Hello @BJTYRE1@
What version of QuickBooks are you using? QBO self employed? Plus?
The tax side of business can be confusing especially when you are just starting! Most business owners are thrown into it and I commend you for reaching out for help! It is much easier to take care of and easier to grasp the concepts in the beginning stages of a business rather than a few years in.
Sales tax and income tax are completely different. The way sales tax is handled is based on your state. Each state has different rules and websites to go to to remit it.
As stated by @LeahIlanah sales tax is not income. You are more of a "middle man" between the consumer and the state. Kind of like some payroll taxes. But we won't get into those right now
Income tax is based on the net amount of money your business makes throughout the year. When you are an employee, the income taxes are taken out of your paycheck automatically and your employer remits it to the IRS. A business doesn't work like this though. They don't get a paycheck with their earnings.
Therefore, you have to remit these taxes to the IRS throughout the year. When you file your tax return, it reconciled how much income you actually have for the business after your expenses and then figures out what the tax is on that. Then the actual tax is compared to the amount of income tax that you paid throughout the year. if you paid more than your tax you get a refund, but if you didn't pay enough throughout the year then you have to pay an additional amount.
Lets look at a quick example, let's say the sales tax is 8% and income tax (just federal to keep it simple) is 20%. And you sell 10 things for $10 each.
Your state determines at what interval you remit the sales tax. In California if it's a small business it's quarterly. So for each sale you charged and collected from the customer $10.80. (10 for merchandise and 80cents in sales tax). Every quarter you remit this sales tax to your state. So at the quarter you would remit $8 to your state for sales tax. ($100 of merchandise x 8%). Still with me? That's all for sales tax!
Now income tax. This is due quarterly as well. You have federal and state income tax. In the above example, I used only federal to keep it simple. There are worksheets/calculators available on www.irs.gov that you can use to estimate what your income tax percentage is. We are just using 20% to keep it easy.
So you made $100 for the quarter. (You collected $108. But remember sales tax is not income). That is your gross income. Let's say you had $70 in expenses. Your NET income is $30. You then multiple this by the % to determine the estimated tax due which is $6 (30*20%). You would remit this to the IRS on their website. And you would have a state one if your state has an income tax. The website for your state will guideugui through it.
I hope I didn't lose you. I know this can be a little much at first and that was a very long post. But I hope it's a little bit clearer. Did you understand that?
