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Indeed - the information you provided describes an agreement between you and your partner.
In-fact you are partners and do have an agreement.
A partnership is the relationship existing between two or more persons/entities who join to carry on a trade or business. Each person/entity contributes money, property, labor or skill, and expects to share in the profits and losses of the business.
You would need to account for all business activities as for the partnership - that is based on your business model.
As long as you are located in CA - the partnership will be subject to CA sales tax.
Neither of you are allowed to collect sales tax without registration.
You need to register with your state authorities.- and only after that will be allowed to collect sales tax.
If you do not want to be considered as a partnership - you would need to change your business model.
When you run separate businesses - that is OK - and each of you will act as a sole proprietorship.
But when you run business TOGETHER - and share profit - that is a partnership - and that creates an additional taxing entity.
You are correct - that you and physical person and your partner - each are separate entities for tax purposes.
These are two separate businesses and each of you own 100% of corresponding solo proprietorship.
For instance - if you sell or provide services to YOUR customers - customers pays YOU - and that amount is included into YOUR gross income.
However - when your partners pays you - that payment is different - that is not a payment from teh customer - but a payment from a partner based on your agreement to run some business activities jointly and divide profit as you both agree.
THAT agreement resulted in new entity - the partnership - regardless if you officially registered that entity - the IRS and other taxing authorities will view that agreement as a partnership and generally - you would apply for a separate EIN with the IRS.
If for instance - you will ask teh same question to your state taxing authorities - they will view this agreement as a partnership and will hold you responsible for sales tax.
How can I set up a separate EIN for the partnership?
The partnership is based on the agreement - there is no requirements to register the partnership in order to form it.
A partnership is the relationship existing between two or more persons/entities who join to carry on a trade or business.
To apply for EIN - use form SS4
or apply online
Since my partner is non-us entity, can he still collect the sales tax?
Yes - when a nonresident alien needs to collect sales tax - first step to apply for the tax ID with the IRS, and after that - register with the state taxing authorities where sales taxes will be collected.
Does my partner abroad need to set up EIN number?
If you partner will be receiving income from US sources - yes - he need to have a tax ID - that woudl be EIN if the partner is a legal entity or ITIN for a physical person.
If he needs to collect sales tax abroad, how can he pays sales tax to the tax authority?
Each state collects sales tax separately - sales taxes are paid by buyers - the seller collects all these amounts and pay either directly or by sending a check.