hello,

i would really appreciate if anyone can help me.

is web hosting taxable in the state of california ?

Tax laws according to NEXUS rules state that you must charge taxes when the person who has ordered your service is located in the same state as you. If they are located in the same country you charge taxes based on the country tax. Otherwise your service should be tax free. Just be sure not to skip out on your income taxes :D

For example I host in B.C. Canada, If a Canadian signs up with our service we must charge GST. If they are located in B.C. I must charge GST and PST.

considering that my customer is located in the same state as mine, and i have already invoiced him without charging him sales tax, what is the next step i should take ?

Well, you'll have to take the tax out of your hosting fee. Chances are you'll receive many more hosts internationally or within the US which do not pay tax or only have a national tax = it will make up for those who are in the same state as you.

To make up the difference you may need to change your pricing to reflect the tax charged, those hosting with you don't need to know tax is being charged on their purchase so when you do get those hosts that sign up internationally you get a little extra pocket money.

thanks so much for the quick replies.

so in essence if i have invoiced my customer $120 per year, i should just go ahead and add $120 * 8.25 % (ca tax rate) = $ 9.90 and pay that to the government, without having to change any invoicing and stuff ??

also one more question:

are consultancy services e.g. network configuration, software training, etc. etc taxable ??

Originally posted by croutons
thanks so much for the quick replies.

so in essence if i have invoiced my customer $120 per year, i should just go ahead and add $120 * 8.25 % (ca tax rate) = $ 9.90 and pay that to the government, without having to change any invoicing and stuff ??

Ya, it will save you and your customers a ton of headaches on your site when people sign up. Just make sure that you aren't losing money because of this.

About consulting etc... No you don't charge taxes on things like that.

thanks a ton again, david.

Like I posted in a similar thread to this one. ebiz and tax laws in the US is really a grey area. The way I described it above will definately keep the IRS off your back. You're welcome ;)

Webhosting is not taxable in the state of California. It is a service, and under California tax laws, services are exempt from sales tax.

See http://www.boe.ca.gov/sutax/faqpurch.htm#one
and http://www.boe.ca.gov/pdf/pub61.pdf
for more info.

Ya i took a look at the Alphabetical exemptions. I couldn't find one reference to online transactions.

I've read several articles on this subject about how the US government is losing billions in tax revenue because of their inaction in enforcing taxes online.

I've pondered this question many times - Is bandwidth considered property? Is webspace considered property?
If you look at rackshack.net they charge tax on their servers regardless of where you come from in the world.

Web hosting has not been properly distinguished as a service because bandwidth and webspace have no real physical properties.

It is not a matter of online transactions. In (to my knowledge) most U.S. States, services (online or offline) are not taxable, with a few exceptions. As a general rule, only the sale of tangible products (i.e. transfer of property) are subject to sales tax in U.S.

Well I'm in Canada and our tax laws include both sales and services so I don't have that problem here.

Rackshack charges sales taxes because they are in the great state of Texas, which has more aggresive tax laws than some other states. In Texas, tax is imposed on all retail sales, leases and rentals of most goods, as well as taxable services.

Ahhh, Yes of course. I just found that out myself.

croutons, forget what I said. No tax is charged on your web hosting because you are in the state of California. :uzi: IRS and Rev. Canada. :D

Max thanks for pointing that out.

SERVICES — The sale of services where no tangible personal property is transferred or where the
transfer of property is incidental, are not subject to sales and use taxes. Persons providing services
are consumers of property used in their business activities. However, persons who engage in service
operations are retailers of any supplies or other tangible personal property sold to their customers or
clients, and tax applies to gross receipts from such sales. Certain services, however, are defined as
sales of tangible personal property. For example, the fabrication of tangible personal property for a
consumer is defined as a “sale” even when the consumer provides all the tangible personal property
used to fabricate the end product.

Which is why you should hire a tax expert ASAP...and never take legal, tax or relationship advice from people online. :D

--Tina

:D lol... exactly. Although, to be fair, if you check out your state's website, or sites like sba.gov, you can usually find all the (real and up-to-date) information you need without shelling out the big bucks. Of course, it never hurts to consult those lawyer-y type people.


edit: assuming, of course, that you are in the U.S., but I would imagine other countries have similar info available online. Also, your local city officials can usually help you out.

Actually, rarely do local officials even know what webhosting is. :D Finding your state or country's tax information online is your best bet.

Tina - Ya my bad. :D