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How do you report taxes on game sales?


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#1 3DModelerMan   Members   -  Reputation: 995

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Posted 23 May 2011 - 08:46 PM

Hey, I'm researching starting my own game company. I understand everything so far, except for one thing.... what taxes apply to games that are published by another company? I'm going to distribute through Union, and I know they give you 80% royalties. Do you have to report any sort of sales tax? Or only income tax on what you earn from the royalties? I would assume the publisher takes care of sales tax right? Are there any other kinds of taxes I'm forgetting?

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#2 SimonForsman   Crossbones+   -  Reputation: 6058

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Posted 23 May 2011 - 09:39 PM

Hey, I'm researching starting my own game company. I understand everything so far, except for one thing.... what taxes apply to games that are published by another company? I'm going to distribute through Union, and I know they give you 80% royalties. Do you have to report any sort of sales tax? Or only income tax on what you earn from the royalties? I would assume the publisher takes care of sales tax right? Are there any other kinds of taxes I'm forgetting?


That really depends on where you live, ask your local authorities (There should be some form of tax department you can contact with questions like these)

The publisher should deal with sales tax but exactly how your royalties are taxed varies. In some countries profits from hobbies is taxed separatly or not at all if the amounts are small, in others the revenue is just taxed as additional income.

If you register a business you're normally allowed to deduct your expenses but taxes for individuals and businesses aren't necessarily the same. (its quite common that they're different)
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#3 DarklyDreaming   Members   -  Reputation: 363

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Posted 24 May 2011 - 07:16 AM

We aren't allowed to give legal advice - please consult with your local tax office. Seriously, if you are starting a business (a business, not a 'team' or similar) then you should consult with a tax professional, probably a IT lawyer and possibly with a business lawyer, depending on the complexity of operations, and what not to make sure you're covered as far as trademarks, intellectual property and whatever necessary taxing requirements you should meet are concerned. Failure to do this can result in all sorts of nastiness down the road. Once again, if you are serious don't waste your time listening to random internet dudes but instead take the time to consult with your tax office - hell, over here I even got that for free and all the people I meet over there were super nice and gave some real solid advice! So if you're gonna do it; do it right.

Please note that income tax (e.g. personal income being taxed) and the net profit/gross of your company being taxed are considered two completely separate procedures and should be treated as such (e.g. your business income and your salary should not directly interfere with each other and should be taxed separately in accordance to whatever your local law states). Sales tax will be handled by the publisher or distributor, if they state so. Any additional taxes will be handled by the publisher or distributor, if they state so. Anything else falls directly upon your business and your local tax authority. If the sales expected are low or not really enough to get into this whole 'business' stuff then perhaps it would be easier to state it as income tax but, yet again, it would be wise to first consult with a tax professional to see if this is the case.

DISCLAIMER: I am not a lawyer, nor I am proficient in the laws of whatever your local region is, however, I have set up a business and been doing much of this research myself recently so take it for what it is.
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#4 donkey breath   Members   -  Reputation: 206

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Posted 24 May 2011 - 07:23 AM

Basically the government will take every penny you make available to them. If you make a mistake they will demand immediate payment, if they make a mistake they will tell you that you are waiting until at least the end of the current financial year to get that money back (and without interest added).

Sorry that's just my view of the $£%^%£%£$£"!%$£££$%£!$%^ government. They once tried to tax me on 15p (about 20 cents for our american friends) interest I got from my bank account and sent out two letters asking for payment. the letters each had stamps worth more than the amount they were chasing.....


rant over, feel better now..

#5 Tom Sloper   Moderators   -  Reputation: 9512

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Posted 24 May 2011 - 10:33 AM

1. what taxes apply to games that are published by another company? I'm going to distribute through Union, and I know they give you 80% royalties.
2. Do you have to report any sort of sales tax? Or only income tax on what you earn from the royalties? I would assume the publisher takes care of sales tax right?
3. Are there any other kinds of taxes I'm forgetting?

I am not a lawyer or CPA.
1. Your company pays income tax on the money your company receives. You pay income tax on the money you get from your company.
2. Sales tax is for when your business sells direct to the consumer.
3. Yes. Talk to your attorney and your CPA.
-- Tom Sloper
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Making games fun and getting them done.
www.sloperama.com

Please do not PM me. My email address is easy to find, but note that I do not give private advice.

#6 ryan20fun   Members   -  Reputation: 710

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Posted 24 May 2011 - 10:41 AM

(General Theory) (my Location is South Africa)
so, you only have to pay tax if you sell something and your a business, am i right ?
if so, i can sell a game as hobby thingy and not have to pay tax

or does it depend from country, what about where you are ?
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Disclaimer: Each post of mine is intended as an attempt of helping and/or bringing some meaningfull insight to the topic at hand. Due to my nature, my good intentions will not always be plainly visible. I apologise in advance and assure you I mean no harm and do not intend to insult anyone.

#7 Tom Sloper   Moderators   -  Reputation: 9512

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Posted 24 May 2011 - 01:25 PM

(General Theory) (my Location is South Africa)
so, you only have to pay tax if you sell something and your a business, am i right ?

No. You have to pay tax if your government requires you to pay income taxes and if you earn some income. If you make money, you have to pay tax on it, if that is the law where you live. No matter whether you are a business or an individual (depending on the laws where you live).
-- Tom Sloper
Sloperama Productions
Making games fun and getting them done.
www.sloperama.com

Please do not PM me. My email address is easy to find, but note that I do not give private advice.

#8 ryan20fun   Members   -  Reputation: 710

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Posted 24 May 2011 - 02:13 PM


(General Theory) (my Location is South Africa)
so, you only have to pay tax if you sell something and your a business, am i right ?

No. You have to pay tax if your government requires you to pay income taxes and if you earn some income. If you make money, you have to pay tax on it, if that is the law where you live. No matter whether you are a business or an individual (depending on the laws where you live).


Thanks
Never say Never, Because Never comes too soon. - ryan20fun

Disclaimer: Each post of mine is intended as an attempt of helping and/or bringing some meaningfull insight to the topic at hand. Due to my nature, my good intentions will not always be plainly visible. I apologise in advance and assure you I mean no harm and do not intend to insult anyone.




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