- PPF Points
- 54
When I first started my online business, taxes were honestly the last thing on my mind. I was excited about selling and making money—but I quickly learned that ignoring taxes is one of the biggest mistakes you can make. If you’re running an online business like I am, understanding what taxes you need to pay can save you from stress, penalties, and even audits down the road.
The first thing I realized was that I needed to pay income tax on all the money I made online—even if I wasn’t a registered company at first. As a sole proprietor, my business income counted as personal income. Every dollar I made from selling printed t-shirts and branded shoes had to be reported. I didn’t know that in the beginning, and I had to go back and clean up a few messy records!
Next came self-employment tax. This includes Social Security and Medicare taxes that regular employees split with their employers—but when you’re your own boss, you pay both parts. I use accounting software now to calculate this automatically so I don’t get caught off guard.
Another one I learned about was sales tax. Depending on your state or country, if you sell physical products, you may need to collect and remit sales tax. When I started selling in different states, I had to look into each one’s laws. To keep it simple, I used an online tool that tracks sales tax by region and integrates with my store.
To avoid mistakes, I started keeping digital records of every transaction, using software to categorize income and expenses. I also set aside around 25-30% of my profits in a separate account—so I wouldn’t be scrambling when tax season came around.
One of the best things I did? I hired a freelance accountant after my first full year in business. It wasn’t expensive, and it gave me peace of mind knowing my taxes were handled correctly. He also helped me find deductions—like my internet costs, business software, and even part of my home office. These deductions reduced my taxable income significantly.
The first thing I realized was that I needed to pay income tax on all the money I made online—even if I wasn’t a registered company at first. As a sole proprietor, my business income counted as personal income. Every dollar I made from selling printed t-shirts and branded shoes had to be reported. I didn’t know that in the beginning, and I had to go back and clean up a few messy records!
Next came self-employment tax. This includes Social Security and Medicare taxes that regular employees split with their employers—but when you’re your own boss, you pay both parts. I use accounting software now to calculate this automatically so I don’t get caught off guard.
Another one I learned about was sales tax. Depending on your state or country, if you sell physical products, you may need to collect and remit sales tax. When I started selling in different states, I had to look into each one’s laws. To keep it simple, I used an online tool that tracks sales tax by region and integrates with my store.
To avoid mistakes, I started keeping digital records of every transaction, using software to categorize income and expenses. I also set aside around 25-30% of my profits in a separate account—so I wouldn’t be scrambling when tax season came around.
One of the best things I did? I hired a freelance accountant after my first full year in business. It wasn’t expensive, and it gave me peace of mind knowing my taxes were handled correctly. He also helped me find deductions—like my internet costs, business software, and even part of my home office. These deductions reduced my taxable income significantly.