Do I Have to Pay Taxes for an Internet Business? You can affiliate marketing taxes a small business promoting other companies’ products by providing referrals online.
You get paid for every customer you bring to the selling company’s website. This kind of payment plan creates a unique tax situation for you. Understanding the tax implications of being an affiliate marketer can help you plan your income and your tax liability. Sales Tax Many states charge sales tax on items sold over the Internet. What determines whether a sale is subject to tax in a state is not where the selling company is located, but where the affiliates for that company are located. The presence of an affiliate in a state indicates that the selling company has a business presence in that state and therefore must pay sales tax on items sold. State Tax Your small business must pay state income tax in the state you operate in.
Depending on how your business is organized, you could pay corporate tax or a limited liability company tax in addition to your personal income tax. Federal Income Tax Your federal income tax remains separate from any consideration of the companies you market for. You may pay corporate tax if your affiliate-marketing company is incorporated. You will not pay any federal tax as a limited liability company, though you will have to file an informational return. As owner of the limited liability company, you will pay individual income tax on the income earned from your company. Local Taxes You will pay county taxes on any real estate you own for your company, and you may pay city taxes if your city has a city tax program. However, you are not subject to any local sales taxes because you do not actually sell products.
Self-Employment Tax You will have to pay self-employment tax as an affiliate marketer. Employed people pay Social Security and Medicare taxes, and their employers match these amounts and pay those amounts into Social Security and Medicare. You will have to pay the matching amounts yourself. At the time of publication, you must pay 15.