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How to Pay Taxes on Dropshipping

How to Pay Taxes on Dropshipping

Last modified: March 19, 2023

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Dropshipping is a business like any other. Therefore, you will need to learn how to pay taxes on dropshipping. This can be very important because skipping on paying your taxes can cost you more in the long term and may even land you in jail.

How to Pay Taxes on Dropshipping

Dropshipping is a business like any other. You must pay taxes that are based on your local laws and the tax rates. The sales that you make are the same as if you are working within an eCommerce business, service business or anything else. Therefore, there is no excuse for not paying taxes.

What you need to do is to register with the governing body that monitors and records the tax amount that you have to pay. Then you have to consider how much you are going to save every month to ensure that you don’t get a hefty bill at the end of the tax year that you can’t afford.

In some business circles, they say that you should save about 33% of everything that you earn. But this isn’t always the case. Several Shopify accounting apps are really easy to use that can tell you exactly how much tax you need to save.

Different Taxes

However, there might be several different taxes that you need to save for. For instance, you might need to save the money from sales on a sales tax (remember to calculate this within your prices to ensure that you’re still making a profit) and then you will need to pay tax on your profits.

It is important to note that your income tax or general tax is only charged on your profits. This is the amount that you earned from sales in total minus any amounts that it took to run your business. This includes costs for the merchandise, running the website, running your office, taxes already paid and more.

Therefore, you can actually make a lot of savings. For instance, some jurisdictions will allow you to take a percentage of the costs to run your home off your tax bill. A good example of this is in the UK where you can reduce you tax bill by including part of the utility bills, insurance and more.

If you’re in doubt, speak to an accountant and they can help you determine what you can and cannot claim against your tax. If you’ve been doing it for a while, you might also find that you can claim a rebate for past tax years.

Final Word: How to Pay Taxes on Dropshipping

If you’re trying to find out how to pay taxes on dropshipping, then this is no different from any other business. You just need to speak to the people who are in charge of your region’s tax laws. With a Shopify account, you can start your dropshipping business and use tax apps that can help you determine how much you need to save for your end of year tax bill. This makes the whole process a lot easier.

*Don’t forget to check out our roundup of the best dropshipping apps you need on your store.

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