I do a little bit of web development for some a few small businesses. I've been thinking of taking some more control of the hosting duties and going into some reselling (on a pretty small scale to begin with...).

One of the questions I have regards taxes on reselling. Basically, if I offer this service is there any sort of tax that needs to be paid. If I buy a plan at $5/month and sell it for $20, do I charge some sort of sales tax? Do I report it as income? How does it work?

I intend to check with local SBA, but I thought I'd see what people know out here....

Thanks.

Brad

Not knowing your location makes it hard to say.

In New York State (US for those outside the Land of Bush), Web hosting is exempt from sales tax at this time. I'm not sure about Web Design though (can't get a straight answer outta the tax boys). Link is here http://www.tax.state.ny.us/PDF/memos/Sales/M00_7s.PDF As far as I know you do require a tax ID, even if you don't collect. I may be wrong as I'm not an expert.

Other NYS info is at http://www.state.ny.us I'd try varying that URL if you're in the US.

SBA might also help.

Good Luck

I'm in Pennsylvania. I figured the states would be different, but thought I might get an idea to help me figure things out in my head before I go and do anything....

Brad

Brad,

Pennsylvania does not require sales tax to be added to internet hosting yet! If you are planning on becoming a VAR (Reseller) for another company selling tangible products (servers, hardware. etc..) you will need to apply for a PA Sales Tax number and make quartery payments on anything purchased and resold. As for whether you should report your income or not, I would suggest talking with an accountant. The SBA will also give you some info on anything else necessary.

Good Luck!!

In Mississippi you do not process sales tax on intangible goods. Of course you always pay income-tax on profits.
Gary

Same here in Connecticut.
No tax on sales, but tax on income.
Tax ID is your SS#

Originally posted by Sesran
Same here in Connecticut.
No tax on sales, but tax on income.
Tax ID is your SS#

True unless you are a corporation then you will need to use an EIN#.

Here in texas, there is no sales tax for any intangible items sold, so that would include web hosting :). Also, you only have to file income taxes if you are making over $400 a year or do something for a church for over $108.28 (i laughed when i read it too). Thats an individual's (if doing a sole proprietor) total income.

Professional services like web designing usually aren't subject to sales tax (a lawyer or accounting does add sales tax to their bill).

Originally posted by Kaith Sutai-Rustaz
In New York State (US for those outside the Land of Bush), Web hosting is exempt from sales tax at this time. I'm not sure about Web Design though (can't get a straight answer outta the tax boys). Link is here http://www.tax.state.ny.us/PDF/memos/Sales/M00_7s.PDF As far as I know you do require a tax ID, even if you don't collect. I may be wrong as I'm not an expert.


Kaith,

I'm in New York and was very interested in your reply. I went to the PDF file you mention and it seems to relate to sales tax as applied to purchases for equipment and services to be used in internet data centers that provide webhosting services, kind of like NY State wants to promote the webhosting data center industry in New York by giving them a break on paying sales taxes on purchases to improve or maintain their data centers.

No where in that document do I see any mention of the exemption of sales tax for webhosting services for companies like myself who sell services in NY but host their servers in data centers outside of NY.

For instance, I am a reseller for an Alabanza-based hosting company. Their NOC is in Baltimore, MD. My customers are in NY. My business is in NY. I don't see how the document you specify includes ME in the sales tax exemption when selling webhosting accounts to my NY State clients.

Now, if I had my own data center in NY and I wanted to buy new servers, etc. for my data center, I could do so without paying sales tax. I'm not even sure that document says I can sell webhosting services without charge my clients sales tax if I own my own data center in NY.

I know you're not an accountant, but before I pay my accountant a $100 an hour to review that document for me, I'd just like to review how you arrived at the interpretation you describe.

Thanks in advance,

Sean

Sean,

It's the same rule that covers telephone services like those 900# sports or sex lines. They don't charge sales tax either.

Years ago when I first signed up with my ISP they charged tax. Then they sent out an email saying a new law was passed exempting dial-up services so they dropped the tax.

Never seen sales tax mentioned on a hosting site either.

correct me if im wrong, but you only pay sales tax on tangible goods, excluding web hosting, which is why its not stated there. the reason data center sales is there is because servers are considered tanglible goods even if the majority of the service provided is intangible.

Originally posted by jw
correct me if im wrong, but you only pay sales tax on tangible goods, excluding web hosting, which is why its not stated there. the reason data center sales is there is because servers are considered tanglible goods even if the majority of the service provided is intangible.

That is correct.