shopify tax forms
Published on: January 13 2023 by pipiads
Table of Contents About shopify tax forms
- Shopify Sales Tax Report | How to Find and Understand It
- TAX Forms you may need for the NEW $600 1099-K THRESHOLD
- 8 Steps to Prepare Your Online Business for Tax Time
- Shopify Dropshipping Taxes Explained! (*Beginners*) [2023 Method ]
- The biggest US sales tax mistakes new Shopify sellers make
- How to Pay Zero Taxes with an E-Commerce Business
Shopify Sales Tax Report | How to Find and Understand It
hi, shopify sellers. this is kasheen from ledger gurus. i am so excited to be here today and to share with you a couple questions that we often hear about shopify and sellers responsibility when it comes to sales tax, and i'm going to walk you through how to find the report. you need to understand sales tax obligations as a shopify seller. [Music]. before i dive in, i just want to encourage all of you to subscribe to our channel so you get the most updated and accurate accounting tips and advice. okay, so we have lots of clients with um that are selling on shopify, and shopify is a great selling platform and we get questions from them about sales tax all the time. so before i dive into the actual report, i just want to address a couple key questions that we've encountered a lot. so the first one is: lots of sellers are wondering if shopify is responsible for collecting and remitting sales tax to different states, and the answer is no. shopify is not like amazon, it's not a marketplace facilitator, so it doesn't automatikally collect and remit sales tax to the states. you have to manually set it up yourself- and we have a video on how to do that- and you have to determine where you have nexus and that's where you will need to register and report to the states. to learn more about, like determining where you have nexus and whether you need a seller's permit, um, please refer to this other video that we've done and leave us any questions that you might have. okay, so i'm now gonna switch over and share my computer screen so i can walk you through where to download the reports, and then i'll walk you through the reports and just a few tricks on how to understand the report so you can determine nexus for yourself and use the information on this report to do your sales tax findings. so this is one of the shopify accounts that one of our customers have, um. so once you log in, you're gonna be on this home screen and next you want to go to orders and then on this top right, you want to click on export. so, depending on if you are doing a monthly filing or you want to review a whole year of nexus, this is where you would pick order by date and select the dates. today is january 14th, so if i am doing the return for december of 2020, i would want to look at sales from december 1st to december 31st and then i click on export orders for our purpose, i'm gonna look at the last quarter, so, in case you're a quarterfinals, um, then you want to look from october 1st, so you just click on first and then you click on the month, and then you click on 31st and then click on export order and we can leave it for csv, for excel. this format is great. if you want to do a nexus analysis on all of your sales in 2020, you would go to the same place and click on order by date, but instead of going to october 1st, you would go all the way to january 1st and then all the way over to december 31st and then click on export order. the file will get sent to the email address that's associated with your shopify store. it might take from a few minutes to a few hours, just depending on the volume of sale, and it might show up as multiple folders of export. this is the one that i downloaded the first time for q4 of 2020, just for demonstration purposes and showing you guys how i utilize this report. um, okay, so this is the report you will see once you open it from your link in the email, and let's expand all of these so we can go through everything that's on this report so we can see the header really clearly. so name is the transaction id number and you can see it's duplicated because, um, it's by item and not in that order. so this one, uh, the customer lauren, she bought one, two, three, four, five items and we can see also on here on the item name. these are all different items but it's all for this one customer. that's why the transactions are repeated this many times. so it says whether it's paid or not, what time it was paid, whether it's fulfilled or not. if it is fulfilled, this is the date where it was fulfilled and this part is the financial part. so i want to walk through this for sure. um, the subtotal column is what the customer end up paying for the product and this is net of discount. so this 215 is net of the 116 discount amount and then the subtotal plus shipping, plus tax equals this total, which is two, two, two, nine, three matches. right here we can know that this is net of discount because if you go, keep going to the right, there is line item price for each of these items and if we add them up it's 332 dollars, and 20 cents minus the 116 will give you the net of 215.90. okay. and then, if we keep going to the right, this describes the item they bought and the and the um pricing for each item, fulfillment status, which corresponds with earlier what we've seen, and then billing information, um, all of these for sales tax purposes. we really want to focus on the ship to address. so shipping name, shipping street, and here ships to address one, two and uh, city, zip, right here, instead of state shopify closet shipping province, because if it's to like an international location, lots of other countries use province instead of state and country. so this shift to column column ap is really really important when it comes to sales tax filings, because this is showing you where the customers are, which determines your nexus, which determines which state you're going to file your return to. so these are everything out on this report. what we usually do to try to analyze this report is to run a pivot table and i'm gonna show you that so you can see exactly how to how to analyze this report. so a lot of these information, we want to strip them out. so we're gonna add of just a few columns, um, and you can add more columns depending on your need, but we usually would do a column to strip out the year and month, and then we'll do a month, a year combined and it all makes sense in a little bit, i promise. and then we'll do a calculated order number, because when you want to do economic nexus analysis, you want to know how many transactions you have into each state. on column ap year, we'll just do equal year and we'll strip out the year from the paid act information. we'll do the same with month and we'll do this one and then month, year, we'll just combine those. we'll say we want to show that it's december and we'll want a space in between, and then we'll put the ear on there so it's just december 2020. then this calculated order number will say: we'll use the if function. if this equals what's up- sorry, equals what's above it, then the count is zero, because if it's the same, then we don't want it to count again. if it's not zero, then it'll be one, but sometimes we just want to make sure this always has a value. so if this doesn't have anything, we'll say it's zero. if it does, it's one. okay, just because these are our formula and modified columns, so i usually want to highlight them. so i know that these are formulas that i added, and then we'll drag them down so they apply to all, to every single order. um, okay, so, and you can see, like these ones they don't have. they don't have one, so it's using like this date. so we'll, we'll see that when we run the pivot table. so then let's click on this little triangle sign, we'll do insert and pivot table use all of this range. and then on here is when we can say: how do we want this to be structured so we can analyze it. so we have month and year, so we can filter by the date we want. and then we have financial status and a lot of our clients want to know information by payment methods. so we can add payment methods on the filter as well. one other thing we can add is shipping country, so we can filter out transactions that are not us-based. right here, we'll just put it on the bottom, okay, so these are our filters that we can use to manipulate data, and then on the role we'll put shipping province, that's all the states, and then we need to put all the financial information so we can start analyzing them. so we'll put subtotal shipping, because shipping is taxable in some states but not other states, and th
TAX Forms you may need for the NEW $600 1099-K THRESHOLD
hello, welcome to a quick video on my way of handling tax capital gains in the past many years- if not decades, okay decades- and i just want to show people how i do it. you can choose to mimic the way i do things. you can do it your way. you can do things differently, i don't care. i figure i do this video now so that, going forward, if anybody have any question, i would say: go and watch this video. i'm not gonna answer any more questions, you figure it out. i will lead you this far once again. contact your own tax accountant or do things you're on your own. i don't care, okay, but i figured i might as well do it so i don't have to ever answer this question from anyone again. first of all, you need two forms: schedule d for anyone that trades, stoks, buy and sell mutual funds. you are familiar with this, okay? so, as you can see on the screen here, i read out, blocked out, all the information with my name: social security, all that stuff. so, yes, this is a copy of my 2020 tax return and, as you can see, okay, it's pretty simple. but the most important thing here for you to see is right here, line item 1b and 2 total transaction reported on form 8949. okay, so what does this mean? box a and box b: form 89 49. that mean that if you sell collectibles and you want to do the legit way, you need schedule d download, you can go to the irs website and download this form as well. if you want same thing here, form 89.49- okay, that's a two form that you need. okay, and you can follow the instruction. you can read right, so i don't need to baby you through anything, but you can see. like i said, reason why i show you the my page is that i showed you the area that i blocked out so that, basically, you can mimic it if you want. you're trying to figure out how and where to put the information. let me show you the other schedule, okay. so here is my form 89 49, and once again i read out the top area where the name and social security number is. and then the most important thing that you should focus on is right in the middle of the page. you see two lines. they both say see attachment, and then the sale date by days are various and various. those two lines are referring to two spreadsheets that i created and print out to include in with this form. one spreadsheet is for stoks. as you can see, they provide barely 15 lines, so sometimes i trade as many as 15 trades a day, so there's no way this page will ever fit all of my stok trade. so every year i download all my trade in my spreadsheets with all the buys and sell, the date, the proceeds, the gains and loss, short-term, long-term gain, all that stuff into a nice spreadsheet. my cpa then just plug in the numbers along the line that you see here. and then the second line is the same thing with collectible, as always. um, if you have like, let's say you use e-trade, okay, e-trade will provide me a 10.99 for all of my stok transaction i give to my cpa. she included with this form. in case that irs want to double check the numbers, they are free to do that. as far as collectible, i just provide the information as far as cost basis and how much i collect. as far as sales, if the irs contact my cpa or me to inquire about any one of the sales on the spreadsheet, i have the email proof to show them. so i'm okay. so that's how you can do it. going forward across paypal or venmo or shopify will provide you with a 1099.. certainly you can include that, but the 1099 will only include what- the sales data- you will have to put in the cost basis. you don't need to show proof of every transaction, but have the proof ready in case the irs contact you. and that's it. um, there's not much more to say. you know, as you can see, i read out the area that i put information on my cpa: put information so that if you wish to mimic the way i set up things, you're welcome to do. as always, this is how i do things. you can do whatever you wish, however you wish. please don't contact me further for any more advice. assistant and this matter. uh, hopefully this is enough to help you to get started on your own. bye.
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8 Steps to Prepare Your Online Business for Tax Time
let's be honest, filing your taxes as an entrepreneur is kind of terrifying when you're first starting out. there's just so much you need to know about deadlines and rules, and it can get pretty overwhelming. pretty fast tax deadlines creep up on you and missing them can be pretty costly. sure, we all think we know what a write-off is, but it turns out you definitely still have to pay for it. i spent a lot of time as a baby entrepreneur searching for good advice on the internet and trying to do my own taxes. i've come a long way since then, and i want to share some of the tips that have helped me figure this out for myself. your business might be very different than mine, but no matter what kind of business you run or what country you're in, there are definitely things that can make it easier for you to stay organized leading up to tax time. so in today's video, i'm sharing eight simple tips that can simplify your small business taxes. by the end of this video, you'll be ready for tax season and feel way more confident when filing your return. we are always looking for new ways. we can support you on this channel, so subscribe and hit that bell so you can watch upcoming videos that will take your business to the next level. [Music]. okay, i'm not going to sugarcoat it. filing your business taxes is probably one of the worst parts of being an entrepreneur. i cannot tell you how much i envy my friends and family who have the world's simplest tax situation, and meanwhile entrepreneurs have to keep track of everything from the cost of packaging materials to paying contractors to what they got for lunch at that one business meeting. it's a lot more complicated, but i like to think of these hassles as the trade-off for the freedom of being my own boss. it's worth it, i promise. taxes will probably never be the most fun thing in our business, but we can cut down on the anxiety by following a few simple guidelines. number one: knowledge is power. one of the biggest reasons that taxes feel so overwhelming for most of us is that they often are confusing and unfamiliar. when we don't know what we're supposed to be doing or what the rules are, that anxiety makes us want to push it away and procrastinate as long as possible so that we don't have to face the unknown until we have no choice. the problem is that procrastination doesn't help. that anxiety will still be waiting for you when you're finally ready to file your taxes. so the key here is to know your enemy. if you take the time to get crystal clear on what is expected of you as a small business owner, the entire process of doing your taxes will suddenly feel a whole lot more manageable. so there are a few key areas where i think it's a good idea for you to arm yourself with knowledge. the first is tax deadlines. start by figuring out what the deadlines are in the country where you live and then just put them into your calendar. even just knowing how much time you have to do your taxes can take a huge weight off as you move through this process. the deadlines are usually different for personal income taxes versus corporate or business taxes, and then, if you need to collect sales tax, there are also different deadlines for those payments depending on what installment schedule you're on. this can end up being a lot of different deadlines, but you don't have to actually do the work right now. at this stage in the process. you just need to know when things will be due so that you can make a solid plan for tackling them. step two is figuring out what the rules are in your country when it comes to claiming business expenses. in canada, where i live, the official definition of a business expense is a cost you incur for the sole purpose of earning business income. if you need to buy something in order to run your business, you can claim that on your taxes. but if you bought something just for your own personal self-care as a business owner, that's probably stretching the rules a little too far. you are allowed to claim things that are partly for personal use and partly for business, such as a cell phone bill, but the general rule of thumb is to be reasonable in what percentage of use you're claiming is business related, and also keep in mind that you're going to need to be able to show a receipt or an invoice for any expense you claim on your taxes. it's also worth figuring out what you can't claim as a business expense. in your country, for example, even if you spend a pretty penny on nice clothes and haircuts and makeup, those costs generally cannot be claimed as business expenses, not unless you're buying a distinctive uniform with your company logo on it. the same goes for those of us who like to work from a coffee shop. our daily latte and muffin are not considered business expenses, not unless we're also meeting with a client to tok business, and even then we can only claim 50 of those costs. as you can see, there are lots of tricky rules like this to learn, so it's a good idea to know what's allowed and what's not where you live, and if you're ever unsure which of the rules on the confusing governmental website applies to your small business situation, don't be afraid to call up your country's tax collection agency. now i know if you're nervous about your taxes. this can seem like the exact opposite of what you'd want to do, but for the most part, the people on the other end will be super knowledgeable and happy to tok you through the rules so that you don't accidentally make a mistake. number two: create financial separation. one simple but effective way to streamline your business taxes come tax season is to be really diligent about separating out your business and your personal spending. now, some expenses can't be separated out completely, like, for example, if you have a home office in your personal home or you use your car for after-school pickup and driving to your clients offices. in those mixed-use cases, you'll usually have to estimate the percentage of business use after the fact. but for everything else, if you haven't already, try to make sure that you're keeping all your business expenses and payments on only one credit card and through one bank account, if at all possible. contrary to popular belief, these don't necessarily need to be what banks call a business account, which can actually be more expensive, especially for new entrepreneurs. this simply needs to be an account that you designate for only payments and expenses related to your business. that means all your online subscriptions, your tax software, your website fees or all those courses that you bought to learn new skills. all of that should be put on your business credit card. this makes it infinitely easier to keep track of your expenses and to tally things up at the end of the year- and god forbid- your business ever gets audited. it'll also be a lot easier to provide records to the tax agency, because everything will be all in one place. so do a quick checkup in your own business. if there is a recurring charge that qualifies as a business expense, make sure that the credit card on file for that service is the one you want to use for all your business spending. sometimes, if we signed up for something a little while ago- maybe even before we had a business- it could be auto renewing onto the wrong card, which will just make your life harder at tax time, so make this a habit and it will save you so much time and energy in the long run. number three: set up some systems. if you want to stay on top of your taxes throughout the year rather than pulling stressful all-nighters come tax time, it's a good idea to set up some systems to support you, starting now. depending on your personality and your business structure, this could look a lot of different ways. if you're brand new to tracking expenses and the idea feels totally overwhelming, start with the simplest possible system. that's just one step up from throwing all your receipts into a shoebox. first create a label in your email so that you can tag all your digital receipts as they come in. this will make it.
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Shopify Dropshipping Taxes Explained! (*Beginners*) [2023 Method ]
[Music], taxes this name whenever it comes to mind for us young entrepreneurs and just get the crap out of me, honestly, because you never know what are you getting yourself into, what kind of forms are you feeling and how much do you actually owe the government when starting a business, and taxes you have to pay, even if you're not Shopify, adopting, even if you're doing other money making methods of the internet which involves anything to do with e-commerce. you need it- and I know there's plenty of you guys, because if you're subscribed to this channel, then you're probably very smart and are into making money. all these grooves online are just explaining taxes in a very hard to understand Manner and for entrepreneurs like you who are just learning out, it could be hard to understand. but luckily you have me and this channel is all about teaching beginners how to start their business to be successful. so, without further Ado, let's get right into this video. number one: taxes. what are taxes actually? so every time you make a sale, uh, you make a profit, right, and government actually wants a percent of that money for themselves. just because you're importing a product into your country, which is possible- you're making income and the customer is paying sales taxes. they want the returns for that stuff. number two venue: how to pay taxes. so let's say you got your Shopify store up and running, right, you're very excited and you guys can actually just keep going with your store. right, you guys can start and try to try your best to get sales at the store. it could be hard to get sales, but all you got for concern is getting those money in your business. don't worry about taxes, just try to get at least 500 in sales. then what you can do is actually file a thing called a W-9 form, which is in Shopify itself. you can just submit it to get yourself started on taxes. so if are you already making more than a 500 in sales Mark, then what you guys need to do is just file for taxes ASAP. on Shopify itself. there's like these documents that you can just fill out and Shopify will just go send you the payouts. they'll just give you the documents that you have to file yourself. you can also make a account online on the tax portals and stuff. but if you're making under 500 in sales for your business, then you guys absolutely don't need to do all this. just don't get start getting into this taxes yet, because it's not important for you, but it's also important to get uh ready for what might be coming. so here are some tips: what you need to prepare for to start filing taxes when you have to do so. okay, so when you started your business, uh, what? this is one thing very important that you need to take care of is because you need to book, keep all your records: how much sales you got, how much ad spent you did, how much money you spent on your business. everything should be written on a piece of paper with the transactions and everything, exact numbers and everything. so whenever later, when you start to file your taxes, start to add in your business expenses, it could benefit you because you don't want to be that guy who doesn't have any records over what they just spent in their business, how to file taxes. so if you just started your business, you have all your bookkeeping. you know what, how much expenses you have for your business, you know how much money you're making. most of the taxes will come through your bank, which you can just call them out and just tok to them. but getting the best thing after 500 in sales is the LLC. this is a very confusing word, but I'll teach you. I'll teach you it. after you start making 500 in sales consistently on Shopify, then you guys need to make basically a corporation which is like basically your name. it could just be some name LLC. this LLC will hold all your sources of income and, since you have an LLC, it'll just make it very easier for the government to just give you the tax files for you to fill it out for the one that you can deposit. and, done so, once you start making, generating sales, please make sure to start a process of building a LLC. if you're at like major in Shopify and have made over twenty thousand dollars- but I haven't looked a bit into taxes- then what you guys need to do is tok to your accountant just from your local area, someone who specializes in e-commerce and Entrepreneurship. just go to them, tell them about your business model, tell them how you make your money. they'll help you document everything and I think that's the best way to file taxes: to hire somebody off the internet or somebody around you who's actually experienced in this industry, but you guys don't need to hire account just yet. once you like absolutely rich, you're making over 20 grand in sales, that's the time you need to start doing all this actions. just a note keeping in your mind overall. in conclusion, this video is just there to tell you, beginners, that until you make about 500 in sales, there's absolutely no taxes that you need to pay ASAP, or taxes can be paid within like a year of you get that sale. so don't be worried that you have to pay today. there's a specific day for it, always that you have to pay by. so, which is not anywhere soon, let me tell you which it's not anywhere soon for for beginners who just don't have any sales yet, just focus on making sales. right, that's it for this week's video. thank you so much for watching. I hope you guys liked it. if you guys have any questions, drop them down below. I'll answer every single one of them, and I also wanted to tell you guys this: that I'm getting a one-on-one mentorship to you guys. if you guys need any help with your Shopify store or want to start a business, you guys can just hit me up on Instagram. we'll walk you through it. uh, the link is in the description and you guys gotta join that Discord. gotta check out my insta. everything is in the description. see you soon. and YouTube recommends you like this video next, so please make sure to watch it right now.
The biggest US sales tax mistakes new Shopify sellers make
hi, i'm veronica vasek and i help shopify sellers to set up, organize and streamline their financial systems, whether you're looking for diy done with you or done for you financials. in this video, i'll tok about the biggest us sales tax mistakes that new shopify sellers make. are you a new shopify seller and does the thought of keeping up with sales taxes just make you want to run away and hide? no worries, i'll break down the biggest mistakes that new shopify sellers make with us sales taxes and even explain sales taxes to you at the end of this video. let's get started. mistake number one: panic. sales tax rules can be complicated, but there's no need to panic. in fact, most new sellers don't have to worry about collecting sales taxes in other states until the me they meet the minimum threshold. you need to understand the basics of sales taxes and i'll explain that at the end of this video. unfortunately, that leads to mistake number two: bad advice. so you're in a panic because you don't understand sales taxes and you seek advice from online groups who are filled with people who are scared about sales taxes, just like you. or you consult your local accountant, who's not familiar with sales taxes for online sellers, or you log into shopify and it tells you that you have met the threshold in the state. keep in mind that people in online groups and even the folks at shopify are not sales tax experts. many of them will say: i heard that or i read this somewhere, but you don't want to make business decisions based on what someone may have heard. and also keep in mind that most accountants are not trained in sales taxes. sales tax compliance for online sellers is a specialty and few accountants work on or even know about it. sadly, in most cases, you'll end up making the next two mistakes, and that leads us to mistake number three: you register in every state to collect sales taxes. okay, so you asked around and someone told you that you need to register to collect sales taxes in every state. wrong- you don't have to register to collect sales taxes unless you have met something called nexus. i'll explain what nexus is shortly. mistake number four: you collect sales taxes without registration, and that's wrong too. you should not collect sales taxes unless you register in a state. mistake number five: not understanding sales tax basics for online sellers. let's unravel the mysteries of sales taxes so that you can avoid making these costly mistakes- one of the most important things you should know about sales taxes is that the rules are different for every state, so the rules vary from state to state, and the rules change on a regular basis for shopify sellers. the burden is on the seller to register, collect and remit sales taxes. when it comes to sales taxes, you need to consider whether you have physical nexus and or economic nexus. what's nexus? nexus is the level of connection that you have with a state or jurisdiction. it's just really a fancy word for saying that once you have nexus in the state, then you need to register, collect and remit sales taxes in that state. the first type of nexus that you need to consider is whether you have physical nexus. for many states, physical nexus has to do with whether you have a physical presence in the state, whether you have warehouses in a partikular state, or even whether you have employees or sales reps. now, keep in mind that every state has different rules, and so you need to make sure that you look up your state and and see whether you have physical nexus as well as other states, based on these physical nexus rules. and then you have economic nexus. economic nexus refers to when you sell from one state to other states. you must meet the minimum threshold for each state before you have economic nexus, and the minimum thresholds are based on minimum dollar amounts or number of transactions. and then you also have to consider product taxability. is the product that you're selling taxable in a state? for example, i have a client who sells clothing and clothing is not taxable in every state. in order to stay in compliance with your sales taxes, first you have to determine whether you have nexus sales tax experts recommend that you do a nexus study and that means that you're going to look at all the states in which you have had sales for a partikular period of time and look back to see whether you've met the minimum threshold for a dollar amount of transactions or number of transactions. then you also have to assess product taxability in the states in which you have nexus. once you've determined that you have nexus and that your product is taxable in a state, then you need to register, collect and remit sales taxes, and it's important that you do it in that order. you need to register for sales taxes first before you can collect sales taxes and then, once you collect, then you can remit. here's a chart, for my friend says: sales tax and more. at salestaxanmorecom they specialize in sales taxes and they put together this great chart of the economic nexus thresholds for sales tax. let's take a look at the state of arkansas. their financial threshold is a hundred thousand dollars in sales and their transaction threshold is 200 transactions, and the look-back period is the previous or current calendar year. for the state of arizona, the financial threshold is a hundred thousand dollars in sales and they don't have a minimum transaction threshold, and at the bottom for california, their monetary threshold is five hundred thousand dollars. as a new shopify seller, then, unless you have met the monetary thresholds or transaction thresholds for these states, you don't have to worry on day one from an economic nexus standpoint, because you must first meet the monetary or transaction thresholds in all of these states. so if you have sales into the state of california, for example, you have to wait until you have five hundred thousand dollars in sales for the previous or current calendar year before you would reach nexus. i'm veronica wasik. are you ready to work with an experienced and reliable shopify accounting pro? check the description below to learn more about my services and how we might work together. if this content is helping you, then subscribe to my channel, ring the bell and give me a thumbs up and check the description below for all of my resources, including my free shopify bookkeeping blueprint and the link to join my facebook community, and let me know in the comments if there are any other topics that you'd like me to cover in the future. i'm here to help you. i'll see you next time.
How to Pay Zero Taxes with an E-Commerce Business
let's cover a topic that not that many people cover here on youtube, and that is e-commerce taxes. as you can see from my shirt- automated e-commerce. i ran a company in e-commerce. we taught over 900 people how to build six-figure and seven-figure shopify and amazon stores, as well as myself having shopify stores that i ran to over 100 000 to multiple six figures, and from that i got into the tax saving business because i wanted to lower taxes for my e-commerce and for my e-commerce consulting business, which was automated e-commerce. so i know a thing or two about lowering e-commerce taxes. there are different scenarios that you need to consider. if you are just a drop shipper, you're selling products, not even touching them. somebody else is sending those products over from china to your customers. that's going to be way easier to lower taxes than if you have a warehouse. then, specifically, if you're selling to countries like the uk or european countries- if you're selling to european countries, things get a little bit trickier depending on where you're selling them, where your warehouses are based. so let's go through different scenarios that you need to do and what i recommend as an e-commerce business owner, as a previous business owner, what i recommend my clients from all over the world and what i recommend you to do for your ecommerce taxes. first up, what i recommend is that you move your company somewhere that has zero tax. don't move it to a place that has some taxes, like five percent, seven percent. when you're dealing with e-commerce, you really want to be as simplified as possible. there are a lot of moving parts. you have a warehouse, you have a partner, you have a supplier, you have people that pack, you have people that ship a lot of moving parts. you're not just selling a service. you're not just selling something online and just forgetting about it. you're actually delivering a product to a person that needs to get to them. they're gonna be refunds as well, so make it as simple as possible on the tax side. so, for example, you can set up a free zone company or a uae company in dubai and you have that and that's a zero tax company. you can get an e-commerce license very easy. takes about 15 days to set up. very simple when it comes to actually getting payments from your customers. let's say you're doing it through shopify or doing it through amazon. what you don't want to do is use stripe and paypal or other payment processors from the ue. typically, yes, you can get an account there. a lot of my clients have stripe connected to the uae but unfortunately some transactions don't go through, specifically from the us and canada. they just don't go through because of ua stripe or uae. paypal amounts get frozen a lot more often than they would from the us and it's just a hassle to deal with it. the transactions fees tend to be a lot higher and also you'll have a harder time actually getting the account. so what you want to do, you want to have that free zone company, that uae company, but you want to have a pass-through as well. so let's say, we start a us llc in the us. you can start in wyoming and arizona, whatever state you choose. just don't choose new york, california or hawaii. they tend to be very aggressive with taxes. choose pretty much anywhere else. you can choose florida or you can choose whichever one you prefer. ideally, you're not a us citizen or a us resident. if you are, then things get a little bit more complicated. we'll tok about that in a second. i've toked a lot about us taxes, the guilty tax, how to reduce taxes. but in this partikular scenario, in e-commerce, as a us citizen, you can pay zero tax. that's the beauty of it. so if you're making money through e-commerce, you can definitely pay zero percent tax while being an american, which is beautiful. now you have the uslc, you get stripe, you get paypal, you get easy paydirect. you get many different payment processors out there that there are for e-commerce, as well as a us bank account, which you can get fully online. i got a mercury bank account. it took me about 10 days and that was all fully online. with a uslc based in arizona. you have the uslc, you have a mercury bank account. you're receiving payments through stripe, through paypal, through shopify payments, whatever it is. you're receiving money into that us bank account. what you want to do, then, is transfer that out over to the uae bank account so it pays zero percent tax. if you're a non-us citizen, non-us resident, all the money that the us llc makes will also be zero tax, but it's just better to send it over to the uae, so it's truly zero tax. in case the us changes the law or in case they need to report something, you just don't have the money in the us bank account. you have it in the uae bank account and, essentially, you have it as a pass-through. that is how the money flows. that is how the money comes from the customer. it comes to a us llc, then they get, it gets passed to a uae company and it flows very easily. what you can also do if you're dealing with european payments or uk payments. you can also have a uk lp and with that uk lp you can get a bank account through that uklp and then send money over to the ue. the problem is that they're more restrictive laws when it comes to uk lps. you will need to pay vat at a certain point. you might need to pay some taxes after, let's say, 75 or 100 000 pounds that you're making. so i tend to recommend more the uslc run in order to lower your taxes that way. that is how the financials work on it. now let's actually go into the ground and, depending on how your business works, if you're just doing drop shipping, very easy to pay zero tax- you just have your supplier in china. the supplier in china sends over the products to your customers. typically, you won't pay any tax on those products in the places where you're selling them. mainly, if you're not based in the us or you don't have a us company in a partikular state, you're not gonna pay state taxes if we're dealing with european sales. for example, i have a client that deals with netherlands. he sells only to the netherlands. he has a warehouse in the netherlands. he's not a netherlands citizen, not a netherlands resident, but everything is done in the netherlands. you might need to pay vat value out of tax to the netherlands, depending on the amount of money that you make. so you do need to look at all these laws carefully. if you want to look at them carefully with me, you can book a call. with the first thing in the description: we can look at the partikular country that you're selling to, what their vat laws are and exactly what you need to look for. but in europe, specifically and in the uk, you might need to deal with some vat if you are selling to one partikular country a large amount of sales. now let's look at where is your warehouse, where are your employees? let's say that you have a warehouse of a hundred employees that belong to your company in the united states. then we start to have issues because that warehouse might be engaged in trade or business in the united states by irs definition. so, for example, you might have a uae company with a uslc. you're a non-us citizen, or you're a us citizen that lives abroad completely and you're lowering your taxes down to zero, but in reality, that warehouse is making you a lot of money. the products are coming from china over to that warehouse. people pack them, ship them, then they send them over to your customers in the us. the customers send the returns to that warehouse. you're really engaged in trader business in the united states, and this also happens with a lot of amazon sellers. so if you're selling on amazon and you're living somewhere else but you're doing everything through amazon, depending on how your relationship is with amazon, most times you won't be engaged in twitter business in the united states, but you do need to plan this out carefully. so what you might want to do is have two companies in the us: one company that receives money from stripe, from paypal, from shopify, from amazon, and then sen.