post #16 of 16
Quote:
Originally Posted by sweettales View Post

Hi, I have some questions and I am hoping someone can help me out. I am just starting out my cake business and taxes get me a little confused. Lets say that because I bought a new mixer, new oven and I basically built a studio from the ground up I will be able to show a loss for a while and that is because I had to bring water, gas, electricity, pour a new floor among a number of things, the thing is that my operating expenses and fix and direct cost for the month of July were only $345,   however, my sales for the month of July were $2500. Even though on paper I can show that the $2500 still is a loss, how do we go about paying for social security? and sales taxes? Do I have to pay sales tax although I am still at a loss? what about social security?

Social security and income tax are based on your business's net income, if you have no net income you do not owe tax, and if you have a loss you may be able to apply that loss against other income. Note that net income for the whole year is considered, so if you erase your loss and turn a profit by the end of the year you will owe social security and income tax. Talk to your accountant for more details.

Sales tax is a different story since it is calculated based on gross revenue, but if your products are taxable you would simply collect the necessary sales tax from your customers and pass it on to the state.