Is direct navigation income royalties or business profits?

domaintraveller

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I was wondering if anyone knows if income from direct navigation (type-in traffic) is considered a royalty income on a domain asset or business profits? In some cases, using DNS, there is no website, only a redirection record to an affiliate program or search engine. I looked up the OECD e-commerce classification tables, and there is no mention of this type of income classification. Anybody have an opinion?
Thanks.
 

draggar

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I am NOT a lawyer or tax consultant (and this is an excellent question for one of them) but I would think it's business profits.
 

angel69

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You'd better ask a tax advisor or CPA but it looks like business income to me. I'm not sure you'd classify income from type-in traffic as "royalty income". Royalty applies mainly to copyrights n trademarks. It also depends on where you live, ie if you're not in the US it may be treated differently. And it also depends on how you declare your income/profit n loss from domaining, ie do you list them on your personal taxes as your own small business revenue for example, or do you have an LLC or another legal setup for your domaining business
 

domaintraveller

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To me it looks a little like passive property-like income because the nature of the income is very similar to rents. Rents you own a property and get tenants, but it's still considered passive - unless you run a giant operation, then it's a business. Usually this type of income is either taxed twice as much - or sometimes half as much as business income so classification could be important. There are no expenses, usually a business has expenses. There is no work to be done. Usually business income requires some level of active participation. My view is that this is too new and too niche for anyone to have considered it, yet I know there are quite a few people deriving income from direct navigation. I suspect most are claiming business profits.
 
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