Tax on domain sales?

[Kings]

Are there any taxes involved when selling a domain?

Say I buy a domain for $8.99 and sell it for $5000. Surely, there must be some sort of tax? Can someone give me any help?

(If it depends on the country you live in, I live in The Netherlands.)

Thanks!

 

[jopros]

Register your company in off-shore and you'll avoid all taxes.

 

[Riceman]

Register your company in off-shore and you'll avoid all taxes.

exactly. If you are in the states you will probably have to pay income tax on it

 

[paxton]

In the tax world, there are a lot of "gray areas." Seems to me that Domain sales for profit/(loss) are not addressed in any tax publication. So far, the best online article I could find on this subject was published almost a couple years from Duke's DNJournal site:

http://dnjournal.com/columns/tax_tips.htm

From this article by an anonymous CPA:

"The first issue to explain to your tax professional is that domain names are service contracts - some mistakenly think them to be tangible personal property."

That says it all right there.

Now, if anyone has any updated information on the subject, please post it here. Thanks.

 

[johnn]

Please apply the rule "Don't ask - Don't tell"

The TAX subject is complicated as Internet transactions go across the states and countries.

Shhhhhhhhhhh. Please be quiet!

 

[octobus]

Always incorporate if domains become more than a hobby. Why not if it's a serious hobby, because corporations have more freedom in filling their tax returns

 

[primacomputer]

Always incorporate if domains become more than a hobby. Why not if it's a serious hobby, because corporations have more freedom in filling their tax returns

Corporations also have a tax on profit and generally at a higher rate that personal income at that.

Individuals and corporations have equal freedom in filing a tax return. You file, or the IRS will see that you loose your freedom by putting you in jail!

 

[octobus]

Of course it depends on your tax juristdiction. In my situation a corporation pays a 25% flat-rate tax on profits. When you cash the profits, you either take it as capital income with 28% flat-rate tax or divideds that are tax-free up to a certain limit.

Naturally you can also collect a monthly salary. By combining these three income sources, you can for sure get a lower general tax rate than having evertyhing filed as a progressive personal income.

Secondly, corporations are generally applicable for VAT returns. This a huge advantage if the VAT rates are around 15-25% for services and products. I know that VAT (sales tax) is small or almost non-existant in US. But elsewhere in the western world, VAT can make up a good proportion of that shiny BMW SUV's price :] .

Corporations can deduct business expenses. This becomes very topical when your domain porftolio is counted in thousands. (or why not even in hundreds)

I didn't mean tax evasion by "freedom". As a corporaton you have more space for tax planning. An individual has somewhat limited options for presenting his income to the Revenue Service.

You can decide to leave the money in the company, and expand the company from within. Without paying tax on every $, although it was never real income for you because you spent all your parking revenue on another typo portfolio.

Most importantly corporations have a limited liability, where as operating as an individual you put all finances at risk. You never know if you become subject to the Cybersquatting Act.

 

[pimpdaddy]

The only tax you might have to pay
would be the income tax

But as far as the resale tax there is none
Domain sales is considered an intangible item
thus no tax (I talked to the IRS people)

John

so non tangible items are non taxable?

 

[Badger]

Dont kid yourself anyone. If you already pay tax (i.e. a job) and you have already received all your tax free allowance then capital gains is payable on all profit made on domain sales

In the UK this means you enter the nasty 40% cap gains bracket. And already the inland revenue here has a department concentrating solely on internet businesses. Mainly, i hasten to say, at their current no.1 target 'ebay....'

But no doubt the likes of escrow etc will be next. The only salvation for us (sorry, those ) tax dodging individuals is in through the fact that this global network economy of ours doesnt yet allow the nasty types at the IRS and the inland revenue powers that extend beyond their own national boundaries. And I also know that certain serious domainers use escrow services from countries with, well how shall i say it, an attitude that doesnt much like compliance when it comes to requests from foreign entities to grass on their customers....

 

[Jeff]

Important reminder!

From 2003:

Originally posted by jj2ii3344
Yes, there is no tax associated with the selling of a domain name.

Where did you see ("link") or hear this, jj2ii3344? :o
It's either a short-term or long-term "Capital Gains" tax* , as I understand it (here in the U.S.), IMHO.
Thanks.

* PLEASE consult with your respective tax preparers/planners, folks ... while the comments made here may be helpful in a general discussion sense, they should not be mistaken for individual, specific tax advice/planning, IMHO.
Check with your tax professional and/or the IRS (or relevant regional Taxing authority) regarding your unique situation, in all cases!
Thanks for understanding.

 

[EbookLover]

So if I sell a domain name for $1,000, I would *not* have to pay a "resale" tax, but I *would* have to include that income/profit on my tax returns and pay income tax on it?

Of course, ALL income is to be reported on your tax return, that is a given.

On the other hand, if you received full payent in cash...

need I say more?

Don't forget, in some states, you might have to charge the state sales tax even on intangible items and services but ONLY on sales where the buyer resides within your state. Technically, in this case, you are not paying tax, you are merely collecting it for the state. Some states even allow you to keep 1-2% of the tax collected if it is paid to the state by a certain deadline, therefore, you may be able to profit from some of the sxales tax collected.

But you really need to speak to an accountant witin your state/locality. No one can give you the correct answer here as none of us know the law as it pertains to your state and locality. It is never wise to take tax advice from strangers.