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  1. #1
    Join Date
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    Question RackShack Sales Tax

    I was thinking about switching to rackshack but they charge 8.25% sales tax . I live in Oregon, luckily we don't have to pay sales tax... which leads me to the next question I thought there was a moritorium on internet sales tax... aparantly that doesn't apply to state taxes on internet services? I have never paid sales tax on anything I have purchased on the internet before so I was a bit surprised. Can anyone recommend a hosting company with similar services/prices without the sales tax?

    -CP


    "All accounts and services provided by RackShack are subject to the current tax rate as imposed by the City of Houston, State of Texas which is currently 8.25%. 80% of the monthly service charge is subject to the 8.25% tax rate, while the remaining 20% of the monthly service charge is not taxed. 100% of the setup fee is subject to the 8.25% tax rate. The above applies to all accounts and services provided by RackShack."
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  2. #2
    Join Date
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    sales tax

    They are not allowed to charge sales tax unless they maintain a place of business in the state you live in/work in. So if they have a business office or sometimes even a pop, then you could be required to pay sales tax if they dont then its illigal for them to collect sales tax
    affordablecolo.com carrier grade colocation at a affordable price!
    Charles Baker - Company Operations
    1-866-316-HOST
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  3. #3
    Join Date
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    i get charged the sales tax on my raq with rackshack.net and i'm in Oz !
    : CentminMod.com Nginx Installer (Nginx 1.11, PHP-FPM 5.4-5.6 & 7.0, MariaDB 10 + ngx_pagespeed + HTTP2 + lua) for CentOS 6 & 7
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  4. #4
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    They are not allowed to charge sales tax unless they maintain a place of business in the state you live in/work in.

    That's not correct. Sales tax is determined by the point WHERE the article or service is to ARRIVE. Technically, all these mail order companies and Internet sales are supposed to be taxing, but it's simply a nightmare to keep track of 50 sales taxes, plus some things may not be taxable in some States, it would be a nightmare to take in all those taxes and then turn them over back to the States that collected them, becuase when they collect tax they are to turn them over to the government of each State they collected from.

    I would inform your State Attorney Generals Office. They may be charging tax and just keeping it.

    Give them a call and threaten them, and tell them that AT&T doesnt charge sales tax and ask why they do?
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  5. #5
    Join Date
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    Well, AT&T may be a bad example as they don't have to charge sales tax. You'll notice that your bill is at least $5 higher, even when you don't make a single call that month, due to various fees and taxes they do collect. Don't get me ranting on my phone bill... I don't want to go there!

    edit: unless you meant AT&T hosting... heh?
    HostHideout.com - Where professionals discuss web hosting.

    Chicken
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  6. #6
    Join Date
    Sep 2001
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    That's one of the reasons I didn't sign up with them. I've done business with several Texas-based companies, and I've never seen any mention of sales tax before.

    I think one of the co-location facilities I was looking into, are based in Texas, and they don't charge sales tax.

    I don't think it's legit, but then again, it is George Bush's home state. lol

    Edit: Maybe someone should ask RackShack for their sales tax ID number??
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  7. #7
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    I would say to call them up and ask. I hope they aren't just keeping the money.
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  8. #8
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    They are only allowed to charge you sales tax if you live in Texas PERIOD. If they are trying to charge you this and you don't llive in Texas, then the Texas State Auth. need to be informed.

    In Texas, alot of service oriented businesses don't have to charge sales tax, but it looks like RackShack has taked the route they are renting you hardware and not providing a service.

    http://info.sos.state.tx.us/pub/plsql/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=34&pt=1&ch=3&rl=308
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  9. #9
    I have a raq with rackshack and live in the UK, just received this from them:

    Since the raq or virtual site is located in texas is phisicaly sited in texas then sales tax is applicable.

    Is this correct?

    Brian
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  10. #10
    And here is a transcript from them:

    <Brian> Why is rackshack charging me and have charged me 8.25% texas sales tax were I done live in texas?

    <WebSales_Aaron> Brian - Because the company you are purchasing the service from (RackShack) is in Texas and the final location of the service (Colo Facility) is in Texas, according to Texas tax law, texas sales tax applies

    <WebSales_Aaron> That is the word from RackShack management

    <Brian> Yes but only if you live in texas, I live in the UK so sale tax is not applicable to me.

    <WebSales_Aaron> The thing is, since the RAQ or Virtual site you purchase will be physically located in Texas, tax applies. The fact that people are out of state, in thise case, does not apply, because the product remains in texas.

    <Brian-> Can you send me this in an email form.

    <WebSales_Aaron> I can send a transcript of this chat right here. We don't have a set script about this topic. Will that be acceptable. If it is not, you can email [email protected] asking for a better, more official explanation

    Thank you,


    So is this correct?

    Brian
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  11. #11
    Join Date
    Sep 2001
    Posts
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    I don't know, it doesn't sound right. I know here in Michigan that businesses are exempt from sales tax, if the product they are purchasing is for resale, which I would think applies in this situation.

    I know many if not most other states also use that guideline.
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  12. #12
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    Here's the law, according to Texas. lol

    You just have to love the "big oil & Bush" state.

    Actually, I'm not really sure if this applies to hosting. *shrug*
    Attached Files Attached Files
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  13. #13
    Join Date
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    Aloha

    well here are my thoughts

    if you rent something say a storage locker in another place you would pay tax for that physical location

    they most likley have set it up they get some advantage to writing off something if they set it up this way as a rental and property rental or ???
    who knows most likely a tax lawyer or accountant set it up for them and this is the way they are doing it ??
    I would really doubt they are pocketing the money ???
    but if they are that would not be very smart move ;(
    I should also say I am not saying they are not smart I think they are very smart
    I would and really doubt they are doing this !!!!!!!!

    man they put capone away for taxes when nothing else would work
    to me there are a few thigns you dont mess with
    taxes are one of them !!!!
    Last edited by Honu; 10-03-2001 at 04:27 PM.
    Aloha, Chad
    www.happyfish.com
    To do a move in such a way that no one suspects let alone detects !!!
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  14. #14
    I think these 3 sections would be applicable to the above and I think sales tax is added regardless if you live in texas or not.

    (g) Local taxes.

    (1) For local sales tax purposes, city, county, transit authority, and/or
    special purpose district sales taxes are due if the Internet access service
    provider has only one place of business (the location from which the
    provider accepts orders for Internet service) within the boundaries of a
    local taxing entity. Local sales tax must be collected based upon the tax
    rate at that location, except that no transit authority sales tax is due on
    services provided to a location outside the boundaries of the transit area.
    In the case of multiple locations, if an order for Internet service is taken
    at one location but the service is provided from another location from which
    customers may order service, the place of business from which the service is
    provided will determine to which local taxing entity the tax is allocated.

    (2) For the purposes of the local use tax, if a place of business is outside
    the boundaries of a local taxing entity, the Internet access service
    provider will be required to collect local use tax if the client is within
    the local taxing entity and the service provider has representation in the
    local taxing entity as outlined in sec. 3.286 of this title (relating to
    Seller's and Purchaser's Responsibilities). Even if the service provider is
    not required to collect local use tax, the client is still liable for the
    tax if the service is received or a benefit is derived from the service
    within the boundaries of a local taxing entity.

    (3) An in-state customer purchasing Internet access services for the benefit
    of locations in more than one local taxing entity is responsible for issuing
    to the Internet access service provider an exemption certificate claiming a
    multi-city benefit and for determining the extent of benefit for each
    entity. The local use tax for each entity must be reported, allocated, and
    paid by the customer. An Internet access service provider that accepts in
    good faith an exemption certificate claiming a multi-city benefit is
    relieved of responsibility for collecting and remitting local tax on
    transactions to which the certificate relates.
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  15. #15
    Join Date
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    Question Texas based taxes?

    Does anyone else use a hosting company in Texas that charges sales tax to out of state clients? Maybe another user of a different provider in Texas can shed a little light on this.

    -CP
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  16. #16
    Join Date
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    Location
    Houston, Texas
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    The key to Texas law and Internet use taxes relates to where the services are "delivered" or "provided".

    In the case of a Raq, the service is delivered and provided in Houston, Harris County Texas.

    You will notice that part fo the services are taxes at 100% and some at 80%. This relates to the Texas law that was passed repealing some of teh tax on Internet services. The "moratorium" that was referred to earlier was not applicable to all 50 states. Some states, including Texas, that were already charging sales taxes on Internet services, were exempt from the provisions although Texas later exempted SOME Internet services from sales tax collection.

    I hope this clears some of the tax issues up.

    Robert Marsh
    Head Surfer
    Rackshack.net
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  17. #17

    The Realist

    " The Realist " could you please provide where (URL) was it that you found the information listed in your previouse reply?

    Thank you in advance.
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  18. #18

    Re: The Realist

    Regarding the below, it was infact within this very thread, 1st page, 12th post down there is a link called txtax.txt.

    Its within thers M8.

    The Realist


    Originally posted by mr0817
    " The Realist " could you please provide where (URL) was it that you found the information listed in your previouse reply?

    Thank you in advance.
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  19. #19

    rackshack.net experience

    I am considering a rackshack.nte dedicated server, has any one had any experience with this company and their systems that may affect my decision ??
    Thanks in advance
    Ian

    www.thewebsitecompany.co.nz

    <<MOD NOTE:>>
    Please set up a signature (see profile) - Ohhh and welcome!
    <</MOD NOTE>>
    Last edited by Chicken; 10-11-2001 at 08:01 PM.
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  20. #20
    Join Date
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    Location
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    Re: rackshack.net experience

    Originally posted by iancal
    I am considering a rackshack.nte dedicated server, has any one had any experience with this company and their systems that may affect my decision ??
    Thanks in advance
    Ian

    www.thewebsitecompany.co.nz

    <<MOD NOTE:>>
    Please set up a signature (see profile) - Ohhh and welcome!
    <</MOD NOTE>>
    Aloha
    do a search
    you will find lots or read the raq forum
    yes they are good bang for buck you can not go wrong
    get the one with 2 HD at least
    that is if you are sure you know waht you are doing how many people you will be hosting what kind of stuff you will be hosting etc...
    chances are if you are starting out and want to learn get a raq or start with a reseller account
    Aloha, Chad
    www.happyfish.com
    To do a move in such a way that no one suspects let alone detects !!!
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  21. #21
    Join Date
    Aug 2001
    Location
    Charlotte, NC. USA
    Posts
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    I used to have dedicated server from host located in Huston, Texas.
    I used to pay almost $80/month

    And I live in Charlotte, North Carolina

    Even though I didn't like it, I was convinced that they had
    no choice. They had huge headache over tax themselves
    because it was very hard to convince their customers.

    One of their accountant told me that if I can prove that I
    resell the service and charge tax to my customers, plus,
    provide my Tax ID, then, there may be a way not to pay
    tax.

    However, I did not study that route any further because
    I did not sell the service. I was developing the scripts
    on the server.

    If you guys want to research further into this tax thing,
    type in "nexus" and "tax" on search engines

    I am sure there will be plenty info.

    Jonathan
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  22. #22
    Join Date
    Nov 2000
    Location
    Austin, TX
    Posts
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    The reason Texas has such a high sales tax is because there is no state income tax. The only reason there is a tax on rackshack's service is because it consists of leasing hardware which is a tangible good, otherwise people offering non-tangible services do not have to charge sales tax.
    Justin Bachus
    BlastHosting, LLC - Professional web hosting at a low price with
    PHP, MySQL, FreeBSD, and more!
    http://www.blasthosting.com
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  23. #23
    Join Date
    Oct 2000
    Location
    Winchester Va
    Posts
    49

    An answer

    Our parent company Visual Link was thinking of offering dialup access in that area we were doing market research into this and have an answer. I have to admit I AM affiliated with cobaltracks and I am just setting a question straight. This guy is VERY helpfull and if anyone has any questions send them in his direction.
    Sam


    >Dear XXXXXXX
    >
    >You work with an out-of-state firm that sells Web hosting services.
    >The firm has a computer data center in Houston, Texas. You ask about
    >the application of Texas state and local tax to services sold by the
    >Houston location.
    >
    >Web hosting falls within the definition of data processing services
    >in Tax Code Section 151.0035 and Rule 3.330. Your firm is engaged in
    >business in Texas by virtue of having a data center located in
    >Houston. Accordingly, your firm is required to collect tax from
    >individuals receiving benefit of your service in Texas regardless of
    >the location of the server on which their Web page is located.
    >Please refer to Subsections (e) and (f) of the enclosed Rule 3.330
    >for information regarding service benefit location. I should also
    >point out that 20 percent of the value of data processing services is
    >exempt from Texas state and local tax.
    >
    >The entire text of the Tax Code, a complete set of rules, and a
    >wealth of other information are available at
    >http://www.window.state.tx.us/taxinfo/salestax.html through our
    >website.
    >
    >This opinion is rendered based on the information you provided.
    >Other facts, though similar, may yield different results.
    >
    >You may reach me toll-free at 1-800-531-5441, ext. 3-4680. The
    >direct line is (512) 463-4680. You may also write to Tax Policy,
    >Comptroller of Public Accounts.
    >
    >Sincerely,
    >
    >Al Van Allen
    >Tax Policy Division
    >
    >Enclosures Rule 3.330
    > Local Tax Bulletin
    >
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  24. #24
    Join Date
    Aug 2001
    Location
    Houston, Texas
    Posts
    695
    This all goes back to "WHERE" a service is provided, and this is where the issue gets sticky.

    We have recently undergone a serious audit by the State Controllers office and so we have a little experience in this area.

    If there is any question, it has to be settled in the State's favor or you rick paying the tax you should have collected out of yoru pocket.

    Robert Marsh
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  25. #25
    Join Date
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    Location
    Winchester Va
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  26. #26
    Join Date
    Oct 2001
    Location
    California, USA
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    Well,
    I don't know if this applies to any other type of business, but here's what works for phone companies: they rely on the 'two out of three' rule...

    Basically, they consider the state where the call is originated, the state of destination and where the bill is sent to.
    If two out of three of these states are the same, bingo. You've figure whatd tax is applicable.

    So, I guess, should thee rule be used here, we would have:
    -state where the hosting company is incorporated
    -state where the servers are located
    -state where you live

    ??
    http://www.voilaweb.com - the Social Internet Toolbox.
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  27. #27
    Join Date
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    Location
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    Originally posted by cyansmoker

    So, I guess, should thee rule be used here, we would have:
    -state where the hosting company is incorporated
    Why? Wouldn't that be the equivalent of where the phone company is located -- which isn't part of the "two out of three rule" as you've explained it?

    I don't see really how that rule could be made to fit hosting, since it's designed for a situation in which each phone call is charged for -- sort of like if each visitor to a web site were charged for in the hosting environment.
    Specializing in SEO and PPC management.
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  28. #28
    Join Date
    Oct 2000
    Location
    Winchester Va
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    According to the person we spoke with from the Texas goverment it doesn't matter. Wherever you are if you want to be legal you have to charge the tax to your customers. Especially if your customer or you are in texas. So you'd have to charge each customer you had and for every virtual site you created. I'm not sure what you might have to charge on products sold off of your website I did not discuss that with them.

    I could be wrong so as I said give them a call they're very very helpful.
    Sam
    Last edited by smoats; 11-02-2001 at 05:49 PM.
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  29. #29
    Join Date
    Sep 2001
    Posts
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    Hmm, well I had an email conversation about this with the "Tax Policy Division of the Texas Comptroller of Public Accounts" when I had just signed up with Rackshack. Being in Europe and all I did not see why I had to pay salestax to Texas.

    I already have to pay 19% here ):

    Although I still do not agree, according to the TX tax department I not only have to pay tax to rackshack, I also have to charge tax to all my customers and pay that to the texas tax dept. It's a weird world

    Transcript:
    Dear Mr. Pelgrim:
    Thanks for using tax.help email to inquire about computer equipment
    leased in Texas and Texas sales tax.

    You stated that you live in Europe and have recently begun leasing
    computer equipment that is located in Texas. The equipment can be
    remotely accessed and you have complete control over it. You pay a
    monthly fee that includes Texas sales tax. You asked if you should
    be paying Texas sales tax on this transaction. Additionally, you
    asked if you must collect Texas sales tax if you rent the equipment
    to third parties also located outside Texas.

    Response: From your description it is not clear if you are
    leasing/renting computer equipment, or if you are purchasing/selling
    data processing services. It is also not clear if you are renting
    equipment or buying services and reselling them to others.

    If there is a problem with the computer equipment, how is the problem
    fixed? Is the lease for the use of computer time, or the actual
    equipment? Is there software provided by the lessor? Do you use
    that software to process data?

    Per attached Rule 3.294 "Rental and Lease of Tangible
    Personal Property," a lease or rental is defined as "a transaction,
    by whatever name called, in which possession but not title to
    tangible personal property is transferred for a consideration."
    The rental or lease of equipment located in Texas is taxable regardless of where the lessee is located
    If you or your customers are purchasing data processing services for
    use outside Texas, you may issue a Texas sales tax exemption
    certificate to the seller in lieu of paying Texas sales tax on
    charges for the service. See attached Rule 3.330(e)&(f) concerning
    multistate benefit of use of services.

    This opinion is based on the facts presented. Additional or
    different facts may yield different results.

    Please let me know if you have additional questions.

    Sincerely,
    Philip Knisely
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  30. #30
    Join Date
    Jun 2001
    Posts
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    Originally posted by jw
    The reason Texas has such a high sales tax is because there is no state income tax. The only reason there is a tax on rackshack's service is because it consists of leasing hardware which is a tangible good, otherwise people offering non-tangible services do not have to charge sales tax.
    I have a web hosting company and I live in Houston, However, our server is in Baltimore.

    Now, you're correct, we do not have a state income tax. the 8.25% is high due to the county and city. The actual state mandated tax is roughly only 3%. The county and city added their own tax rates...and thus you have 8.25%.

    :-)
    TradeViceroy
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  31. #31
    Join Date
    Nov 2000
    Location
    Austin, TX
    Posts
    415
    Actually i think its around 7%, with the maximum total a person can be charged at 8.25%. This discussion is very englightening by the way. I wonder if any other states have similar rules that no one has been prompted to check.
    Justin Bachus
    BlastHosting, LLC - Professional web hosting at a low price with
    PHP, MySQL, FreeBSD, and more!
    http://www.blasthosting.com
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  32. #32
    Join Date
    Sep 2000
    Posts
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    Originally posted by TradeViceroy


    I have a web hosting company and I live in Houston, However, our server is in Baltimore.

    Now, you're correct, we do not have a state income tax. the 8.25% is high due to the county and city. The actual state mandated tax is roughly only 3%. The county and city added their own tax rates...and thus you have 8.25%.

    :-)
    So do you charge or pay for sales tax on your virtual accounts since your servers are in baltimore?
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  33. #33
    Join Date
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    Location
    Winchester Va
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    Virtuals

    Hello,
    To my knowledge yes you would have to pay for the virtuals, the correct form is

    Texas sales and use tax form
    01-114

    You would need to get a Texas tax ID number also before doing buisness......

    Sam
    Last edited by smoats; 11-05-2001 at 03:52 PM.
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  34. #34
    Join Date
    Feb 2001
    Posts
    52
    If you are out of texas but your server is in texas, and you resell an account the way I see it is you MIGHT have to pay tax on your server, but should not on the accounts you resell. Of course this is just my observation on how I think it would work in that scenario.

    Note this doesnt apply for other situations such as your in texas and server is not etc.

    -BW
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  35. #35
    Join Date
    Jun 2001
    Posts
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    Originally posted by JeremyL


    So do you charge or pay for sales tax on your virtual accounts since your servers are in baltimore?
    No, I currently don't pay any sales taxes. The only taxes I pay are federal taxes on the company. However, we haven't made enough money to even qualify to pay taxes.

    As far as I understand, The Texas tax code doesn't have anything in there that applies to on-line sales. I know many merchants in Houston who do NOT pay sales tax unless the person lives in the state.
    TradeViceroy
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  36. #36
    Join Date
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    Winchester Va
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    There may be some confusion here. I wasn't talking about haveing to pay VAT taxes on vritual sites or anything like that. If your servers are in Baltimore you won't have to pay sales tax, atleast I don't think so.
    If your servers are in Texas no matter where you are,how much you make or where your customers are you will have to have a Texas state tax ID.... I'm not really sure why the have such a strange tax on this but they do. You should call the Texas tax controller and ask if you have any questions about this.
    Sam

    *This is all from conversations/email I have exchange with the tate of Texas.
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  37. #37
    Join Date
    Jun 2001
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    Well...it doesn't apply to me then. =) My services are rendered out of state, thus no sales tax. The county clerk's office told me this. +)
    TradeViceroy
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  38. #38
    Join Date
    Oct 2000
    Location
    Winchester Va
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    Cool :-)... Maybe since your server and your clients are out of state your ok?
    We gave them this scenario..

    We are a company from out of State but in the US, our customers are all outside of Texas. We have no presence in the state other than our server, do we still have to charge our customers tax?. There response was s but we might be able to get a 20% discount??? The answer was if you want to be legal Yes.
    Also the guy we're talking to is going to be gone for three days so here is the Texas com troller office 18002525555.


    Odd..... Oh well I've beaten this thread to death I'll leave it alone. it just seems they have the weirdest tax laws.

    OK OK I know I said I wouldn't post here again but the news is getting worse. Not only do you have to charge your virtual customers tax, after being charged tax from your provider. ANY e-commerce on the server will be charged....

    Not bad enough? If you get caught not paying they fine you based on 4 times your income for 4 years :-(....
    Sam
    Last edited by smoats; 11-06-2001 at 06:11 PM.
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  39. #39
    Join Date
    Dec 2000
    Location
    Atlanta
    Posts
    574

    You're payin', so why not enjoy?

    Let's all go to TX and enjoy the municipal features we pay for. I.E. Let's go to the ZOO, see ENRON, etc. (The Enron joke is for you business gurus.)

    One observation: Read the law before you say "do other providers tax??" They may well not understand or even be aware of the law. Comparing to status quo will NEVER work when it comes to taxes.

    That's right, I'm an economist. <grin> (Hence the monetary policy bias.)


    Drew N.
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  40. #40

    *

    I just thought it was my duty to post a link to a thread in Rackshack forum. This threat finally explains the whole Texas Sales Tax Question. The thread contains an offical Rackshack Answer. The link to the Thread is http://forum.rackshack.net/showthread.php?threadid=3376

    Thanks always.
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