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Do you pay taxes for your domain sales?

Dynadot

Do you pay taxes for your domain sales?

  • This poll is still running and the standings may change.
  • Yes always

    34
    votes
    55.7%
  • No never

    18
    votes
    29.5%
  • Sometimes

    9
    votes
    14.8%
  • This poll is still running and the standings may change.

atinc

Entrepreneur
Impact
3,655
When you have an inbound sale, do you pay tax for it?

I don't expect you to comment particularly about your case..

but I am asking you to participate the poll where the results comes anonymously.

Are there any discouraging penalties about this in your country?

Let's see the results..
 
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MapleDots

Account Closed (Requested)
Impact
13,111
Being incorporated, yes.

Good anser Kate but...

Being not incorporated - also yes

I also charge sales tax if the sale occured in my home country of Canada.

Anyone that makes any serious money would be a moron not to claim expenses and taxes. The tax man WILL find you but that is the least of it.

I make 100k and deduct 50k in expenses and now I only pay taxes on 50k.
You have to pay taxes to claim expenses, if you don't claim expenses you are (insert strong language here).
 
It depends on where you live. Not every country required you to pay tax for domain sales.

let's use Hong Kong as an example:xf.grin:
  • Hong Kong follows a territorial principle of taxation. Individuals are taxed only on income that has been “earned in Hong Kong”.
  • There is no capital gains tax, no dividend tax and no inheritance tax in Hong Kong.
I don't have to pay tax as long as the buyer is not from Hong Kong.:xf.cool::xf.laugh:
 

D Haynes

Top Contributor
Impact
3,637
Good anser Kate but...

Being not incorporated - also yes

I also charge sales tax if the sale occured in my home country of Canada.

Anyone that makes any serious money would be a moron not to claim expenses and taxes. The tax man WILL find you but that is the least of it.

I make 100k and deduct 50k in expenses and now I only pay taxes on 50k.
You have to pay taxes to claim expenses, if you don't claim expenses you are (insert strong language here).

Just out of interest....

What expenses would you claim in relation to a domain sale? I assume you would only pay tax on the profit of a sale and not just the sales price but sales tax on the whole amount?

I guess the tax man is only a really worry if your selling thousands of dollars of names a year. I'm sure many on this forum are not doing that.
 
Just out of interest....

What expenses would you claim in relation to a domain sale? I assume you would only pay tax on the profit of a sale and not just the sales price but sales tax on the whole amount?

I guess the tax man is only a really worry if your selling thousands of dollars of names a year. I'm sure many on this forum are not doing that.

It depends on how you are accounting.

If you are doing it via capital gains you deduct the original cost at the time of sale. If you are doing ordinary income where you basically do total income - total expenses you might expense them at the time of purchase instead.

Renewals are another ongoing business expense. You might also have expenses related to your office location, equipment, travel, etc. that are business related.

I have a CPA handle it for me.

Brad
 

MapleDots

Account Closed (Requested)
Impact
13,111
Just out of interest....

What expenses would you claim in relation to a domain sale? I assume you would only pay tax on the profit of a sale and not just the sales price but sales tax on the whole amount?

I guess the tax man is only a really worry if your selling thousands of dollars of names a year. I'm sure many on this forum are not doing that.

I purchase domain names for as high as 20k so that is an expense against all profit. (example: I paid 20k for red.ca) There are also the renewal fees, web hosting for the landers, ssl certificate, dedicated IP, google ads, outbound costs, office phone, heat, electricity, office help etc.

I would be foolish not to run as a legitimate business because those costs come directly off my profit margin.
 
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D Haynes

Top Contributor
Impact
3,637
I purchase domain names for as high as 20k so that is an expense against all profit. (example: I paid 20k for red.ca) There are also the renewal fees, web hosting for the landers, ssl certificate, dedicated IP, google ads, outbound costs, office phone, heat, electricity, office help etc.

I would be foolish not to run as a legitimate business because those costs come directly off my profit margin.
It depends on how you are accounting.

If you are doing it via capital gains you deduct the original cost at the time of sale. If you are doing ordinary income where you basically do total income - total expenses you might expense them at the time of purchase instead.

Renewals are another ongoing business expense. You might also have expenses related to your office location, equipment, travel, etc. that are business related.

I have a CPA handle it for me.

Brad
Thanks for the replies.

I see there are different tax implications depending on the business. So if your buying and selling domains you pay tax on the difference after all expenses where as if you buy a domain for your own business use you can write it all off as an expense. I think lol.
 

MapleDots

Account Closed (Requested)
Impact
13,111
Thanks for the replies.

I see there are different tax implications depending on the business. So if your buying and selling domains you pay tax on the difference after all expenses where as if you buy a domain for your own business use you can write it all off as an expense. I think lol.

You still have to report all profits and then remove expenses. You have to work within your local tax laws to see what applies in your country of origin. It's really no different than any other business.

In Canada I pay sales tax on everything I buy but I can claim back all the tax amount that I paid on my business assets. So if I pay $13 tax on a $100 chair and that chair is used for business I get the $13 dollars back plus I can deduct the chair as an expense. If the expense is over $300 it is considered an asset and we have to depreciate it over 5 years whereas computer and related equipment gets depreciated over 3 years.

There is a big difference in doing domaining as a hobby as opposed to a business. Each one has it's advantage except you usually don't get charged with tax fraud if you claim everything as specified. I think the vast amount of people in domaining today fly by the seat of their pants and figure they will never be caught. So now what if you do get a big sale, lets say 500k do you claim as income or not. Either way you have to declare to the taxman, they see 500k come into your account or you report it. If you report it they as what else you have done and pandora's box is opened.

Do it right from the start and you will do yourself a huge favor in the long run.

PS. IF you don't report your 500k sale then..... well if I have to tell you then it does not really matter and you are beyond reason. Bubba will explain it to you in the big house :whistle:
 
Impact
25,546
Yes.

Just for the domaining part:
Income - domain sales, parking revenue
Expenses - buying domains (aftermarket, hand regs, wherever), renewals, any domain tools I use, advertising

My other income is from affiliate marketing
Income - all affiliate income
Expenses - hosting, affiliate tools (stats, product tools etc.), graphic work, ppc/advertising

Also this year, new computer, new chair = business expense. Sometimes I buy books for a site I'm working on = business expense

With domains, sometimes I look over the year and with renewals you can decide when they are an expense. For my domains expiring in 2019, I can go ahead and renew this year to 2020, to drop my taxable income a little bit.

Print it all out, give it to my accountant. 1 folder. Left side income, right side expenses with a cover sheet on top for both.
 
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D Haynes

Top Contributor
Impact
3,637
You still have to report all profits and then remove expenses. You have to work within your local tax laws to see what applies in your country of origin. It's really no different than any other business.

In Canada I pay sales tax on everything I buy but I can claim back all the tax amount that I paid on my business assets. So if I pay $13 tax on a $100 chair and that chair is used for business I get the $13 dollars back plus I can deduct the chair as an expense. If the expense is over $300 it is considered an asset and we have to depreciate it over 5 years whereas computer and related equipment gets depreciated over 3 years.

There is a big difference in doing domaining as a hobby as opposed to a business. Each one has it's advantage except you usually don't get charged with tax fraud if you claim everything as specified. I think the vast amount of people in domaining today fly by the seat of their pants and figure they will never be caught. So now what if you do get a big sale, lets say 500k do you claim as income or not. Either way you have to declare to the taxman, they see 500k come into your account or you report it. If you report it they as what else you have done and pandora's box is opened.

Do it right from the start and you will do yourself a huge favor in the long run.

PS. IF you don't report your 500k sale then..... well if I have to tell you then it does not really matter and you are beyond reason. Bubba will explain it to you in the big house :whistle:
Thanks again for your informative post. If I had a 500K sale I'd have to register as self employed to get a unique tax reference to be able to pay the tax which I believe would be 50 percent (or at least 40 percent) and I wouldn't be able to write any of it off as I'd have only just turned self employed. I can see why people wouldn't declare a sale like that for a couple hundred thousand but at the same time I'd imagine it would be hard to hide.
 

gina ferrano

Established Member
Impact
350
When you have an inbound sale, do you pay tax for it?

I don't expect you to comment particularly about your case..

but I am asking you to participate the poll where the results comes anonymously.

Are there any discouraging penalties about this in your country?

Let's see the results..

In the past, I had not. I am in the U.S, not incorporated. If I was I would write off everything (all my domain purchases even ones I don't sell), so instead, I do capital gains/loss plus expenses. (Brandbucket) So a year I make a bit more and I have a name that has depreciated I will sell it for a loss to help offset income.

NOTE: one doesn't need to be 'self-employed' if you sell a name whether $500 or 500k, it would fall under capital gains unless you're incorporated then it would be different. I would consider incorporating if I consistently start making more money, for now, it's <6k.
 
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Doron Vermaat

Co-founder, Efty
Efty Staff
Impact
4,518
It depends on where you live. Not every country required you to pay tax for domain sales.

let's use Hong Kong as an example:xf.grin:
  • Hong Kong follows a territorial principle of taxation. Individuals are taxed only on income that has been “earned in Hong Kong”.
  • There is no capital gains tax, no dividend tax and no inheritance tax in Hong Kong.
I don't have to pay tax as long as the buyer is not from Hong Kong.:xf.cool::xf.laugh:

Hooray for Hong Kong!

Shame the average house price is US$1.28m :greedy:
 

Culminant Domain

Established Member
Impact
294
Yes.

Brad
Hi Brad. I wrote the following on an older thread that might not ever receive an answer. Could you clarify this for me?

I went to my accountant today. All good until I brought up my income from selling (3) domains in 2021. All registered in 2021. I registered another roughly 300 domains all this year. My domain reg purchase total was around $3200. My total expenses (iPad purchase for logos), BB, Flippa GD fees) were about $4500. My income was 2900. My question is this: Since my goal is to sell as many domains as possible, as fast as possible, would I use Schedule C? And if so, would at least the 3200 in reg fees less the income (sales) be my taxable income? Could I "write off" the iPad and other small platform fees/costs? I want to get this foundation right for coming years and continued "success." For now my return is on hold until the correct decision is learned. Accountant's first time with a domain side hustler. Thank you.
 
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