Quick question, do you cgarge sales tax to customers, be it in-state or out-of-state? If so how do you charge? My company is set up as a corporation. Just curious, im new to all this. I ask because I never pay sales tax when i order something out-of-state and i wondered who absorbed this? Thanks in advance.

This is going to be dependent on which state you are operating from. Some states see webhosting as a service, while others see it as a product. Contact your local SBA or state tax office to find out the details in your area.

In my case, at least, I am only required to submit sales taxes (for the products which are taxable) for customers who live in the same state as I work. Since I have very few customers in my state, I just eat the taxes & don't charge the customer any "extra". (My estimated tax payments are calculated into my operating costs, and becomes a piece of how I set my pricing structure.) So, there is nothing on my website about taxes, each customer just pays the price I set.

Thank You for the response, I will have to investigate that.
FYI, I operate out of NJ, If anyone has any specific info.Thanks

Originally posted by kmh
Since I have very few customers in my state, I just eat the taxes & don't charge the customer any "extra". (My estimated tax payments are calculated into my operating costs, and becomes a piece of how I set my pricing structure.) So, there is nothing on my website about taxes, each customer just pays the price I set. Do you mean that even though you charge everybody the same abount, you keep track of which customers are from your state, and calculate tax on that... so that on your books they are paying less in the sale, and the balance in tax... and you submit that tax amount to the state?

In other words, as an example... you have five customers and one of them is from your state. Sales tax is 10%, and you charge $20 per month... So while your income is $100 gross, you consider payment from one customer to be an $18.19 sale with $1.81 in sales tax? (Not, of course, that you'd deal with it that way for every sale, but that sort of calculation when coming up with your sales tax liability.)

Just curious.

I keep everything in an offline database with a number of scripts written to pull up various "reports" for me. One of the reports basically just runs a query for customers in my statse, adds up the amount of $$ I have received from them, and calculates the tax for me.

I've been paying the tax on the entire $20 (using your example). You make a very good point that I could setup my script to factor out that $1.81 & then only pay the tax on $18.91, which would save me 18 cents per $20 account from my state.

Of course, I would then have to run my total gross receipts script to also adjust payments received from customers in state.

At this point, the annual savings don't justify the extra lines of code (and greater potential for bugs in the script), but if I end up with more customers from my state, I may think about it.