I've searched and searched and have even spoke to an accountant regarding this question: what kind of business is web hosting classified as? Do we charge taxes since most clients arn't in the state, or what? I'm going to be operating out of California, but I don't want to get off on a bad start. I want all my ducks in a row. Do I need a license in my city? State? Any help would be appreciated. Current hosters in California, do you pay taxes on the business?

What did your accountant say? Did you check with someone in your city's chamber of commerce, or with the city's business department? They'll have answers for you.

You can also buy an inexpensive kit for starting a business in California, or talk to a SCORE representative. (www.score.org)

Do you need a city license: it depends. Some cities require it; others don't. For example, Aptos (central coast) is an unincorporated area - so businesses in Capitola need to get a license from the city of Capitola, while businesses in Aptos (the city next door) don't need one. It all depends on your physical address.

Do you need a state license: no, you don't - at least not as of 2003.

If you're in Los Angeles, you definitely need a business license. They are so hard up for money now that they are going back 3 years for taxes.

The government is now sharing information with the localities in California - what this means to you is that if you claim a business and business expenses on your taxes they are going to let your municipality know and if you haven't paid the municipality fee most likely they are going to come after you for it (plus late fees, of course.)

If last year was your first year, then get your license application and fee-waiver request in asap. If you haven't done much business in your locality then you can get a waiver of the local business tax fee (this is in LA anyway.)

Regarding which "category" to file your business under - GET THE TAX FORMS and see the rates for the various businesses. I'm not being sarcastic I just can't stress strongly enough how important it is for you to make a good choice. In Los Angeles there are a couple of different categories internet businesses could be listed under - the wrong "choice" can literally cost you hundreds of dollars.

Good luck,
Red