Uber has never once turned a profit, and is allowed to continue running their business. If you’re a small business owner running an ebay or ecom business, and you claim losses for 3 out of 5 years in a row, it’s likely that the IRS will audit you, and could deem you a hobby. Amazon is often cited as not generating a profit for many years, but is now profitable. For them, it was somehow okay to run a business making no profit! So like, how come small businesses can’t claim losses, but big corps can?

  • FireTower@lemmy.world
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    2 months ago

    Why does being profitable justify being even more profitable by paying fewer taxes?

    It’s not about encouraging profitability (that only one proof of a real company) as much as allow businesses to grow, without people faking businesses to write off personal expenses. Properly reporting expenses can allow new or growing businesses to reinvest in themselves. I agree that there should be a different structure for large business but I’ll give a hypothetical to outline why it’s important for small businesses.

    Let’s say a new family owned machineshop does $200k in sales in its second year. Pre-tax after all other expenses the business has netted $50k. Post tax (-$40k) they’ve got $10k left to reinvest. They want to buy $20k worth of machinery to grow the business. If they can deduct $20k for the machinery from the $40k in taxes the can buy it. If not they can’t.

    Meanwhile the large international conglomerate machineshop down the road makes $400k a year post tax. If the want $20k in new machines they just buy them. This isn’t because they run a better business w/ better margins or product but because they have more volume.

    • snooggums@midwest.social
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      2 months ago

      Properly reporting expenses can allow new or growing businesses to reinvest in themselves.

      Why is that a thing for businesses and not regular people? Why is it important for someone to pay 10% on a knife purchase, but a business doesn’t need to pay the same thing when both situations end up with owning a knife?

      • FireTower@lemmy.world
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        2 months ago

        The Federal government doesn’t have a sales tax on consumer purchases goods that they charge regular people (-a few very specific things). Most sales taxes are done by states, some states have none.

        And the business isn’t dodging paying sales tax w/ deductions because again most things they spend money on aren’t being taxed on purchase. They’re having their amount of income the government can tax reduced as a reward for investing in themselves to promote economic growth.

        Also private citizens have tax credits (which are preferable to deductions) too if they purchase certain things like EVs. If you buy a new EV the government will give you a few grand.