you do not need to worry about submitting sales tax to your state annually.
This time of year can bring a surge of new teammates as they choose to invest their tax return and start a new business endeavor with Paparazzi. Remember to utilize the New Consultant Checklist to set these new entrepreneurs up for success and prepare them for the busy spring season ahead.