Domain Sales income - tax implicatons?

[sasquatch]

Well, if you incorporated in an offshore location with privacy laws (like let's say Panama or BVI,) only couple of people there will ever know your identity. The host country government will never know you, and so how can your own country know you?

So, if you do that, and if your hosting servers (w/ your websites) are out of your home country as well, and you're not selling tangible goods across the border, than there's highly unlikely that your home country tax authorities will ever find you, or connect you personally to any of that. If you play it right, and if you're a little creative - it is quite possible to escape with no tax (as of this moment still)

It is quite possible to take your profits out of your offshore bank/merchant account without ever triggering liabilty for your home country taxes, in several different ways. One of them, by having your corporation pay you money as business expenses to you as a corporation president... etc....

One should also mention that these examples and dealings are not illegal. In fact, if played right - they are quite legal. Many big U.S. and European companies, and famous U.S. celebrities and business people are engaging and/or have engaged in these types of dealings, either by forming an outright offshore company, or forming an offshore subsidiary of their home country company.

Finally, consulting an experienced tax attorney experienced in offshore e-commerce will certainly yield better answers for anyone potentially interested in establishing an offshore IBC.

 

[Domagon]

The bulk of those entities go off-shore to reduce, or even eliminate, the entity's (ie. corporate) tax liability, which many consider double-taxation. It does *not* necessarily eliminate all tax liability.

Individual U.S. residents (even if living abroad) still have to pay tax on the money they personally earn, including dividends, distributions, payroll, etc.

To reiterate again, getting the money out of an off-shore company is the challenging part...business expenses, shifting assets, creative book keeping, etc only gets one so far.

In my opinion, for an entity with profits of only a few hundred thousand or less per year, the cost of maintaining an off-shore business is likely not worth the effort - may even cost them more, since a good accountant can find various legal ways of reducing tax liability, some of which are not obvious to the lay person.

Ron

 

[Poker]

Great reading at tax time, thought it may help others to give this thread a bump...

 

[Deleted member 4749]

Guys, which U.S. state has the least tax margin?

 

[LeftRightOut]

Reading this thread made me smile and think of how many people are probably going "Yeah tax, right, sure. Wish I had your problems pal."

I treat my domains as a hobby not a business, therefore I do not have to declare income but I also do not get to claim deductions. I will probably switch it over in a year or so because deducting registration fees sounds cool and I won't feel as guilty regging crap that doesn't pay for itself.

 

[clemzonguy]

I treat my domains as a hobby not a business, therefore I do not have to declare income but I also do not get to claim deductions. I will probably switch it over in a year.

Waiting is a bad move when you can count a loss for at least 3 consecutive years.....

One popular test for determining profit motive is called the "3-of-5" test. If your business makes a profit in any three out of the past five consecutive years, it is presumed to have a profit motive.

Link To Article

If you're just starting out or waited till the last minute I would pick up a copy of quicken then import your paypal account & bank information directly and go to town....

And if you haven't already pick up a copy of Pick up a copy of
"Doing Business Tax-Free"

 

[LeftRightOut]

Waiting is a bad move when you can count a loss for at least 3 consecutive years.....

Ahh yes, I should have qualified my statement, I am in Australia. Here they don't appreciate people starting businesses to claim losses for years in a row with no planned way of turning a profit.
Our way of figuring out if we are a business http://www.ato.gov.au/businesses/content.asp?doc=/content/25307.htm

 

[768768]

Guys, which U.S. state has the least tax margin?

If you mean the lowest tax rate on income, there are several I believe with no income tax. I think Nevada and Alaska are two of them.

 

[Prosperous]

I keep track of ANY expense related to selling domain names like:
Purhase cost
Renewal Fees
eNom fees when refilling account with credit card
Webhosting
PayPal fees
Escrow Fees
eBay Fees
I keep names as "inventory". At the end of they year, you get a deduction for cost of goods sold as well as any of the above expenses.

Schedule C, same here as Bob and FLe8 etc.


Rob