Results 1 to 18 of 18

Thread: Tax Question

  1. #1
    Join Date
    Aug 2002
    Location
    Los Angeles, CA
    Posts
    33

    Tax Question

    I am confused because i have seen some hosting companies charging tax to their clients if they live in the same state. Is this a normal thing that all hosts do or should be doing? Does uncle sam tax us and it's our responsibility to tax the clients?

    I appreciate any feedback you can give on this subject.
    SevenFourteen
    http://www.sevenfourteen.com
    [email protected]

  2. #2
    Join Date
    Sep 2002
    Posts
    522

  3. #3
    Join Date
    Aug 2002
    Location
    Los Angeles, CA
    Posts
    33
    Does anyone here charge their clients sales tax on the webhosting packages?
    SevenFourteen
    http://www.sevenfourteen.com
    [email protected]

  4. #4
    yes company charge for tax if you live in same state where the company is registered. Other states are tax free for hosting service over the Internet.

  5. #5
    I heard rackshack charges tax to everyone, not just people living in texas. Maybe I am wrong though.
    http://www.schooldebts.com -- Consolidate Student Loan Debt

  6. #6
    Join Date
    Aug 2000
    Location
    NYC
    Posts
    6,627
    It depends on the tax code of the state in which the company operates. In most states there is no tax on such services, but in a few (I think Texas is one, but might be wrong) there is. As to whether it's charged only to residents of the state, that would also be up to the individual state. I wouldn't be surprised for states that do it to charge everyone; the fact that your server is located within the state could be interpreted as you having a business presence there... and so you could easily be seen as being liable for local tax.
    Specializing in SEO and PPC management.

  7. #7
    I am not sure if the hosting companies too charge taxes. I thought it was only their fees which is to be paid as i do the same.

  8. #8
    Join Date
    Aug 2002
    Location
    Los Angeles, CA
    Posts
    33
    Wow there is such a broad range of answers...Does anyone know if california has this tax? I plan on reselling from a company that has servers in florida, does that mean i have to charge tax to people in florida because the company i will be reselling for does?
    SevenFourteen
    http://www.sevenfourteen.com
    [email protected]

  9. #9
    This is a first for me. I believe, at least in my state, that sales tax is not applied to services, such as hosting, only retail sales. But then again I am no accountant.

  10. #10
    Join Date
    Aug 2000
    Location
    NYC
    Posts
    6,627
    Again, most states do not require that you collect sales tax. For a definitive answer this probably isn't the right place for this or any legal question -- ask your state's treasury or taxation department. They're probably on the web, or else call them.

    If you get an incorrect answer here, you won't get much sympathy telling a state auditor "but some guy on WHT said..."
    Specializing in SEO and PPC management.

  11. #11
    Join Date
    Aug 2002
    Location
    California
    Posts
    44
    Here is the reply I got from the state official (California):

    BEGIN
    Unless you are selling tangible personal property to your customers, no tax would be due on the service charges. It appears that you are only
    providing a service, so no tax would be due. Regulation 1502, Computers, Programs, and Data Processing applies to your business, as does Regulation 1501, Service Enterprises Generally, can both be downloaded by clicking on the link below.

    Reg 1502
    http://www.boe.ca.gov/pdf/reg1502.pdf

    Reg 1501
    http://www.boe.ca.gov/pdf/reg1501.pdf
    END

  12. #12
    Join Date
    Aug 2002
    Location
    Los Angeles, CA
    Posts
    33
    Thanks everyone for your inputs. I have found very helpful answers here. I would also like to personally thank ethos for finding hard proof for my question. Now that this is settled, let's celebrate I wish everyone success in all their quests.
    SevenFourteen
    http://www.sevenfourteen.com
    [email protected]

  13. #13
    Join Date
    Aug 2002
    Location
    Kelowna B.C.
    Posts
    1,687
    Originally posted by bjseiler
    I heard rackshack charges tax to everyone, not just people living in texas. Maybe I am wrong though.
    Rackshack chrages tax on all orders regardless of where you're from. That is according to their order form.

    Unless you are signing up within the State of Texas, there is no tax charged. One of my relatives was present at the Nexus conference that discussed this issue over taxes and the internet.

    If Rackshack is charging tax on all customers than they are pocketing the cash from the ones not located in the Texas
    Hosting.Express | Affordable Web and Email Hosting
    Shared | Reseller | 24/7 Support | NSA Free
    SPECIAL OFFER - domain name, email and cPanel web hosting = $3.73 per month | Contact Us: 1-800-861-1888

  14. #14
    Join Date
    Jun 2002
    Location
    Arabia
    Posts
    678
    I in a 3rd world person - Never paid any taxes, never will.

  15. #15
    To be absolutely safe I would check with your accountant.

  16. #16
    Join Date
    Dec 2001
    Location
    Houston, Texas
    Posts
    549

    FYI

    Rackshack charges tax because in the State of Texas (or Houston local tax - one of the two) they are providing rentals of tangible goods. Mr. Marsh has explained it before in these forums...

  17. #17
    Join Date
    Dec 2001
    Posts
    1,194
    It works like this,

    1.)If you are selling a tangible or non-tangible product inside your state you must charge and submit sales tax.

    2.)If you are purchasing tangible or non-tangible products OUTSIDE of your state you are due to a use tax.

    3.)If you are selling to another state you are not required to charge sales tax, BUT you are required by law to notify the buyer of there obligation to the use tax stated above in number 2.

    If the buyer is in your state you must charge and submit sales tax. If the buyer is in another state than the BUYER is responsible for reporting the purchases and paying a use tax, but this never happens and thus companies use this as an advertisment via the web, NO SALES TAX! But in fact its a lie and its illegal...... Because they are misleading you, true there is no sales tax, but they are not telling them they are required to a use tax. This is illegal because they are responsible to tell them they are required to pay a use tax.

    Sales Tax - Collected for tangible or non-tangible products from the buyer by the seller. The seller then reports and pays the sales tax to the treasury department using his/her tax ID, etc.(depending on company setup)

    Use Tax - If anyone in state "1" purchases a tangible or non-tangilbe product in states "2-50" they are required to notify state "1" that they purchased a product outside of state "1" for the intention of USE inside state "1" and paying the use tax(equivalent to sales tax, but payed based on the buyers location tax rating) to state "1". The seller is not required to charge sales tax for reporting purposes in there state because the tax has already been payed by the buyer(however who does this? No one)

    Technically a non-tangible product can not be purchased via the internet and used within the purchasers state because the product is never shipped to the buyer. An example would be webhosting, its purchased outside of the state( so sales tax does not apply), BUT yet its not brought into the state of the buyer for use either(so use tax does not apply).

    The problem is the Federal Gov. has caught onto this and simply doesnt like it. I would expect new laws governing the internet to be poping up sometime in the future, but they will most likely not be able to be enforced either.

    At least not until we are all registered by smart chips and serial numbers and forced to take the mark of the beast and burn in hell... but who's worried about that now a days when we can have super dual 2ghz processors and eat popcorn out of the microwave
    www.boxedhost.com
    COMING SOON!
    A Resellers Dream, In a Box

  18. #18
    Join Date
    Dec 2001
    Posts
    1,194
    Its also safe to say that the way in which tax laws govern outside country purchases cant be governed properly either, so how this works i dont know, but it will get alot easier if they get this one currency thing going like they are trying...

    Tax laws are confusing, unforceable, contain too many loopholes, and are governed by understaffed workers who wouldnt find the problem until the person commiting the crime had already passed away of old age unless it was a huge crime that was obvious.

    Basically with taxes there are ways to get your way, some people call it smart business and some people call it tax evasion.... And some people never take the time to learn about them or bother with them. Basically all of the above can be put in jail, is it likely no, but should you take that chance... no way. The safest thing is to contact your state treasurer and tell them exactly what products you will be selling at what location and for what purposes.

    You can contact organizations such as the SBA, SCORE, etc. and they can give you free information regarding about anything you need really...

    But what ever you do make sure you consult a professional if your not sure, ive done so, but lets face it... do you know that. Or am i just typing for the fun of it, you dont know.. Could i be wrong, yes...

    Its too important a question to ask on a forum board in my opinion, on offense to anyone, but you should ask a prof. in your area.
    www.boxedhost.com
    COMING SOON!
    A Resellers Dream, In a Box

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •