Taxes on shrinkwrap products?

[JohnnyC]

What's involved with collecting taxes and/or other legal issues if you license your product to a company for money?

[danjacoby]

If you license your product to another company for resale (that is, they're the retailer), then collecting sales tax is not your problem. "Other legal issues" can mean anything, but getting an agreement in writing is always a good idea.

Of course, income taxes are another issue.

HTH,

Dan

[markpro]

That would depend on many issues, particularily which country, and or state/province you are referring to.

In Canada, if you provide a solution to a company as a bundled "product" it is most likely to be both GST and PST applicable. PST because it is classified as a "product" not simply a "service". If you provide a solution where payment is based on an hourly consulting fee it may only be GST applicable.

If your overall annual revenue is below ~28K you do not have to collect GST. Beyond that you must register and collect.

The Big Disclaimer here is that your best bet is to seek the advice of a Tax Accountant, and/or Federal and State/Provincial agencies. Nothing beats a good Tax Accountant!

[JohnnyC]

Thanks. This is a solution I've developed for people who design and build theme parks. I'm still trying to figure out how best to market it but for now I am setting up one contract per attraction, letting them use the software license for free for that one attraction and charging only labor for software support and custom add ons. That way I can get this off the ground while I seek out a tax adviser. I'm already set up as a technical consultant under these conditions so I use my standard invoicing.

[LiveOak]

Thank goodness here in the states we don't have VAT or such! Only the retail buyer pays sales tax (Burbank hasn't changed it's national affiliation, has it?). A good reference before you pay a tax accountant is www.boe.ca.gov, this is the California State Board of equalization's web site. You don't actually need a Seller's Permit in California to sell to another reseller, just ask them for a Resale Certification. The obligation of the seller is to collect such a certification on a wholesale sale, not to determine its validity, that is on the buyer.

-bd

[JohnnyC]

Thanks, I'm glad I checked back on this.

[JohnnyC]

Thanks, I'm glad I checked back on this.