E-commerce businesses sell products and services for profit by way of the Web to customers throughout the global economy. Typically, if your for-profit business has a location in a state where your customer that makes a purchase form you resides, then you will be required to collect and remit sales tax.

In general, sales tax is the tax collected by the end user (the last to purchase) of a product or service. Understand that each state has their own rules regarding what is considered a taxable product or service and what is not.

Your products or services may be taxable in one state, but not in another. In some states if you separately state items on your invoice they are not taxable, if you lump them together, they become subject to sales tax. In other states, the opposite viewpoint or definition might be in effect.

It is up to you, the Entrepreneur or small business owner to determine and understand exactly what the rules are for the sales and use taxes you are responsible for collecting whenever you sell a product or service of your business.

Make it a strong point to follow all the rules and regulations required for you to properly operate your business right from the beginning. You can then be confident your hard work at building a successful business won’t be cut short by something you should have done correctly from the start.

Now, nothing is truer than you can’t run and hide from the tax man. Hopefully it won’t be news to you that as an eBay seller, you might be required to pay tax on your earnings.

I’m not sure why many people believe that just because they are doing business over the Web that means they are exempt from paying some sort of taxes. Understand that if you regularly acquire items and sell them for profit then it is a business, and most countries completely recognize and consider that you are trying to make a profit on the items that you are selling on eBay or an eCommerce site, therefore, tax is due.

One rule to remember is if it has a “paper trail,” then it can be taxed, and with that being said, the US, UK, New Zealand, Canada, and Australia, all require tax payments when you are selling items to make a profit.

If your residence is in and you do business from anywhere in the US, then you are subject to a sales tax. To do this, you are going to need an ID. To get a Sales Tax ID, visit http://www.thestc.com/ta.cgi?STRates to find your local state office. On the website, you will see your state, the tax rate, and any exemptions that you may rate.

To see if your county demands a sales tax, do a simple search of “your county name + sales tax.” There are some people that believe eBay is responsible for delivering 1099′s after the seller has reached a certain amount by the end of the year. This is NOT true, since eBay is only the facilitator for auctions. However, if you use PayPal or another online payment processing service, PayPal is responsible for keeping all records of transactions.

What you do is either request or print off a transaction history for the year and start inputting all transactions of sales, and everything that is transacted through your PayPal account should be claimed and presented. This is the reason why it is highly recommended to have a bookkeeper, especially if you are not good at keeping your books organized and in proper order. If you are in business your mindset should be that you are always prepared for an audit.

Some sellers have more than one PayPal account, with one PayPal account strictly for their eBay store. You can have a Personal PayPal account, as well as a Business PayPal account. You should consider doing the same for your bank checking, with one account strictly for your eBay and other online sales (i.e. Amazon.com etc.).

You should be aware that there is legislation taking place in the US that requires PayPal to report anyone with over $20,000 in payment volume or 200 transactions a year. So if you are all over the place with mixing personal purchases and transactions with your business account, then you are going to need to have somebody go through each and every transaction for the year and file it correctly.

This won’t come at a cheap cost, as you will need an accountant to do this for you. This is precisely why I recommend from the very beginning that you keep all personal costs and PayPal business transactions separate. That means if you want to buy something on eBay, you should use a separate ‘buying’ eBay and personal PayPal account.

Understand that every country has certain changes in legislation and rules for filing your taxes. The biggest thing you need to remember is that if you make a profit on any transaction, you have to report it to the tax man in whichever country you reside.

Finally, I would strongly suggest that if you sell online (eCommerce) for a profit, you get yourself a tax professional to look over your income and expenses; therefore you can never be too organized.