Gross Income United States
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Question: I’m a freelance website developer, am I supposed to collect sales tax for my service?
I live in Ontario. First, am I supposed to charge a sales or service tax on services I render? What if my client is in the United States — would I have to charge them tax? What about my income tax — how do I report this income? How do I subtract my business expenses? If I receive payment of $2,000 for a website, and I spent $400 on development costs, which is the gross income? net income? and what other business-related/tax-related terms should I know here? Should I be registered as a business somewhere, or do I just file everything as personal income? I’m so f’ing confused lol. Taxes are a joke, there’s no documentation for citizens anywhere.
Answer: I’ll answer your questions in list form:
1. You are required to register for GST if you make over $30,000 in sales in a year. However, you can register voluntarily. This is suggested as you can claim input tax credits on any GST you paid for business purposes – essentially, you get your GST back.
You don’t have to charge PST. See http://www.rev.gov.on.ca/en/guides/rst/651.html on web design.
2. If your client is not a Canadian resident, you should not charge any GST.
3. For income tax purposes, any income you make developing a website is business income. Business expenses incurred can be deducted against the income.
4. Gross income means your total sales in the period before expenses.
Net income means your profit for the period (income – expenses).5. In terms of business expenses, you’ll have office expenses (whether its a home office or a rental unit), computer expenses (which will be depreciated), promotion expenses, and possibly others.
6. If you are operating the business under your own name, then you don’t need to register your business. However, if you are operating under, for example John Smith Web Design, than you will need to register your business name.
Doing more, buying less
Rosario and Igor Montoya used to buy, buy, buy, for themselves and their two children without a second thought. Expensive sneakers, a new laptop, Legos — they all got what they wanted. But with the recession slashing the Montoyas’ workload and income by more than half, their priorities have shifted from products to activities.
Richard Peter Citizens Briefing 02/06/2009
