Retail Industry Specific Tax Regulations
1. Sales Tax
- What It Is: Retail businesses are typically required to collect sales tax on the goods they sell. The rate and rules can vary by state and locality.
- Who It Applies To: Any business selling tangible goods or certain services.
- Tax Implications: Retailers must register for a sales tax permit, collect the appropriate tax from customers, and remit it to the state. Failure to do so can result in penalties.
- What It Is: Use tax is a tax on goods purchased out-of-state but used within the state. Retailers may be required to pay use tax on items purchased without paying sales tax.
- Who It Applies To: Retailers who purchase goods from out-of-state suppliers or sell goods across state lines.
- Tax Implications: Retailers must track out-of-state purchases and ensure that use tax is paid when applicable.
- What It Is: COGS represents the direct costs of producing or purchasing the goods that a retailer sells.
- Who It Applies To: All retailers must calculate COGS to determine taxable income.
- Tax Implications: Properly accounting for COGS is essential to accurately determine gross profit and taxable income.
- What It Is: Retailers can use Section 179 to deduct the full cost of qualifying equipment and improvements in the year of purchase.
- Who It Applies To: Retailers who invest in new equipment, fixtures, or technology.
- Tax Implications: Accelerates depreciation, reducing taxable income in the year of the purchase.
- What It Is: Retailers must depreciate the cost of store improvements, such as renovations or new fixtures, over a specified period.
- Who It Applies To: Any retailer making capital improvements to their store.
- Tax Implications: Improvements are usually depreciated over 15 years, although some may qualify for bonus depreciation.
- What It Is: A method for valuing inventory that estimates the value of ending inventory by applying a cost-to-retail ratio to retail prices.
- Who It Applies To: Retailers with large inventories and diverse product lines.
- Tax Implications: RIM simplifies inventory valuation, but accurate record-keeping is crucial for tax purposes.
- What It Is: Retailers must comply with payroll tax regulations, including Social Security, Medicare, federal and state unemployment taxes.
- Who It Applies To: Any retailer with employees.
- Tax Implications: Accurate payroll management and timely tax payments are critical to avoid penalties.
- What It Is: Retailers selling online may be required to collect sales tax in states where they have economic nexus, even without a physical presence.
- Who It Applies To: Any retailer engaged in e-commerce or remote sales.
- Tax Implications: Retailers must track sales across states and comply with varying state sales tax laws.
- What It Is: The tax treatment of gift cards and store credits can be complex, especially regarding the timing of income recognition.
- Who It Applies To: Retailers that issue gift cards or store credits.
- Tax Implications: Income is typically recognized when the gift card is redeemed, but unclaimed balances may be subject to escheat laws.
- What It Is: Retailers must account for the tax implications of discounts, coupons, and promotional offers.
- Who It Applies To: Any retailer offering discounts or promotions.
- Tax Implications: The tax treatment depends on whether the discount is reimbursed by a third party (e.g., manufacturer coupons) or is a retailer-funded promotion.
- What It Is: Retailers must adjust their taxable income to reflect returns and allowances.
- Who It Applies To: Any retailer dealing with product returns or allowances.
- Tax Implications: Proper accounting ensures that the retailer does not overstate income, which could lead to higher tax liabilities.
- What It Is: Retailers must navigate varying state and local tax laws, which can differ significantly in areas like sales tax, property tax, and business licenses.
- Who It Applies To: Retailers operating in multiple states or municipalities.
- Tax Implications: Retailers must stay informed about the tax laws in each jurisdiction where they operate to remain compliant.
- What It Is: Some states impose environmental fees on the sale of certain products, such as electronics or hazardous materials.
- Who It Applies To: Retailers selling products subject to these fees.
- Tax Implications: Retailers must collect and remit these fees as part of their overall tax obligations.
State Tax Implications for Texas
Texas State Franchise Tax
If you are an LLC registered in Texas you will need to file a franchise tax return for years 2023 and prior.
New Filing Requirements for 2024
The no tax due threshold is increased to $2.47 million and certain filing requirements are eliminated.
Taxpayers Under the No Tax Due Threshold
For reports originally due on or after Jan. 1, 2024, a taxable entity whose annualize total revenue is less than or equal to $2.47 million is not longer required to file a No Tax Due Report. However, the entity is still required to file the Public Information Report or Ownership Information Report.
REINSTATING OR TERMINATING A BUSINESS
Both Texas-formed and out of state entities registered with the Texas Secretary of State (SOS) must satisfy all state tax filing requirements before they can reinstate, terminate, merge or convert a business. Note the filing due dates to avoid late penalties.
We can help with all of this.
If you are an LLC registered in Texas you will need to file a franchise tax return for years 2023 and prior.
New Filing Requirements for 2024
The no tax due threshold is increased to $2.47 million and certain filing requirements are eliminated.
Taxpayers Under the No Tax Due Threshold
For reports originally due on or after Jan. 1, 2024, a taxable entity whose annualize total revenue is less than or equal to $2.47 million is not longer required to file a No Tax Due Report. However, the entity is still required to file the Public Information Report or Ownership Information Report.
REINSTATING OR TERMINATING A BUSINESS
Both Texas-formed and out of state entities registered with the Texas Secretary of State (SOS) must satisfy all state tax filing requirements before they can reinstate, terminate, merge or convert a business. Note the filing due dates to avoid late penalties.
We can help with all of this.
Get started on your required Beneficial Ownership Information Report
(BOI Report to FinCEN)
As part of the Corporate Transparency Act, a new federal mandate requires that businesses file a Beneficial Ownership Information Report to avoid criminal and civil penalties. We can help you to file in a compliant and stress-free way. Most reporting fees are 100.00.
Why do you need to file?
In 2021, Congress passed the Corporate Transparency Act on a bipartisan basis. This law creates a new beneficial ownership information (BOI) reporting requirement as part of the US government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.
Who needs to file?
All domestic and foreign entities that have filed formation or registration documents with a US state, unless they meet one of 23 enumerated exceptions, including:
EXEMPT: Large operating entities that meet all the following criteria:
When to file?
(BOI Report to FinCEN)
As part of the Corporate Transparency Act, a new federal mandate requires that businesses file a Beneficial Ownership Information Report to avoid criminal and civil penalties. We can help you to file in a compliant and stress-free way. Most reporting fees are 100.00.
Why do you need to file?
In 2021, Congress passed the Corporate Transparency Act on a bipartisan basis. This law creates a new beneficial ownership information (BOI) reporting requirement as part of the US government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.
Who needs to file?
All domestic and foreign entities that have filed formation or registration documents with a US state, unless they meet one of 23 enumerated exceptions, including:
EXEMPT: Large operating entities that meet all the following criteria:
- Employee more than 20 people in the US
- Had gross revenue (or sales) over $5 million on the prior year’s tax return
- Has a physical office in the US
When to file?
- A company registered business before January 1, 2024 has until January 1, 2025 to file its initial BOI Report.
- A company created or registered in 2024 will have 90 calendar days to file after registration is effective.
- A company created or registered on or after January 1, 2025, will have 30 calendar days after registration is effective.
- Civil penalties are up to $500 per day that a violation continues.
- Criminal penalties include a $10,000 fine and /or up to two years of imprisonment.