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Rakhi Vasavada
Rakhi Vasavada , Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4419
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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If business XYZ did $85k in sales but had $150k in expenses

Customer Question

If business XYZ did $85k in sales but had $150k in expenses including COGS, does the business still have a tax burden besides the sales tax on the items?

We owned a boutique that we poured $200k in to. We ended up closing the doors within 14 months due to a variety of factors. I am behind on doing 2011 tax returns because we went broke and I didn't have it. I am trying to get caught up now but wanted to get an idea of where I will be.

We had MAYBE $85k in sales, but all but one month, our costs WAY exceeded our sales. Typically, the rent for our store was more than total sales, not including payroll and all the other expenses.

Am I going to have a tax burden owed based strictly on the revenue?
Submitted: 3 years ago.
Category: Finance
Expert:  Rakhi Vasavada replied 3 years ago.

rakhivasavada :

Dear Friend, Hello and welcome...

rakhivasavada :

Kindly be online for a while as I prepare your reply....

rakhivasavada :

For the services that you have sold, you will have sales tax liability.

rakhivasavada :

However, since your expenses where more than the sales, you will have Net Operating Loss and you will have no tax burden. You will have sales tax burden on the sales you made, and this will increase your Net Operating Loss. You will have no other tax burden besides this.

rakhivasavada :

I hope this helps...

Rate this answer POSITIVELY IF you are done with this and if this helps and satisfies you as this is the only way we get compensated for assisting you. You may use "CONTINUE CONVERSATION" to revert with additional queries if you have or if I have missed out on any aspect of your question.

Customer:

So provided I already paid the sales tax, which I did monthly, and provided I am calculating things right, showing a net operating loss will NOT leave me with any taxes owed on the revenues my store had...?

Customer:

Also. An operating loss can offset other revenues from a second business yes? If I lost $55k on my boutique and made $85k in another company, it offsets it and leaves me with a tax burden online on the difference - $30k

rakhivasavada :

Yes, the loss on business -1 will offset income from other sources including business - 2. ....This will reduce your taxable income and reduce your regular income taxes.


However, the loss on business -1 will NOT offset self employment taxes that are due on the profits from business -2.

Customer:

Ok. You answered my questions. Thanks a bunch! :-)

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