Hawaii does not have a sales tax; instead, they have the general excise tax, which is assessed on all business activities. The tax rate is .15% for Insurance Commission, .50% for Wholesaling, Manufacturing, Producing, Wholesale Services, and Use Tax on Imports For Resale, and 4% for all others.
Su yes, this would be on top of her other taxes ...
On the plus side, however, your daughter will essentially be her own business and can deduct all business expenes
*including this excise tax, from her federal taxes
thia would be the case if the boss is, indeed, payng her as a contractor and providing a 1099
If she receives a S-2 however, and is paid wages, as an employee, then the owner of the bsusiness should be paying the excise tax (the boss"
sorry for the typo (a W-2)
depending on wht her business expenses would be, (if she is, indeed, paid via 1099 as an independent contractor, the net benefit could actually be higher as a contractor
My concern is that - to be safe - she would probably need to hire a tax service to help her evaluate her tax burden - another exense, make quarterly payments, and, unless she lists herself as an employee would not be paying in to her social security, would not have the protection of workers compensation should she have an injury at work. It just seems to me that this should be the responsibility of her employer. I have never heard of such a thing in a retail store environment - but I know Hawaii is an unusual state.
I agree, that this is atypical ... the commission piece makes it a little more in line with convention
on the workers comp piece, sh needs to check but may health incurance policies DO provide for what's called 24 hour coverage (meaning that she WOULD be covered at work BECAUSE the WC isn't available)
I see your point. The commission part of this is a little hazy right now and I am asking her to get that pinned down. I don't want to throw a buch of questions at you for my 30.00 commitment, but can you tell me roughly what she would expect to pay in taxes on her 1099 income?
and on the xosicial security piece you are right
she WILL have to pay in both the employee and employer portions, but, again, for many, the ability to deduct expenses on her schedule C m ore than offsets that
that's called self-employment tax, (paying both sides of the social security)
and finally on the estimated payments...
It means paying in 4 times rather than having it withheld, but not neccesarily more tax ... once again, the as a busines pwner she would only be taxes on profits not all revenues
your concerns are valid, but if she's successful, the contractor route can be more lucrative (after taxes)
it really dep[ends on the numbers, what sorts f ex[penes she chan now deduct that would have been the employers' in an employee situation
OK, so she would pay the 4% excise tax plus taxes on any profits. The profits could then be considered her "income" on a personal level and that is usually roughly 20%. Does that sound correct?
Hre are the tax brackets fort 2013
so if she had, say, 30,000 in profit
she's pay (I'm assuming single) 10% on the first 8924
than 15% on the rest
so not quite that bad.... again taking off those expenses first is what things turtn on
but that gives you a fell,a dna place to start inrunnung the numbers
plus remember that on state and feredal it's TAXABLE income she will also have the personal exemption, and standard OR itemized deductions
This has been extremely helpful and gives me (and maybe her) a new perspective on this. She'll be able to deduct her travel, babysitting, lunch, and probably a lot more under the guidance of a good tax professional. I will find out what state taxes might be in addition to the excise tax and ask her what her commission might net her and then get her to get a solid agreement signed if she wants to pursue this. Thank you very much.
YW, here are the HI satat income tax rates
If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.
HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.
Thank you very much. I have to get my butt back to work but I very much appreciate all this information!
You are very welcome
Ill be sure and give you a good rating this evening when I get back home. Thanks again!