When selling your game(s) do you pay taxes? Are you a registered company?
by Chosen · in General Discussion · 04/20/2012 (3:44 pm) · 5 replies
Hey there,
I'll keep this short and sweet. I was just curious as to how many developers actually sell their games and if they(you) do, Do they(you) pay taxes? Also I was just curious as to how many "companys/businesses" are official (According to the government).
That is all,
Thanks Jacob
I'll keep this short and sweet. I was just curious as to how many developers actually sell their games and if they(you) do, Do they(you) pay taxes? Also I was just curious as to how many "companys/businesses" are official (According to the government).
That is all,
Thanks Jacob
#2
04/20/2012 (6:11 pm)
I am more of a 'middle ware' developer...you may have seen some of my blogs. I am registered as a business and I do pay taxes on anything I make. Nothing will kill a game designer career quicker than a tax audit that goes bad. I am from the United States and I am just not willing to play around with the tax guy. As a matter of fact I pay an accountant each year to ensure that I am compliant. Now, I am not sure where you from in this great big world of ours but if you are from the states, I highly recommend the LLC option (LLC stands for Limited Liability Company) Do your research and if you are SERIOUS about being a developer I highly recommend you be honest and upright about paying your "due". Steve is from the UK and as you read he registered according to his governmental requirements. Research your governmental requirements and act accordingly. In the long run, reputation means more than any money you make. 
#3
If you're selling from the US to an outside country, you're not going to need to worry about sales tax unless there is a particular agreement with that country. For instance, selling to Norway without sales tax is fine. The government would prefer 25% tax on all digital goods, but the tax man here admitted they can't collect this. So the only businesses affected are large companies which also have a presence here.
This isn't the end, of course. Apple do something really sneaky: They sell at US price + local tax, but are registered out of Luxembourg. This means they *actually* pay 6%, so on top of the base price of everything (yep, downloads too) they pocket another 19%. Technically they're compliant with Norwegian tax law. It's just that the country never sees the money. Pro-tip: Write more specific laws.
Selling to the EU should be the same deal from the US, while selling within the EU from country to country is again complicated sometimes. There is a simple rule of thumb for it all, but it only applies to physical goods. If you are in the EU I suggest spending some time getting all the forms and papers you can from your local tax critters.
(Physical goods: You are supposed to sell at base price, and the border monkeys slap the local VAT on top of that. In reality many companies forget to subtract local tax - one German company in particular that I know of - ensuring the governments double-dip. You lose when buying. You don't gain anything when selling.)
LLCs and such can be a mess if your local laws require an accountant, so there's more reading to do. Around here we have a pretty generous amount of money we need to make before accountants are required by law, and when you reach that amount you've probably already got one. For a sole ownership company here it's pretty simple: Keep track of the flow of money and don't worry. Except for that little problem of classifying the goods you sell when they're all digital ;)
Selling to Japan? Good luck!
04/20/2012 (7:10 pm)
Taxes can be really, really complicated. If you're talking about selling from the US to the US your safest bet is to charge VAT/sales tax according to state. This is why using a merchant gateway is a lifesaver (or at least a business saver). They handle the tax on sales, you just handle your income tax. Note down every bit of income and every expense.If you're selling from the US to an outside country, you're not going to need to worry about sales tax unless there is a particular agreement with that country. For instance, selling to Norway without sales tax is fine. The government would prefer 25% tax on all digital goods, but the tax man here admitted they can't collect this. So the only businesses affected are large companies which also have a presence here.
This isn't the end, of course. Apple do something really sneaky: They sell at US price + local tax, but are registered out of Luxembourg. This means they *actually* pay 6%, so on top of the base price of everything (yep, downloads too) they pocket another 19%. Technically they're compliant with Norwegian tax law. It's just that the country never sees the money. Pro-tip: Write more specific laws.
Selling to the EU should be the same deal from the US, while selling within the EU from country to country is again complicated sometimes. There is a simple rule of thumb for it all, but it only applies to physical goods. If you are in the EU I suggest spending some time getting all the forms and papers you can from your local tax critters.
(Physical goods: You are supposed to sell at base price, and the border monkeys slap the local VAT on top of that. In reality many companies forget to subtract local tax - one German company in particular that I know of - ensuring the governments double-dip. You lose when buying. You don't gain anything when selling.)
LLCs and such can be a mess if your local laws require an accountant, so there's more reading to do. Around here we have a pretty generous amount of money we need to make before accountants are required by law, and when you reach that amount you've probably already got one. For a sole ownership company here it's pretty simple: Keep track of the flow of money and don't worry. Except for that little problem of classifying the goods you sell when they're all digital ;)
Selling to Japan? Good luck!
#4
04/20/2012 (7:34 pm)
Well I'm from Canada so I suppose i'll just have to google the hell out of it. Another quick question for anyone whos reading. Would programs like kickstarter count as income?
#5
"Income" is a category, though. Your country might have different bookkeeping requirements for it. Here it depends on whether you count something as direct sales or royalties. There are around 100 different categories for money received or paid (slightly fewer for income than payments) when you use a proper invoice/accounts system! There may be different taxation requirements as a result.
04/20/2012 (8:02 pm)
Kickstarter is income of some sort. It can't be used as venture capital (at least there are laws against using it for that sort of thing in various countries). But it's money you get for stuff you make, so definitely income :)"Income" is a category, though. Your country might have different bookkeeping requirements for it. Here it depends on whether you count something as direct sales or royalties. There are around 100 different categories for money received or paid (slightly fewer for income than payments) when you use a proper invoice/accounts system! There may be different taxation requirements as a result.
Associate Steve Acaster
[YorkshireRifles.com]
Making money from something is an income. Income is subject to taxation.
Personally I am registered for tax as "self employed".