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Geek Culture / Tax for online purchases?

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Matt Rock
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Posted: 11th May 2007 01:14
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I'm going through the process of building the payment system on my website, and I'm using Paypal to take care of stuff for me. But here's a question: do I charge tax for electronic software sales? I assume I don't need to because whenever I buy stuff online I never get charged sales tax, but I figured I would ask before I got much further into the site's construction.


"In an interstellar burst, I'm back to save the universe"
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xplosys
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Posted: 11th May 2007 01:20 Edited at: 11th May 2007 01:23
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If the company selling items/media online has a registered physical location (store with a tax ID) in NY, you are supposed to charge sales tax to customers from NY, otherwise no. If you are selling online as an individual and not as a company, then no.

You must have a registered state tax ID to charge sales tax, and you only charge individuals who reside in the state in which it is registered.

Best.

I'm sorry, my answers are limited. You must ask the right question.

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Matt Rock
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Posted: 11th May 2007 01:24
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Awesome, and great response btw! I was unable to find this stuff on the IRS website, or anything about internet sales really. ty for the help


"In an interstellar burst, I'm back to save the universe"
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xplosys
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Posted: 11th May 2007 01:32
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You are most welcome.

I'm sorry, my answers are limited. You must ask the right question.

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GatorHex
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Posted: 11th May 2007 01:39 Edited at: 11th May 2007 01:46
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You should be taxing buyers from the country you live in.

If you sell to somone form another country there is no tax but the buyer may have to pay import duty. If customs detect it but thats the buyers problem

Normaly (in the UK anyway) you have to make a fair ammount of sales (about £40,000 I think) before you have to register for VAT.

Beware of using PayPal (i dunno it may work better in the USA) in the UK it's realy bad at approving credit cards and you cannot tell the crooks from the genuine customers half the time! Also PayPal charge you a charge back fee of about £7 for every bad chageback!

I tried to run a business though paypal once it's a nightmare :/
Other people i've talked to say the use an electonic copy of the electrol register to prove somone lives where they say they are instead.

http://www.KumKie.com http://bulldog.servegame.com
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xplosys
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Posted: 11th May 2007 01:41
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Quote: "You should be taxed in the country you live in."


Oh, believe me.... we are!

I'm sorry, my answers are limited. You must ask the right question.

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Ron Erickson
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Posted: 11th May 2007 04:47
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I just looked some info up on this subject recently. Xpolsys is correct.

Quote: "I assume I don't need to because whenever I buy stuff online I never get charged sales tax, but I figured I would ask before I got much further into the site's construction."


Did you know that if the retailer does not charge you sales tax you are still supposed to pay the tax to your state? No one actually does, but technicaly you are supposed to. It is called Use tax. Your state governament expects you to fill out a form and send them a check for the tax of any taxable purchase that you were NOT charged tax for. As an individual, it would be almost impossible to get caught. As a business though, if you get audited and they find any occurences, the penalty is steep. They will assume that 25% of all purchases made by the company had no tax paid and you would have to pay the tax on that plus interest and penalties!

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Steve J
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Posted: 11th May 2007 04:48 Edited at: 11th May 2007 04:49
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@xplosys: hahahah, yes we are; But in a worldwide view very little. Go to a foreign country and look at the taxation rates. While income tax and property tax, and car mortgages are all unconstitutional and illegal, they are still really low in a world wide view of the majority of 1st world nations. Not to say I enjoy them, or like the idea of our government allowing these things.

I believe that a few states require sales tax on the internet, such as Washington starting 2008, not 100% sure what it really means and how they can track it all the time (Besides on April 17th), but hey who knows.. I would oh so much rather our federal government relied on the proper income management-tarrifs, but I think the civil war kind of cemented a big "no" on it being a major part of the income..

pleading and needing and bleeding and breeding and feeding exceeding..where is everybody? trying and lying defying denying crying and dying..where is everybody?
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Jeku
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Posted: 11th May 2007 05:33
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@Matt Rock - If I were you I'd put away a chunk of your earnings just in case.

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Ron Erickson
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Posted: 11th May 2007 13:54
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Quote: "@Matt Rock - If I were you I'd put away a chunk of your earnings just in case."

Sales tax are funded by the the buyer. The question is if he is responsible to collect them from the buyer. He is responsible to pay for any income tax though. So, in that sense, you are right. He should put away a good chunk of any money earned.

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Virtual X
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Posted: 11th May 2007 17:55
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I'm not sure about the US, but I certainly wouldn't start charging tax such as VAT to start with, it just adds unnecessary complexity and alot more paperwork LOL, currently the UK VAT threshold is £61,000 and £70,000 if your selling to other EC countries.

but if your tax system is like the UK in terms of payment thresholds then i certainly wouldn't worry about it until you get to that stage.
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Matt Rock
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Posted: 11th May 2007 21:00
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I'm with Jeku here. No one is predicting this game to be some sort of phenomenon or anything, but what if by some miracle it ends up being some cult smash hit and sells 50k copies? If that were to happen with any sort of quick pace, I'd be done for . Again, I'm not thinking it will, in fact I'm sort of thinking the opposite, but it's happened to others before. Maybe I'll just tuck 10% away and see what happens down the road. Better safe than in prison for tax evasion .


"In an interstellar burst, I'm back to save the universe"
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bitJericho
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Posted: 11th May 2007 23:58
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Quote: "I'm with Jeku here. No one is predicting this game to be some sort of phenomenon or anything, but what if by some miracle it ends up being some cult smash hit and sells 50k copies? If that were to happen with any sort of quick pace, I'd be done for . Again, I'm not thinking it will, in fact I'm sort of thinking the opposite, but it's happened to others before. Maybe I'll just tuck 10% away and see what happens down the road. Better safe than in prison for tax evasion ."


If your game is a runaway smash, then you can afford a good accountant to take care of that stuff for you

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Miguel Melo
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Posted: 12th May 2007 14:52
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Actually I do have a question: when I buy something from outside the European Union, say the USA, I always pay the marked value for the item which I assume includes the taxes for the country the seller's in.

Now when the parcel gets caught by Portuguese customs I have to pay a shedload of taxes on it that always include 21% VAT plus other "unnamed/unfathomable" taxes.

My question is then: I can demand that the US seller NOT tax me on whatever the sale/added value tax is over there??

It hardly seems fair that I should be doubly taxed...

I have vague plans for World Domination
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bitJericho
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Posted: 12th May 2007 16:30
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I highly doubt you're being charged tax from any US seller. The taxes are almost always charged separately.

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xplosys
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Posted: 12th May 2007 21:28
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Quote: "I highly doubt you're being charged tax from any US seller. The taxes are almost always charged separately."


Correct.

The U.S. does not have a Federal\Country Sales Tax. Our sales tax is only collected at the state level, and you would only pay sales tax if you reside in the same state as the seller.

Best.

I'm sorry, my answers are limited. You must ask the right question.

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Matt Rock
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Posted: 12th May 2007 23:01
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Quote: "If your game is a runaway smash, then you can afford a good accountant to take care of that stuff for you"

heh, I hadn't even thought of that. Good point


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