WEB For those who run an online business... question for you about taxes, etc

Discussion in 'OT Technology' started by TurkeyChicken, Aug 16, 2007.

  1. TurkeyChicken

    TurkeyChicken New Member

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    I've mentioned a few times a website that I plan on developing over the next few months. It's basically a mix of istockphoto.com and allposters.com. People can upload their photos and others can buy prints of them.

    My question revolves around what is considered income and what is taxable.

    When someone uploads a print, they determine how much it will sell for. They get to keep whatever the price they choose minus (15% + cost of shipping / printing). In most cases, it'll be more than half the cost of the print that goes into their pockets.

    I'm going to set the payment system up similar to Google Adsense... so they get paid monthly if they've sold X amount of dollars in prints.

    Now, Because I'm going to have (lets say 80% of the total cost assuming 20% is going to printing and shipping and will be deducted automatically when its' getting printed and shipped) 80% of the cost of the print sitting in my company bank account for a minimum of a month, what is considered income? In reality, only 15% of that is true income, the rest is simply someone elses money that I'm holding for a short amount of time.

    I'm not sure if anyone here will really be able to answer that and I'm going to talk to a lawyer eventually, but I wanted to have at least a little bit of an idea so I could get some questions ready and stuff.
     
  2. thomor25

    thomor25 I make money online....

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    it comes out simple to accounts payable. You don't report it cause technically its owe to them you just haven't sent checks yet.
     
  3. TurkeyChicken

    TurkeyChicken New Member

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    Alright, so as long as my Balance Sheet reflects all this, everything should be good?

    I just wanted to make sure it wasn't in the same category as paying an employee or something. If nothing else, I suppose it could be classified as a donation :o
     
  4. thomor25

    thomor25 I make money online....

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    you might have to file 1099's for people for anything over $1000
     
  5. TurkeyChicken

    TurkeyChicken New Member

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    Hmm, So that means I would have to require people submit their SSN number I would imagine. I guess that's what adsense does anyway
     
  6. ///M Pilot

    ///M Pilot New Member

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    Not a 1099, a W9 (or W8) depending on their status. And yes, you need their SSN.

    You're just an intermediary .. an agent if you will. Total income less expenses = profit. I'm not a tax attorney but in most states you're taxed on profit, not overall income.

    Your balance sheet should reflect an income of (say for instance) 1M, but your expenses will be 850K. Then you're left with 150K in "profit" which is taxable. Of course the actual numbers will be higher, because you have to factor overhead in (which is also deductable ) ..

    Consult a tax attorney :)
     
  7. TurkeyChicken

    TurkeyChicken New Member

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    Hmm, Cafepress uses a 1099 form for people making more than X amount of money. I wouldn't think a W9 would be needed.

    I guess I just need to ask someone legally :o
     
  8. Tony Stark

    Tony Stark John McCain has an illegitimate mexican baby

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    Its not $1000, its actually $600
     
  9. Tony Stark

    Tony Stark John McCain has an illegitimate mexican baby

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    its on federal level so its universal
     
  10. RaginBajin

    RaginBajin Have you punched a donkey today?

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    As a corporation/LLC, then you get the ability to subtract expenses from total income and only get taxed on the profits. That's the beauty of a incorporating.
     

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