I'm in the process of registering my hosting business with the state of Pennsylvania (where I reside), and have a few questions...

1) I've setup the business as a sole propietorship and registered a ficticious name (DBA name). That covers everything needed to startup, correct?

2) How do you handle your states sales tax? In Pennsylvania we have a 6% sales tax, which is 60 cents per $10 (the cost of one of the hosting plans I'm going to offer). I'm interesting in finding out if other hosts remit a sales tax to the state. Since I have my company setup as a sole propietorship, I don't have to do seperate taxes for the company. Do I still have to collect a sales tax?

Thanks for any help.

In the state of Connecticut we only need to pay income tax, internet related services are not taxable under the CT sales tax law. May be different in PA, but I am pretty sure that it is similar in all US states. I have never seen a host or designer charging tax.

Laws vary state-to-state. You'll have to check with your state's taxing authority.

Here in Massachusetts, services (including internet services) are not charged a sales tax. However, leases or rentals are. So while we don't have to charge sales tax on virtual hosting or dial-up, we do have to charge sales tax (to Mass. residents/businesses) on dedicated servers or co-location.

But, as I said, it varies state-to-state. In Texas, for example, the first $20 of an Internet transaction is tax-free, but anything above $20 is taxed sales tax (or something like that - I'm not in Texas, so I might be confused on the exact numbers).

Good luck,

Jason

You would be better off to go straight to the state, especially when it comes to taxes. Your state actually has a nice website with info on it. Taxes: http://www.state.pa.us/PAPower/links/PANavigator.asp?TAX=1&category=15

I also suggest you find a CPA for your year end books, at least for the first year or so. It is worth the money to see how a professional works the system :cool:

sPoT!

Originally posted by sPoT!
You would be better off to go straight to the state, especially when it comes to taxes. Your state actually has a nice website with info on it. Taxes: http://www.state.pa.us/PAPower/links/PANavigator.asp?TAX=1&category=15

I also suggest you find a CPA for your year end books, at least for the first year or so. It is worth the money to see how a professional works the system :cool:

sPoT!

Yes, I actually filed all the necessary business registration forms through their website. It's very nice indeed. Thanks for the suggestion.

Thanks Sesran and Jason! That helped.

Yep, the rules really vary. Here in WI, our ISP's have to charge sales tax.

I would also suggest that you have a brief chat with your accountant/lawyer. Setting up shop as a sole propietorship opens you up to a lot of personal liability. In most states it's very cheap to incorporate as a corporation or LLC.

If you decided to incorporate, you can just delcare the corporation as a "S" corporation (a normal corporation is a 'C" corp.) and all the taxes etc. flow onto your personal taxes.

IMNAL, put I would never setup any business as a sole propietorship. If someone decided to sue you, they can go after all your personal assets (i.e. car, boat, house etc.). If you're incorporated and follow the rules (i.e. keep books, keep your business/personal stuff seperate) they can only go after the corp's assets.

Just my 2 cents,

Frank

Originally posted by ffeingol
IMNAL, put I would never setup any business as a sole propietorship. If someone decided to sue you, they can go after all your personal assets (i.e. car, boat, house etc.). If you're incorporated and follow the rules (i.e. keep books, keep your business/personal stuff seperate) they can only go after the corp's assets.

Frank


(not a lawyer, not a legal opinion)

Frank,

Being a corp. doesn't automatically give you blanket law suit protection.

First, there's a difference between liability and professional liability. In the former, if you have a store and someone trips on the carpet that's one thing. But in the latter, if you are an engineer and make a bad design being a corporation won't protect you. In terms of providing services (such as hosting) just being a corp or LLC may not give you the personal asset protection most people think they're getting. Usually you need professional liability insurance and I doubt very many insurance companies will issue a policy to a web host (if they do it will be outragiously expensive!)

Second, being a corp won't prevent you from being sued. Anyone can sue you over just about anything. There's no form of business that can prevent a suit.

Third, in many cases the courts have allowed officers and large-holding shareholders to be individually sued on the grounds that they are the ones who actually make the decisions and control the business (i.e. a corporation is run by people, not a mind of it's own).

In short, if you really are that concerned from day 1 about protection talk to a lawyer first.

Jaiem,

Yep, I agree with you totally. That's why there is officers/directors liability insurance etc.

In today's US sue happy world, I just don't think anyone should open a business w/o talking first with an accountant and a lawyer. There are so many tax, liability etc. things that you really need to know.

Frank