Taxation Around the Nation
October 21, 2005 7:39 AM Subscribe
Does a company like 37Signals / Basecamp have to charge its users for sales tax? Looking at Basecamp, they charge different monthly rates for associated tiers of service. I would imagine they have customers from all over the States, as well as different countries. Are they required to apply sales tax to these monthly rates based on the customers geographic location. Or, because they are an e-commerce entity, and aren't really selling anything tangible, do they simply charge the flat rate and ignore sales tax?
More pointedly, I am wondering how complex tax collection / reporting is for a U.S. based e-commerce business of this sort.
More pointedly, I am wondering how complex tax collection / reporting is for a U.S. based e-commerce business of this sort.
Tax and revenue recognition for software companies that don't actually ever put a CD in a box and ship it are varied and complex. As far as I understand, though, these types hosted products are sold as a "service" rather than a product and as such are not subject to sales tax. You're going to want to check with a CPA/tax advisor though as state tax collection agencies can make the mob look friendly if you cross them.
posted by Wolfie at 8:45 AM on October 21, 2005
posted by Wolfie at 8:45 AM on October 21, 2005
Wolfie, there are states with sales tax on services.
posted by phearlez at 10:40 AM on October 21, 2005
posted by phearlez at 10:40 AM on October 21, 2005
The Canadian GST, the Goods and Services Tax, applies to services sold, even to non-residents.
posted by GuyZero at 11:30 AM on October 21, 2005
posted by GuyZero at 11:30 AM on October 21, 2005
My bad - as i said - varied and complex - talk to an expert.
posted by Wolfie at 11:43 AM on October 21, 2005
posted by Wolfie at 11:43 AM on October 21, 2005
Note that the tax picture is changing with several states entering into a compact, the Streamlined Sales and Use Tax Project, which became active this month. Essentially it simplifies the process of determining and applying the sales tax for individual purchases.
As of now there is no federal law mandating collection, so taxes on out-of-state purchases are basically up to the customer.
posted by dhartung at 12:53 AM on October 22, 2005
As of now there is no federal law mandating collection, so taxes on out-of-state purchases are basically up to the customer.
posted by dhartung at 12:53 AM on October 22, 2005
This thread is closed to new comments.
Whether the specific services you reference are subject to sales taxes is a totally separate state-by-state question.
Once you have nexus in all 50 states (or voluntarily agree to collect the tax), there is software that will automatically track the state and local sales taxes.
posted by probablysteve at 8:39 AM on October 21, 2005