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Old 20th September 2011, 10:25 PM   #1

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Default Question For A New Business

A partner and I are starting a business and this will be essentially based online. Here is the basic concept.

It would operate sort of like the jelly of the month club. You know, from Christmas Vacation? (no our item is not jelly)

How I see this working for is simply this. We charge a membership fee. Each month we go out and buy the "jelly" for each of our members paying the sales tax just like a local purchase. So in essence they are not buying anything from us, just joining and a benefit is the free jelly each month. This way we don't handle sales tax form the business side. Then just pay our normal taxes on the profit side.


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Old 21st September 2011, 03:43 AM   #2
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I'm confused. (Sorry)

If you're starting online and think you're going to support a business that requires a PAID MEMBERSHIP, you're dreaming. Sorry. But it's not going to happen unless you've got something really, really unique that people will beat a path to your door... or you have a budget to promote the living daylights out of it.

Sorry to sound negative... but from you've explained, I don't see where the money is. You're talking sales tax issues and all that... but I don't see the money (cause it's not coming from paid subscriptions... I promise you that!)

Hope this helps! Good luck!

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Old 21st September 2011, 04:15 AM   #3
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I agree that when you are starting your business you must not require paid membership. Not a clever decision. In the start you should better offer some benefits to your potential customers like we do...

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Old 21st September 2011, 07:57 AM   #4

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First off, thank you very much for taking the time to respond. I always appreciate feedback. And I do understand your confusion, because I quite simply have not provided details about the business. Such as our product, our targeted audience, and our marketing to said audience. However, my original question was not about the viability of the business, but concerning the tax issue.

We have a fairly unique product for which we have direct access to our target audience. This is not a simple build it and hope they come online enterprise. Don't get too hung up on the example I gave.

Again, thank you for taking your time. I sincerely mean that.

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Old 21st September 2011, 09:36 AM   #5
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I think I get it - you are satisfied as to the viability of the business because you already have the product (or have a regular supplier confirmed) and you know your target market want it and will pay for it through a membership arrangement.

You will be a middle-man. You will be purchasing in bulk from a supplier, then supplying it individually to your members, not as a sale but as a benefit of membership. You will pay the sales tax on your bulk purchase and thus, you feel, not be required to charge sales tax again to your members.

If this is to be large-scale, I would suggest you contact a tax attorney in each of the jurisdictions in which you intend to have members. Because - the individual state laws may feel that you are still "selling" the product and they may still want their tax cut. Never mind that you have already paid sales tax to your state taxing authority, they still want theirs.

If this will remain small scale, it might not matter. Your logic is sound, as far as logic goes, but the law isn't always logical (said as a non-lawyer.)

Last edited by Spider; 21st September 2011 at 09:40 AM.
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Old 21st September 2011, 10:14 AM   #6

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Yes Spider, that is the general idea. I guess I look at it like they are paying for a service. I don't see this getting beyond making about 5-6 grand profit a month. And that is after some time. So this isn't going to be a full time gig. But, it could open doors with other ventures as well. And it takes very little up front to get started

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Old 22nd September 2011, 07:58 AM   #7
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I don't think it really matters much as to what you call it. You are charging a fee and in return the members are getting a product. That's not any different then any other transaction. If you were just charging for the privilege of becoming a member without them getting anything in return then maybe, but I don't see how this is not considered a sale.

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