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Taxes on Averages

Taz

New Contributor
Read Millionaire Fastlane
Sep 15, 2019
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Quick question, if I am calculating the average profit, is there a way I can factor in sales tax? For example, lets say I'm talking about iPhone sales and I'm predicting my average profit per phone is $70. Could I take that number and subtract from it tax of 8.25% (texas), to accurately measure the profit?
 

TreyAllDay

Whatever it takes
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I've Read UNSCRIPTED
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Edmonton, AB
I believe you're talking about calculating net income (what you take home) from gross income (what you made before tax). Not sure what the tax rate is in texas but you can just use

Gross Income x (1-taxrate as decimal) = Net Income

So for example, if your tax rate is actually 8.25%, as a decimal it is 0.0825 making your calculation

$70 x (1-0.0825) = $64.23
OR
$70 x 0.9175= $64.23

That's the calculation but the tax rate depends on what your states tax rate is, and how you choose to pay yourself which I won't get into, but some examples:

SOLE PROPRIETOR - you get taxed as personal income
LTD Company, paying yourself the profit as an employee - get taxed as personal income but not at company level because you've expensed out payroll.
LTD Company, paying yourself the profit as a dividend - get taxed on profit at company level and then again on dividend payment to yourself possibly.
 
OP
OP
T

Taz

New Contributor
Read Millionaire Fastlane
Sep 15, 2019
38
18
17
I believe you're talking about calculating net income (what you take home) from gross income (what you made before tax). Not sure what the tax rate is in texas but you can just use

Gross Income x (1-taxrate as decimal) = Net Income

So for example, if your tax rate is actually 8.25%, as a decimal it is 0.0825 making your calculation

$70 x (1-0.0825) = $64.23
OR
$70 x 0.9175= $64.23

That's the calculation but the tax rate depends on what your states tax rate is, and how you choose to pay yourself which I won't get into, but some examples:

SOLE PROPRIETOR - you get taxed as personal income
LTD Company, paying yourself the profit as an employee - get taxed as personal income but not at company level because you've expensed out payroll.
LTD Company, paying yourself the profit as a dividend - get taxed on profit at company level and then again on dividend payment to yourself possibly.
Would an LTD be something like an LLC?
 

Tourmaline

Bronze Contributor
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Read Millionaire Fastlane
I've Read UNSCRIPTED
Speedway Pass
Jun 4, 2019
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Texas
From what I can tell, yeah an LTD is the equivalent of an LLC.
 

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