For Sale Canadian Tax for Domainers Needed

[cashboy]

Can anyone help me with Canadian tax help for deducting domains? We are now starting to
pay up to 30k for one domain, and I am afraid my accountant will need to start to change my
deductions from expenses to assets. My accountant is clueless. I see that there are tax laws in the
U.S., e-books, etc, but I need Canadian help. Much appreciated.

 

[hugegrowth]

would like to see info on this too.

 

[onlinestoreca]

I think anyone that is doing anything with a domain name has a good argument that domain names are advertising.

If you are just buying and holding for speculation purposes, that might be different. But if you are using the name for anything, including pay per click, then I would think the purchase of a domain name and yearly fees would be treated as advertising.

We do not own these domains, we merely rent them. I can't imagine how they can be considered an asset. I know my bank won't take into account the domains if I want to borrow money.

This is just my two cents, please feel free to show me where I am wrong.

Scott

 

[TheLegendaryJP]

If you are a sole proprietor and purchase a name for $X and still own the name at tax time the expense of purchasing the name is a non factor until such time you sale and thus will at that time report a gain or loss. At least this is how you run a sole proprietorship based on my opinion.

As for a corporation the purchase of a domain that has not been sold can then be used in terms of depreciation and so forth.

As for reinvesting a profit or portion of a profit from domaining into another name it is not a shelter to void taxation on those funds from what I understand no matter sole or corporate.


You asked for Canadian help so I will add my discovery of GST. As a canadian you pay GST if your income is $30k and up. Now here is the key. Should your sales be to non candians/residents and outside the country ( say to an american ) you cannot collect GST as they are exempt, therefore you do not need to pay it as you could not collect it . Sales within canda are subject though should they meet or exceed $30k . For this simple fact there is no need to claim that domains are GST exempt because they are intellectual property , besides there is no case I know of where it has stood the test any ways. So foreign buyer=GST exempt=no need to claim intellectual property to avoid GST as the CRA allows for that which is deemed to be such.

I am no accountant but it was explained to me in this manner. Hope this helps a bit.

 

[Focus]

If I buy a name for 10k for advertising in one year and make 20k from it in ppc for instance (just random numbers) my profit would be 10k, expenses 10k...for ADVERTISING that is...the next year all you should claim in the re-registration fee I believe

 

[DomainsInc]

This is just my opinion but i don't see why you couldn't claim like this
domain purchases, reg fees = expenses
ppc earnings =income
domain sales=income

 

[TheLegendaryJP]

This is just my opinion but i don't see why you couldn't claim like this
domain purchases, reg fees = expenses
ppc earnings =income
domain sales=income

No doubt the domain is an expense but as stated if you are not incorporated is a non factor until sold. Now in saying that I am basing this on your business being a reseller and therefore you will not see profit or loss until sold. Focus was spot on. The key was it is not a way to avoid taxation on funds that are a profit.

Therefore his $30k domain if bought with $30k of profit money is not a way to avoid paying tax on that 30k. I wish, Id turn around and buy a big name ever dec 31st.

 

[DomainsInc]

No doubt the domain is an expense but as stated if you are not incorporated is a non factor until sold. Now in saying that I am basing this on your business being a reseller and therefore you will not see profit or loss until sold. Focus was spot on. The key was it is not a way to avoid taxation on funds that are a profit.

Therefore his $30k domain if bought with $30k of profit money is not a way to avoid paying tax on that 30k. I wish, Id turn around and buy a big name ever dec 31st.

Whats stopping someone from saying they bought a domain for 10k for ppc advertising or developement, couldn't they then claim the domain as an expense?

 

[TheLegendaryJP]

Whats stopping someone from saying they bought a domain for 10k for ppc advertising or developement, couldn't they then claim the domain as an expense?

Is that $10k you just made froma domain sale ?

 

[Focus]

I think it does'nt matter where the money CAME from imo...whatever you buy domain wise for advertising (from what I understand but I'm no tax lawyer) can be deducted against earnings from advertising only in that same year..I don't believe it has to be amoratized over time, as domains are simply being leased from the registry annually and not really a "hard asset" although the "value" of the name based on what you paid for it could be assigned possibly for business purposes like stating wealth and portfolio net worth, etc. Just remember, you need a paper trail..if you say you spent 50k in domains to make 70k in ppc you better make damn sure you have records of such.

For instance...there is no way that people spending 100k on a big generic traffic name can't & don't count that as an expense against what it earns that year. I think there are two seperate issues here...buying domains for resale and then profit and also buying domains for advertising and profit. These situations are taxed differently as far as I know based on how you present them being used (and how you actually do business) Personally, I bought and sold names last year and bought domain names for ppc earnings...needless to say it's a big headache tax wise since alot of the online business taxes are really still unclear and in grey area but it basically comes down to common sense and doing the right thing I think..just report what you earned total and make the reasonable deductions, pay your taxes and you should be fine. It does'nt hurt to have an accountant process them for you but make sure you sit down with them and go through it together because this business surely is confusing and they might overlook something..again, not legal advice just my highly informed opinion. Please do correct me if anything is amiss. k:

 

[DropWizard.com]

JP

A depreciable capital asset is depreciable regardless of the business form. Proprietorship, Incorporated or Partnership.

A typical example would be a car. If bought for business purposes you can write off the depreciation regardless of your business structure.

However I have not seen anything yet as to what status (class) domains have been assigned to. It would be most advantageous of course for a 100%writeoff during the year of acquisition. But somehow I doubt that rev canada will quite see it that way.

I seem to recall Dan C E R A had some info on this.

 

[DNGeeks]

No matter what ANYONE tells you the ONLY way you're goingto find out the truth is to call an accountant or revenue canada themselves.

Whatever you are told, try to get it in writing.

Sure Revenue Canada mind see a $100 domain purchase and allow you to deduct 100% of that as an expense. But if they see a $10,000 domain they may decide that you need to claim this as a Capitol Cost Allowance and limit you to 20-30% per year.

Call them, they're actually quite happy to answer your questions and will do their best to find someone who can answer you.

 

[RatherGood]

No matter what ANYONE tells you the ONLY way you're goingto find out the truth is to call an accountant or revenue canada themselves.

Whatever you are told, try to get it in writing.

Sure Revenue Canada mind see a $100 domain purchase and allow you to deduct 100% of that as an expense. But if they see a $10,000 domain they may decide that you need to claim this as a Capitol Cost Allowance and limit you to 20-30% per year.

Call them, they're actually quite happy to answer your questions and will do their best to find someone who can answer you.

You have to be joking. Nothing the CRA says to you on the phone is legally binding. Most "agents" can't even speak english.

If you want advice from them that is legally binding then you will be paying them a hefty fee to research it and give you something in writing.

As far as the subject of the thread goes, there is no formal taxation guidance whatsoever from the CRA or from CICA or any other accounting professional organization on the treatment of even a single domain name registration, let alone a domain name businesses where you are doing mass registrations, buying, selling and monetizing.

 

[Deleted member 5660]

it may be treated like buying a trademark, copyright, song rights, etc.

 

[ianccc]

If your core business in DOMAIN's it is considered inventory and you will have to pay tax on them just like having "cash in the Bank"if yor core business is something other that domains it is a "capital expence" and therefor taxes as a reduced rate

 

[TheLegendaryJP]

If your core business in DOMAIN's it is considered inventory and you will have to pay tax on them just like having "cash in the Bank"if yor core business is something other that domains it is a "capital expence" and therefor taxes as a reduced rate

How did you sum up what I said in 4 sentences lol I ramble.

 

[RatherGood]

How did you sum up what I said in 4 sentences lol I ramble.

I'll sum it up in 2 words; "tax court". Especially if you are trying to use the capital gains exemption for your sales under the guise of domains not being your core business. If you own more than 1 domain name a year and have more than 1 re-sale a year its easily construed as part of your core business.

 

[Focus]

1 sale of a domain a year? where did this number come from just out of the air? and relative when being compared to who, sedo? I think what makes you the MOST MONEY is considered your core business...not that you have to have a "core"...we all have different sources of money and they are taxed differently from what I know..if you buy a name for 25k and sell for 50k you made 25k, spent 25k simple math folks..

 

[cashboy]

Thanks for all the input. Quite a lively topic!! I am incorporated and
the total income from the business is ppc. Not selling domains. I learned early on not to even mention the word sales when talking taxes. It puts the domains in an automatic asset mode. I have read quite a few forums on this subject and it seems that there are no concrete laws, even in the U.S. What I would like to find is anyone who has been audited and stood the test of the Canadian taxman. I think the idea of putting the domains in the Advertising category is brilliant. An advertising expense...to direct traffic to landing pages. The question is....Is a 35k domain an expense? Most accountants I think would be uncomfortable with that. Is a 10k domains an expense? Do I go the "expense" route, which is the best for me,...and wait to get audited? Then, pay the piper in penalties and fees? God, the accounting nightmare is giving me a headache. ...I am counting the sales of the occasional domain as income.

So,...anyone been audited yet?

 

[Focus]

If you are using them for ppc I would call their cost what it is, advertising...whether the traffic comes from yahoo/google paid ads you run or traffic from a name you bought..it's the same thing in essence...when you sell a name ever, then you pay taxes on it at sale time but cannot re-deduct it's original cost if you claimed it for advertising before..that's where you have to be careful imo..