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

 

[JB Lions]

Hey Joe

If you make any kind of money you need to charge sales tax. One way or another the government will come after you if you don't charge sales tax. You can be a sole proprietor (like me) but that does not exempt one from paying and collecting sales tax.

So what most domainers don't realize is they think if they get caught that they will just have to pay income tax. In fact, if it is considered any type of business the government will also make you pay whatever taxes should have been collected.

Tax rates vary from state to state or province to province but there are few places in the world that don't charge sales tax. Failure to collect them will cost one in the end because the domainer will have to pay the lost sales tax and all penalties thereof.

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

This question comes up from time to time, talk to an accountant is always the correct answer. I'll just copy and paste my answer from last time -

"An accountant is not that much, I pay $225 currently. Had another one when I lived in another state, was under $200. I know when I first started, I thought it would cost a lot, be some big deal. It's not.

It's pretty easy, income and expenses. I have a folder. Left side, income, right side, expenses. I just hand it to my accountant.

My income = domains sold, parking revenue, affiliate revenue etc.

My expenses = domains bought, domain tools I pay for, advertising, hosting etc."

https://www.namepros.com/threads/us...ify-your-domains-in-2016.915162/#post-5359202

 

[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

 

[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.