i am wanting to start a business

i want to start my own hosting company (max 10 staff)
and i am getting a dedicated server and i am going to sell reseller accounts

now my question is...

I live in canada and i'm 22

i know in canada one does not have to signup for gst,pst tax unless you make more than $30000 per year (canadian)

so now is it still legal to be a business like that in USA
although i am canadian
so do i have to charge US tax on hosting fees?

thanks for yoour input

(NOTICE: im not a big expert on this, but, I do know some on the subject)

The first question, yes, you can run a business like that
The second question, no, you do not have to charge tax unless your clients are in the same state as you (which isn't possible, since you are in canada).

Sales tax is for the sale of goods.
Web hosting is a service so you will not need to charge tax.

Thats not completely true. Services can be taxed just like goods. In the U.S. there is sales tax, business tax, federal tax, and state tax to worry about. Since the person is in Canada they do not need to worry about any of that but rather only Canadian taxes. My recommendation when it comes to starting a business is to make sure you have a formal business plan. Good luck.

thanks for the help guys
well that sums it up

i am within the law in usa and canada
unless my canadian earnings will be more than 30000 CND $ per year
i should not have to worry

thanks for the info

I also am considering running an Ontario based online business.

Based on my information and with talking to Enterprise Toronto (CityHall front door, walk straight and go to the right side!) the comment on not paying tax under 30,000 in sales is correct, but only refers to GST.

however, for PST, you have to pay. the only exception is if you are selling pencils for 10c each!! Anyway...

The Ontario Ministry of Finance will tax you, however will not tax you on your first $400 in tax collected for your first year of operation. So if your clients are Ontario residents, you will have to charge PST at a minimum. This is because irregardless of where your business is, your business income is on an Ontario registered business.

Another thing: if you are doing hosting reselling, this is a business to business service, and as such no PST will need to be paid for your service if the other is also an Ontario business. Only the client at the end of the chain pays the tax, not another business.

Internet businesses make this all quite unclear, but basically if you are a registered business in Ontario, expect to pay the PST.

Hope that helps.

cheers
sf2k

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thanks for your input

now i just have to find out what they do in BC

Sorry, I should have been more precise.
Since the question was "do i have to charge US tax on hosting fees?" I assumed they meant charging the customers sales tax.
You would still need to pay your relevant business taxes but you wouldn't be charging your customers taxes.
Again, this applies to US tax laws, I'm not sure about BC.

Actually wrong again. Typically you have to charge sales tax to those customers in the same state as your entity was formed in. Some states have clauses though that exempt from this under certain conditions.

does one have to get a business no. in order to sell hosting and reseller accounts

my best outcome i can think of for now is to cover my own costs and from there we will see

What is a business no.? Is that something in Canada? Do you mean a business phone number, business license number, business trade name number, something else?

Actually, right again. Sales tax is for the sale of goods, not services. Hosting is a service so sales tax does not apply in any US state, including the one the service is being offered in.

As I said certain states might have different rules for what gets taxed under sales / use tax, but many states do require you to charge sales / use tax on services.

For some examples in just the state of Connecticut: http://www.ct.gov/drs/cwp/view.asp?a=1477&q=269930

It's so great that your business is on selling or reselling dedicated servers. Maybe we can be copartners . How about ?

Yes, it's called a "Vendor's Permit" and is used for tax remittance. There are provincial and federal permits. I'm not sure of the particular BC laws, as I'm in Ontario, but I don't think it will hurt my little story..

So let's say we all live in BC (!) and I have a vendors permit. This means that if you also run a business, I won't charge tax on the item I sold you, since only the customer pays the tax. I have to keep a record of this kind of thing, so hence the permit number.

I think most jurisdictions are resigned to the Internet ways of business and just prefer company income tax as it's main method of money generation, but you never know, so always ask your local government.

cheers
sf2k

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