Do you have to Apply Gross sales Tax as a Social Media Influencer?

The question of whether or not you have to levy sales tax as a social media influencer has been discussed for years. Some people say that because the state doesn’t collect it, you don’t have to. Others argue that if they were a brick and mortar store they would have to collect sales tax. So what’s the answer?

Why do social media influencers need to be careful about how they’re taxed?

As a social media influencer, have you ever been asked to mention or rate a product? Many companies want their products to be known on social media. It is estimated that the consumer generated endorsement market will exceed $ 250 billion annually through 2020! That is why so many people are using this as another way of generating income.

When a company pays an influencer, this is taken into account taxable income. In most cases, you are responsible for paying taxes on this money yourself. Unless companies withhold or otherwise report this payment as taxable income, the payer is required to report and pay self employment tax (15.30%) including Medicare and Social Security.

How tax law applies specifically to social media influencers

Companies can hire an influencer to take photos at one of their events. However, if that person says something about the company or its products, it would be considered an advertisement. When it comes to advertising on social media, most companies don’t Income tax withheld from their influencers for working for a “discount” (e.g. a free product) when paid that way. But don’t make a mistake; these persons must continue to claim the income and pay tax on it.

If you’re a social media influencer and aren’t paying taxes on your income, what can you do about it?

If your tax bill is more than $ 100,000, you should also consider automatically extending your tax for six months. If you owe more than $ 50,000 in back taxes and fail to apply for this extension, the IRS may immediately seize funds from any bank account (including joint accounts) known to them. This can cause your bank account to be blocked, which not only causes great inconvenience, but can also damage your creditworthiness.

Advantages and disadvantages of using sales tax as a social media influencer

As with most things, there are pros and cons to the practice. The biggest benefit is that you don’t have to worry about quarterly payments or managing your tax returns all year round. However, some influencers who choose not to pay sales tax end up owing a lot of back taxes when they finally file their annual return. Further help in understanding the VAT nexus, Click here.

On the other hand, some influencers have found that by paying sales tax on their income, they are more transparent to consumers who may feel deceived if they see a product review without it. Paying taxes will also help build trust between you and your audience, which is critical to establishing yourself as an authority in your field. Ultimately, this is a personal decision that only you can make yourself.

Conclusion: Social media influencers have to pay attention to how they are taxed. If you are paid for a product recommendation, it is taxable income and must be reported on your tax return each year. Make sure you follow the rules and you won’t have any problems with the IRS.