question Question about the fun stuff! (taxes)

[NameShiba]

Hi there NamePros forum.

As I start to make my journey into the wonderful realm of domaining -- there was a question that came up. Being my first real year as a domainer, I wondered about taxes and at what point that selling domains is considered a one man business instead of a one man hobby.

I haven't sold anything on GoDaddy or Afternic where they require a certain level of information -- but just some small sales (under 600$ on Flippa). However, I intend to do more and go further with domaining.

At what point would I have to file for something and not stay as a hobbyist? Where would that route take me -- and how would I go about this on the journey to become a professional domainer -- going the extra mile to become official?

I reside in the US, live in Hawaii with the military -- and home of residency is in Georgia.

Thank you,
-GR

 

[fatter]

I think it depends on the state, I think Washington state just ruled domains as property, hence the sale of them is subject to sales tax, I read the list of things in NY that are subject to sales tax and domains wasn't one of them. I have always paid my taxes, in fact its tough to give almost half of a big sale to uncle sam but we do. One good thing I noticed my SS anticipated retirement jumped pretty good because of the 15 percent I have to send for ss taxes from the sales. I look at it like every time you sell stock do you have to pay sales tax. Of coarse I don't do this for a living, some years I don't sell anynames, and some years 5 or 10.
Joe T

 

[Eric Lyon]

There are some interesting questions about taxes. It seems that domain names are virtual assets which are leased, so they don't have any value until you transfer the lease. So what happensif you exchange them for another virtual asset like Bitcoin.

Another possibility isto sell the name for Britannias. Now the Britannia is an english coin, and it is legal tender with a fact value of £100, but because it is solid gold, it will cost you over £1,000 to buy one from the Royal Mint. Because it is currency, it is exempt from capital gains tax and VAT. So if I sell a name for 10 Britannia, will I have to pay tax on the £1,000 value of the currency, and not pay tax on the over £10,000 that I will receive for the sale of the coins?

Great questions! I can only really reference U.S. IRS Tax laws and guidelines. In the U.S. Cryptocurrencies are taxabe. Reference: https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance

When it comes to precious metals being used:

Holdings in precious metals such as gold, silver or platinum are considered to be capital assets, and therefore capital gains may apply. When it comes to tax purposes, the IRS classifies precious metals as collectibles, and thus they may potentially be taxed at the maximum collectable capital gains rate of 28 percent.

Source: https://www.jmbullion.com/investing-guide/taxes-reporting-iras/capital-gains/

 

[MapleDots]

I've never heard of collecting sales tax on domains, maybe that's in Canada? I take the sole proprietor route myself.

In Canada all goods and services are taxable and any business (or sole proprietor) selling 20k or more per year in goods or services has to collect and remit sales tax.

It will vary per country or per state in the USA but I would suggest anyone selling domains check with their regional laws re charging and remitting sales tax.

It goes without saying that everyone has to pay income tax on a sale but the collection and remittance of sales tax will vary from jurisdiction to jurisdiction.

@JB Lions gives great advice when he says see your accountant and I concur with that. I am merely stating that everyone be very careful before they assume they do not have to collect or remit sales tax.