Before I even ask, I know this is the type of question to which everyone is going to reply: "You need to ask a professional," "Never seek such advice on a public forum," etc., etc. I know, and I will. However, I'm not there yet, and I want to get a general idea what to expect. Thousands of you have already dealt with this, so maybe you can give me a good idea. Sure, it depends on the specific situation and location, but in general.

Ok, now for the actual questions:

1. Does sales tax apply to customers of Web Hosting and Web Design if they are from the same state in which my business operates? I think the answer to this is yes...

2. ...but generally sales tax doesn't apply to customers from other states, right?

3. Is it typically the same deal with city/county sales taxes? In other words, does my local county sales tax apply to customers within my county, but not to those within my state but in another county?

4. Ok, now, say that I outsource servers from a third party in a different state. Am I then also obligated for sales tax for customers from that state? If so, what if I outsource support from a third state? Where does it stop?

5. Can ClientExec be configured to automatically handle all this stuff?

Thanks!

Before I even ask, I know this is the type of question to which everyone is going to reply: "You need to ask a professional," "Never seek such advice on a public forum," etc., etc. I know, and I will. However, I'm not there yet, and I want to get a general idea what to expect. Thousands of you have already dealt with this, so maybe you can give me a good idea. Sure, it depends on the specific situation and location, but in general.

Ok, now for the actual questions:

1. Does sales tax apply to customers of Web Hosting and Web Design if they are from the same state in which my business operates? I think the answer to this is yes...

2. ...but generally sales tax doesn't apply to customers from other states, right?

3. Is it typically the same deal with city/county sales taxes? In other words, does my local county sales tax apply to customers within my county, but not to those within my state but in another county?

4. Ok, now, say that I outsource servers from a third party in a different state. Am I then also obligated for sales tax for customers from that state? If so, what if I outsource support from a third state? Where does it stop?

5. Can ClientExec be configured to automatically handle all this stuff?

Thanks!


1. Yes.

2. No, it does not. But they should pay the taxes on purchases made “outside” of their state. In other words, do not say or type “tax free” anywhere.

3. Only those in your county, but since they are in your state (if one county over) they pay state taxes.

4. No, you pay in the state in which you have your license and/or setup residence. If it mattered where your server was setup, my server would be setup in Africa.

5. I have no idea…

I’m basing this off my experience in South Carolina. Your mileage may vary, depending on your state.

You know you can have these questions answered by a professional for free? Most states have a tax office and they will assist you… better yet, the http://www.firstgov.gov/Business/Business_Gateway.shtml

I would say before you talk to a “professional” read up on everything you can. Know the answers before you go into the meeting. First this will make things go faster. Second, you will at least know if this person knows what he/she is talking about. Don’t be a know it all, but if they get simple things wrong, or can’t answer a question, you might have the wrong professional.


I'm not a lawyer... lol...

Thanks for the response, hekwu. As it happens, I was just doing what you suggested and reading up on it, and I just discovered a few things about my specific state. For one, I found out that sales tax in my state does not apply to "Website development or hosting services," which is great news! All that applies is B&O tax of 1.5%. Am I correct in assuming that B&O tax is typically not charged to my end customers?

What's more, based on my planned earnings for the frist year or two, I won't even make enough to have to file with the state department of revenue. Who would have thought! :)

Anyway, thank you for the response and the informative link, and thank you for clearing up #4. Do others agree with this assessment on #4? Also, I am still hoping for an answer to #5.

Thanks!

What's more, based on my planned earnings for the frist year or two, I won't even make enough to have to file with the state department of revenue. Who would have thought! :)!

You might want to file anyway... no matter if they require it or not.

Also don`t forget that if you sell hosting to customers in the European Union you have to register in the European Union and pay VAT there. Sure you can just not do it but if you don't you should never go to the European Union.

You might want to file anyway... no matter if they require it or not.
Okay...how come? :confused:



Also don`t forget that if you sell hosting to customers in the European Union you have to register in the European Union and pay VAT there. Sure you can just not do it but if you don't you should never go to the European Union.
Really? I had no idea! Thanks for the heads-up. :homer:
To make sure I understand--if I, living and operating in the U.S., sell hosting to a customer in the EU, there is a sales tax (VAT?) that has to be paid? Is this easy to handle? I would be very appreciative of any details that anyone can provide.

Are there any other countries with similar tax (or other) issues that I would have to worry about?

Thanks!

Okay...how come? :confused:




Really? I had no idea! Thanks for the heads-up. :homer:
To make sure I understand--if I, living and operating in the U.S., sell hosting to a customer in the EU, there is a sales tax (VAT?) that has to be paid? Is this easy to handle? I would be very appreciative of any details that anyone can provide.

Are there any other countries with similar tax (or other) issues that I would have to worry about?

Thanks!

Yes, if you sell to a non business customer in the EU you would have to register in any EU country and pay the VAT rate of that customer... However, you can as well not pay it. As long as you stay in the USA you won`t get into trouble. If you go the EU though you may get problems because you didn`t pay taxes. Either pay VAT to the EU or don`t go there...

Yes, if you sell to a non business customer in the EU you would have to register in any EU country and pay the VAT rate of that customer... However, you can as well not pay it. As long as you stay in the USA you won`t get into trouble. If you go the EU though you may get problems because you didn`t pay taxes. Either pay VAT to the EU or don`t go there...
Thanks again. By "go to the EU," do you mean officially take a business presence there, or do you mean me personally ever visiting? Either way, if it is considered illegal in any way to not pay, I think I would want to do it right. Can ClientExec or other billing systems automatically handle this VAT issue? Where do I go to register? And, again, are there any other countries to which similar rules apply?

Thanks

Thanks again. By "go to the EU," do you mean officially take a business presence there, or do you mean me personally ever visiting? Either way, if it is considered illegal in any way to not pay, I think I would want to do it right. Can ClientExec or other billing systems automatically handle this VAT issue? Where do I go to register? And, again, are there any other countries to which similar rules apply?

Thanks

No I mean not paying taxes in the EU is a criminal offense there so don`t physically travel there for any reason if you do not charge VAT. In the USA it is not illegal not to pay VAT to the EU which means as long as you stay in the US you will not get into trouble. The US governemnt doesn`t care if you do not pay VAT to the EU. It is illegal in the EU though.
Also if you take a look at the other large hosts such as EV1, Dreamhost etc. they all don`t charge European non business customers VAT simply because the EU can not enforce this law unless you step into their territory. And yes, there are other countries with similar laws but I don`t know which countries and I don`t care because I do not plan to travel to any country but the USA, Canada and Australia. As a general rule: If you don`t plan to go there there is no need to pay simply because they can not enforce their laws unless you step on their ground. I don`t know any US hosting company that cares about VAT in the EU. They are breaking the law here by doing this but in the US they won`t get into trouble.

The law says that if you sell webhosting to someone in the EU you have to register in just one country of the EU to pay VAT. I.e. you could register in the UK. That doesn`t mean you have to register a business there - your business is located in the USA only. But you register in the UK for paying VAT only. There is some kind of VAT registration form you fill out...that`s all. Then if someone from another EU country orders from you you have to charge the rate that they have in that country. I.e. someone from Ireland orders from you...you pay 21%. Someone from Germany orders from you, you pay 16% and so on. That makes it pretty complicated.

For more information read this:
http://www.multivat.com/registration_doc/registration_doc.pdf

One thing you should know before reading this document is that the service is considered as provided in the EU eventhough it is provided in the US according to civil law. That means if your business is in the US and your servers are in the US the service is provided in the US according to civil law but it is provided in the EU according to VAT laws...which means you have to pay VAT eventhough the service is provided in the US. Don`t get confused if you are reading anything about it because if someone tells you you do not have to pay VAT as the service is provided in the US he`s wrong because the service is still considered as if you had provided it in the EU. I.e. in the German VAT law (which is based on European law and similar in all EU countries) in §3a IIIa it says:

"(3a) Ist der Empfänger einer in Absatz 4 Nr. 14 bezeichneten sonstigen Leistung kein Unternehmer und hat er seinen Wohnsitz oder Sitz im Gemeinschaftsgebiet, wird die sonstige Leistung abweichend von Absatz 1 dort ausgeführt, wo er seinen Wohnsitz oder Sitz hat, wenn die sonstige Leistung von einem Unternehmer ausgeführt wird, der im Drittlandsgebiet ansässig ist oder dort eine Betriebsstätte hat, von der die Leistung ausgeführt wird."

I`m translating that:
If the recipient of one of the services mentioned in IV Nr. 14 is not a business and is residing in the European Union the service is considered as provided where the customer resides if the service is provided by a company outside the EU or by a department of a company if the department is located outside the EU and if this department provides the service.

(In IV Nr. 14 they list various services. One of them is "electronically provided services". The government later published a letter to the tax departments according to which webhosting is to be considered as an electronically provided service.)

That means if a US business sells webhosting accounts on US servers to a non business customer in the EU you provide the service in the US BUT the VAT law still considers the service as beeing delivered in the EU. Therefore you have to pay VAT in the EU. Same applys to European businesses that have a department in the USA. I.e. if their US department sells webhosting to a customer in the EU the service is still considered as delivered in the EU if the customer is a EU resident.

Also check out:
http://www.multivat.com
...or do a search on Google. Don`t get confused though. It is pretty complicated and there are many things to misunderstand.

This will help you to understand.
http://www.allbusiness.com/accounting-reporting/corporate-taxes/519-1.html

Let that link.

Thanks

This will help you to understand.
http://www.allbusiness.com/accountin...xes/519-1.html
Thanks for the article link, iHubNet. It does have useful information, but I'm guessing you didn't mean for it to have anything to do with the whole EU VAT discussion, right? At least I don't think it has anything to do with those issues. It does have good general info. for the U.S., but it is so general that I think you still need to check with the requirements of your specific state.

For more information read this:
http://www.multivat.com/registration...ration_doc.pdf
Wow, thanks for all of the information, glace! However, I am still unsure. That article you provided is geared to EU member countries, saying that they are required to pay VAT in other member countries. Throughout the article, it consistently refers to other EU states or business "between EU states." I'm not saying you are wrong, but I don't see any direct evidence from this article that suggests a U.S. host has to pay VAT. There is some suggestions of that from the other article you translated, but it is hard to tell without the full context. I am going to attempt to email them and clear this up.

Thanks!

You might want to file anyway... no matter if they require it or not.

I'm not a CPA, but I think this is right. The state of Illinois has got on us before about not filing sales tax - our accountant files it regularly, despite the fact that we really aren't selling anything.