82 Costly Sales Tax Registration Mistakes to Avoid

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Your Steps to Simplify Your Sales Tax Compliance.

We created this new report recently for new e-commerce sellers looking to get into compliance with sales tax and are at the stage to get registered for sales tax in many states. This content is covered in various parts inside your Sales Tax System membership.

We wanted to share this report for you also as it is a great reference guide as you get into compliance with more states where you have physical or economic nexus.

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Sales Tax Permit Registration Mistakes to Avoid

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As an e-commerce seller, you want to avoid sales tax permit mistakes. This is the key part of the process when you are collecting and remitting sales tax.  Yes, some states like Washington and Pennsylvania will collect sales tax, but you still need to get registered and file sales tax returns.

Sales Tax Registration Mistakes to Avoid

Avoid these Costly Sales Tax Registration Mistakes

The process to get registered means obtaining a sales tax license or permit to collect and remit sales tax in the states where you have sales tax nexus. Since the June Wayfair vs South Dakota case, you now have to worry about the economic nexus states in many cases when you sell only 200 transactions in a state.

We have applied for thousands of sales tax permits for clients over the last several years and we wanted to share some key costly mistakes to avoid.

1. Are You Applying for a Sales Tax or Use Tax Number?

 Are you an out-of-state seller applying for a sales tax number or an in-state seller applying for a sales tax number? Each state is different. In some states, it is very clear, if you are an out-of-state seller, you are applying for a use tax permit, some states they combine sales/use tax as one option. Every checkbox takes you down a pathway and may come back to haunt you when audited; just make sure you get it right from the start.

2. Not Taking into Account Time Frames.
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How to Transition from One Company to Two; Effectively and Without Pain!

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When starting a business you formed a separate legal entity to separate your personal and business assets, lower your audit of risk, improve your chances for more business credit and convey a more important marketing message. As time goes on and your business succeeds you will want to examine when the time is right to form a separate legal entity to now reduce the liability exposure to your current business.

You may have a successful online internet business and now you are going to introduce a new product to your list that may have more liability associated to it. An obvious one would be if you were looking to invest in real estate. That would definitely be in a separate legal entity from your operating business. Many times I talk to business owners who have been in business for 10, 15 or 20 years and still operating EVERYTHING through one legal entity! That can be very dangerous. That means one lawsuit where the insurance company comes up with an excuse (also known as loophole) where they do NOT have to provide coverage. That means potentially, 10, 15 or 20 years of hard work down the tubes!

Let’s assume you are going to add a second legal entity for part of your business to separate out liability (or maybe you have a different partner on that one). Let’s cover the steps to make this a smooth transition! The easiest way to look at this as if you are starting over with the same steps you used to form your first company. The mistakes come in when you are tempted to take short cuts to save money (like not getting separate business cards, a separate business license)

Here are the steps (for a separate business)

  1. Trademark your business name
  2. Form a separate legal entity
  3. Obtain a separate LLC/Corp record book.
  4. Obtain a separate EIN number.
  5. Open a new bank account for the new entity
  6. Proper capitalization from the correct owners (you, another entity, trust…)
  7.  Apply for a business credit card in the name of the new LLC/Corp.
  8. Separate the expenses related to this new entity.
  9. Apply for a business license http://www.businesslicenses.com/
  10. Check with a local professional for other requirements which may include, other state filing requirements with the department of taxation or franchise tax board.
  11. Establish a DBA name to this separate legal entity is required.
  12. Establish a separate set up books. If you are using QuickBooks® or Xero create a new company file for the new company.
  13. Obtain separate insurance if required by the company
  14. Establish a separate payroll account if payroll is required.
  15. If the Entity is in Nevada, and you are operating in another state, take the steps to foreign register in that state you are doing business.
  16. Establish a 5-year business plan (so the entity is not considered a hobby plus a good idea to keep you on track anyway).
  17. Establish new accounts with vendors for the new business. Even if your first company does similar services, it should be separated.
  18. Establish a separate merchant account and the new entity.
  19. Follow LLC or corporate formalities.
  20. Avoid commingling of funds.

The big key is to be organized. I know it would be easier to just keep things simple, but simple and asset protection are inversely related. Successful business people do not have all their business holdings in one LLC or corporation. The key is to separate your assets and diversify your risk, just like you would diversify your investments for success.

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Productive or Busy. Which One Are You?

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If you are looking for more results in your business there is a real important piece of self-evaluation that must be considered in order to get better results.

That is, asking and reflecting upon this question; are you productive or just busy? Perhaps your goal for better results from your business may mean more income, perhaps it is the same amount of income with more time off, more time with your family.

Increase your productivity and your profits!

Increase your productivity and your profits!

Most entrepreneurs are simply busy, with no clear cut goals and they are hoping the busy activity will somehow lead to results. I know, because I have been there! I used to pride myself in working 14-16 hours days, 6 days a week at least, doing a lot of stuff, mostly just being busy. I know I was jumping from one priority to the next, creating new projects while 10 others were left unfinished.

Did I produce results in my business, yes most certainty but it was not a very effective approach. The mere fact that I worked 14-16 hour days was not what determined that I was busy, there are many, many successful entrepreneurs who work 14-16 hour days and are very productive, Donald Trump is one of them.

Perhaps your goal is not to be like Donald Trump, but you may have to agree, he has succeeded in his business. Dan Kennedy is another entrepreneur who is like productivity on steroids. When he works, he works, no interruptions!

First, let’s address some characteristics of someone who is busy and not getting any results in their business. You can calibrate to see if you fall more into this category (hopefully not) vs. the productive category.

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Pricing, the Key to Your Business Success

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Profits are the key to any business success. Pricing is one of the major elements to determine your bottom line
profits.

The proper pricing strategies will lead to more cash and profits in your business.

The biggest challenge I see in this economy is the knee-jerk reaction to cut pricing to bring in more sales. That only works if you have a great upsell process or lifetime value of a new customer or client after the initial sale. For example, the well-known story with one of Jay Abraham’s clients. He was consulting with a coin dealer and they wanted to increase sales. Jay asked if they bring on a first-time new client to collecting coins, on average once they make their first purchase how many times do they come back in the year to make another purchase. The coin dealer, said, “about 8-9 times on average. Once they get started they are hooked!” Jay was incredibly excited.

His strategy was to focus on getting new customers with that incredible back end. Let’s offer each new customer an incredible deal they can not refuse. Let’s offer each new customer for a limited time a 50% equity position in the first coin they purchase. Meaning, you will lose 50% on each new coin, not break even, but lose money! If the coin was worth $100, offer them only $50 to give them a win early on. The business owner thought Jay was crazy of course. But Jay explained the math of having 1,000 new customers and if each one invested 8-9 more times at full price in a given year, what the impact would be, it was staggering.

These may not be the exact numbers, but the business went from about $3 million in sales to about $150,000 million in sales in about 3 years! That is a rare exception to cutting prices, and even losing money on the front end to bring in a new client or customer.

Most small business owner may not have a product like this where the consumer is so passionate and addicted to the product or service.

Let me point out one of the most important components of price:

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The Joint Venture Success Formula for Massive Lead Generation

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Does your business need more high quality leads at the lowest cost? We are not talking about facebook or Google ads, but leveraging other’s people’s resources. There are companies that have invested millions of dollars on their database to bring in clients and if you can add value to help them do even better, convert more leads, renew more clients at no cost to them; you will look like a hero! Yet, I find 95% of business owners skip this powerful form of marketing. Even at NCP when we have new employees and they are calling our database to find out who may now be ready to incorporate, they also spend time calling on joint ventures opportunities, it is required! I would recommend you finally implement this into your marketing calendar on a weekly and monthly basis. Let’s cover a few basics then get right into your JV success formula for massive lead generation.

The host-beneficiary relationship is made up of two components, the host (the one with the list of clients and is having a marketing message being sent through email, website, webinar or teleseminar are most popular. The beneficiary is the one benefiting from the back end to the marketing message being sent to the host’s list. You are asking one simple questions. Where do my clients or customers go before they need my product or service? Write that one down and put it on your computer. It should be in front of you all day! Now when you speak to clients, leads, vendors it will always be in your awareness. You will be asking yourself, does this client, lead, vendor market to my ideal clients or customers and how can I add the most value so they will be excited to want to send a marketing message to their list!

Recap, if you are looking for more leads and clients, it is very simple, you are the beneficiary. The company who will send the marketing message is the host. Do not wait for hosts to call you with beneficiary opportunities. At some point when you are a big star that may happen, but in the meantime, I would recommend you proactively go after it and make this part of your weekly marketing!

Now the important part, how you approach a host. This is what separates the men from the boys or the women from the girls. You must approach this in a way that it sounds like you are only interested in helping the host get better results. The minute it smells like you are looking only to promote your product or service, nothing happens.

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