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Tax Law (Questions About Taxes)/taxes in exporting business

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Question
QUESTION: Hello,
I would like to start small home-based exporting business (LLC). As part of my business I would like to provide two services for individuals in foreign country
1) buy apparel for them and ship it to their country
2) ship (via USPS) apparel which they bought: some stores do not ship internationally, so I can do it.

My questions are
1) Is resale certificate really needed for me resell apparel if I just pay tax while I am buying clothes for reselling. I am also concerned about me able to prove that I indeed exported apparel because I am not sure if receipt from USPS is sufficient proof. Because in receipt there is limited space to put detail of each item which I sent.
2) Is my service of shipping apparel is taxable? Do I need selling permit for that?

I live in Florida.
Thank you

ANSWER: Is this going to be a real business or a hobby?

If you do it as a hobby, then no, you don't need to get all formal. But as a hobby you cannot deduct reasonable and necessary business expenses either.

If you intend to be successful, then the story changes. You will want to be formal. Business License, resale license, etc. Business isn't easy, you can lose everything, but it the best game on earth. If you are going to play, play to win.

Sales tax is 6% or more in Florida. Add on shipping costs and tariffs, and at some point it will be difficult to make a profit while showing your clients value.



---------- FOLLOW-UP ----------

QUESTION: Thank you for your response! It is more like hobby but my concern is about money which will be send to me for services. If I going to get about $5000 every month to buy apparel on behalf of my friend isn't IRS going to view it as my income? Because, in fact, my income from that will be minor, maybe $200 per month, rest of this are cost of apparel itself which going to be shipped and shipping costs. This is reason why I want to go all formal. Do you think I do not have to do that?

Answer
If you are going to run it like a hobby, it will cost you in taxes, and you don't have to do much management.

If you want to make it cash flow, and not bankrupt you, then you will need to run it like a real business.

You need to decide if you want to go into business for $200 a month or if you intend to make your business worth your while.

If you do it as a real business then the sales tax that you won't have to pay becomes net revenue that you can keep and make your "business" more profitable. If you do it as a hobby the sales tax that you will pay will make your "hobby" more expensive.

There won't be any comfortable middle ground. Claiming to be a business but running it with the casualness of a hobby, will ultimately cause the IRS to disallow all deductions you took and have you pay taxes on the $5000 a month as income.

Richard  

Tax Law (Questions About Taxes)

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Richard Fritzler

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Specializing in Business and Corporate taxation. Comparing the advantages and requirements of different business entities, such as Sub-S Corporations, LLC`s, Partnerships (Both Limited and General), Doing Business as a Sole Proprietor, or Using a C-Corporation. Issues regarding K-1 distributions, 1040, schedule C, 1120, 1120s. Are you considering domiciling a Corporation in a low tax state? I can review the benefits and misinformation that exists.

Experience

I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

Organizations
National Small Business Owners Association.
Publications
Contributing author to "The Corporate Standard Newsletter".


Publications
Contributing author to "The Corporate Standard Newsletter".
Ezinearticles.com articlesbase.com

Education/Credentials
I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

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