Tax Center Guide

The Tax Center provides rough planning estimates based on your paid orders. It does not determine your actual tax liability, collect or remit tax, or replace professional advice.

What is the Tax Center?

The Tax Center is a dashboard tool that displays:

• State Sales Tax Estimate: A state-level reference-rate calculation based on the buyer's location; local rates, product taxability, registration, and exemptions are not included
• Federal Planning Estimate: A fixed 15.3% self-employment-tax estimate plus a 12% income-tax planning rate applied to gross order revenue

Accessing the Tax Center

1. Navigate to your Orders page from the seller dashboard
2. Click on Tax Center in the navigation menu
3. View your tax summary and order-by-order breakdown

Understanding Your Tax Summary

Total Revenue

The sum of all paid orders (excluding canceled and refunded orders). This represents your gross income from sales.

Estimated Sales Tax

A state-level reference estimate calculated from:

• The buyer's state location
• State-specific sales tax rates
• The order amount

Estimated Federal Tax

A rough planning amount, including:

• Self-Employment Tax (15.3%): Covers Social Security (12.4%) and Medicare (2.9%)
• Estimated Income Tax (12%): A conservative estimate based on a typical tax bracket

Total Estimate

The combined sales-tax reference amount and federal planning estimate. It is not a tax bill or minimum amount you must set aside.

Order-by-Order Breakdown

The detailed breakdown shows tax calculations for each paid order:

• Order Date: When the order was placed
• Product: The product that was purchased
• Buyer State: The state where the buyer is located
• Order Amount: The purchase price
• Sales Tax: Calculated sales tax for the buyer's state
• Federal Tax: Estimated federal tax withholding (27.3% rate)
• Total Tax: Combined sales and federal tax for this order

Understanding Sales Tax

How Sales Tax Works

• Sales tax is generally based on the buyer's location, not the seller's location
• Different states have different tax rates
• Some states have no sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon
• Many jurisdictions have local sales taxes in addition to state rates (not shown in estimates)

When to Collect Sales Tax

Registration thresholds and product-taxability rules vary by state and change over time. If your activity creates an obligation in a jurisdiction, you may need to:

1. Register for a sales tax permit in that state
2. Collect sales tax from buyers in that state
3. File regular sales tax returns and remit collected taxes

Mayhem's Role in Sales Tax

Mayhem does not currently collect or remit sales tax on your behalf. You are responsible for:

• Tracking your sales by state
• Determining when you've crossed nexus thresholds
• Registering for sales tax permits where required
• Collecting and remitting sales tax

Understanding Federal Tax (1099 Income)

Self-Employment Tax (15.3%)

As an independent business owner, you're responsible for the full amount of:

• Social Security Tax: 12.4% of net earnings up to the annual wage cap
• Medicare Tax: 2.9% of all net earnings

Regular employees have employers pay half of these taxes, but self-employed individuals pay both portions.

Federal Income Tax

In addition to self-employment tax, business income may be subject to federal income tax based on your circumstances. The Tax Center uses a fixed 12% planning rate; it is not a prediction of your tax bracket or final liability.

Quarterly Estimated Tax Payments

You may need to make estimated payments during the year. Eligibility, due dates, and amounts depend on your circumstances; confirm them with current IRS guidance or a tax professional.

Deductible Business Expenses

Remember, you can deduct legitimate business expenses from your gross income:

• Mayhem subscription fees
• Product materials and supplies
• Shipping costs (if not reimbursed by customers)
• Marketing and advertising
• Business equipment and software
• Home office expenses (if you have a dedicated workspace)

Your actual tax liability is calculated on net income (revenue minus expenses), not gross revenue.

Best Practices for Tax Management

Set Aside Funds

The displayed percentage is a planning aid applied to gross revenue. A suitable amount to set aside depends on expenses, other income, filing status, location, product taxability, and taxes already paid. Use a tax professional or current official guidance to choose an amount.

Keep Detailed Records

Maintain records of:

• All sales transactions (download from your Tax Center regularly)
• Business expenses and receipts
• Quarterly estimated tax payments
• Sales tax collected and remitted

Track Sales by State

Monitor your sales volume by state to understand when you might cross economic nexus thresholds. The Tax Center helps with this by showing buyer states.

Review Quarterly

At minimum, review your Tax Center data every quarter to:

• Calculate and make estimated tax payments
• Check for new sales tax obligations in states
• Update your tax withholding strategy if needed

Consult a Tax Professional

Consider working with a tax professional who understands:

• E-commerce and online sales
• Multi-state sales tax compliance
• Self-employment and 1099 income
• Small business deductions

Updating Your Business Information

For accurate sales tax calculations, ensure your business state is on file:

1. Open Payout Settings
2. Update or create your Payout Profile
3. Enter your business address with accurate state information

Important Disclaimers

Estimates Only

The Tax Center provides estimates to help you plan. Actual tax liability depends on:

• Your total annual income from all sources
• Your filing status and tax bracket
• Available deductions and credits
• Local tax rates in addition to state rates
• Your specific business structure

Not Tax Advice

This tool is for informational purposes only and does not constitute tax or legal advice. Always consult with qualified tax professionals for advice specific to your situation.

Tax Laws Change

Tax rates and requirements change regularly. The Tax Center uses current known rates but may not reflect:

• Recent legislative changes
• Special temporary tax holidays
• Jurisdiction-specific variations
• Industry-specific tax treatments

Additional Resources

• Business and Tax Considerations Guide - Comprehensive tax information for Mayhem sellers
• IRS Self-Employment Tax Guide - Official IRS information
• Sales Tax Institute - Multi-state sales tax information
• TaxJar or Avalara - Third-party sales tax automation services

Getting Help

If you have questions about:

• The Tax Center tool: Contact Mayhem support
• Your specific tax situation: Consult a tax professional
• State sales tax registration: Contact the relevant state's Department of Revenue
• Federal tax obligations: Consult the IRS or a tax professional

Conclusion

Use the Tax Center as a starting point for reviewing paid-order revenue. Keep complete records and use current official guidance or a qualified professional for decisions about registration, collection, filing, and estimated payments.