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Sales tax? Come on.

The City of Scottsdale says I’m supposed to charge sales tax on web hosting. Who among this group thinks that’s crazy?

By Chris Tingom

Principal of Tornado Design, a Phoenix, AZ based web consultancy

7 replies on “Sales tax? Come on.”

Hmm… Well I just talked to the accounting people here at DSB and apparently any web sites we sell to companies in the state of Texas have to have sales tax on them (and we have been doing this all along). Weird that I should just now find out about it. Supposedly, we fall under the “Graphic Design” tax category, which means only like 80% of it is calculated in terms of sales tax? So if the sales tax is normally 10%, then we would only charge clients 8%? dunno.

Texas has had a wierd law about that for some time. When we set up a server on Rackshack (now ev1servers) we had to pay sales tax. Everybody complains so they have huge discussions about it on their web servers. Apparently, they no longer charge if you live outside of Texas.

In TX, web hosting falls under the data processing service category, which means that the first 20% of income is tax free. So for those 8.25% tax brackets here, it really means web hosting is taxed effectively at a 6.6% rate. Yeah… it is weird!

You only need to pay tax if your server is located within Arizona. It’s like when you buy online, you don’t pay tax unless you are in the state that the company/site is located…at lesat, all this is just what popped into my head, I could be wrong 😉

I would definitley review the taxing thing further though, with someone who knows their stuff about web services, etc.

I’m still waiting to hear back from the City of Scottsdale about this. I’m asking them to send me their documentation on this. If it’s true and I do have to pay, I’m going to ask them if I’m the only one paying because everybody I’ve ever talked to in AZ doesn’t pay tax on hosting.

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