W06 Reflection: Legal Structure

This week has been exciting and a bit complicated. I am excited to be figuring out all these legal particulars as it means I am that much closer to launching my business. Which is also a little terrifying. I find myself (almost) hoping that I won’t have any clients. Partly because I’m nervous about doing a good job and partly as a defense of setting my expectations low so I’m not disappointed. I’m doing a sole proprietorship because that seems like the right choice for my business, but the liabilities make me a little nervous, so I almost wish I was doing an LLC. My current plan is to start as a sole proprietor and the make the transition to LLC. But even that is a little unappealing because it would mean paying the one-time new business start-up fees all over again, plus the LLC fees. It still seems to fit my current situation the best.

It’s complicated because of the sales tax. I have many hours trying to unravel my legal tax obligations. I think I have figured out my state obligations for an interactive analyst service. Although, learning about retail sales tax has introduced a question that I haven’t been able to answer yet.

• I am to collect and remit a “Service and Other Activities” B&O sales tax for the state of Washington.
• Retail sales to out-of-state buyers require recipient specific state sales tax to be collected and remitted for each different state, but only if a certain sale quantity threshold is met.

Which makes jumbles my brain into asking:

1. Do I follow this pattern for the “Service and Other Activities” B&O type sales tax and collect and remit sales tax according to client billing state? Are there thresholds before the tax applies?
1. If not, do I collect the Washington state “Service and Other Activities” B&O sales tax from everyone, regardless of what state they live in?
2. Or do I only collect that sales tax from Washington state residents?

I’m also interested in participating in digital download sales on my website in the future, so figuring out the digital sales tax issue is interesting to me as well.

The complication of out-of-state sales feels pretty overwhelming. It’s almost a tipping point of if I bother with an online business or not. I really want to move forward with this, but the out-of-state sales taxes are so complicated as to be disempowering and excessively time consuming.

I think I have it sorted out that digital retail sales only count in certain states and retail sales only count after certain thresholds in each state, so if I don’t hit those thresholds I don’t collect/remit state specific sales taxes nor do I collect/remit WA state sales tax from out-of-state residents. And I think that is also how I treat the B&O sales tax.