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skoster
12-21-2010, 06:52 PM
Hi there,

I'm at a bit of a standstill because I just cannot seem to find a good answer about this. My primary residence is in Michigan, however I stay and work in Maryland. I developed a software product and I'd like to sell it online, but I have no idea whether I need to charge sales tax. I'm planning on giving the demo software away for free, and selling activation codes online.

Is the code a tangible good? Do I need to charge sales tax? I can probably start my business in either state (Michigan or Maryland), although Maryland would be easier since I'm there more of the time. Does it matter which one I start my business in?

Thank you!

Steve B
12-21-2010, 07:10 PM
I think at this stage of your business, you need to find an attorney and a tax advisor that you will work with locally (whichever "local" you choose). Getting advice on such important things at the beginning of your business should probably not be done on a free discussion forum.

Evan
12-21-2010, 10:19 PM
I agree that you need to consult with a local tax professional, or even attorney, to determine whether you have a tax obligation in the states you operate and/or sell from. Generally speaking, software is usually "free" you're just paying for a "license" to use it.

Some states seem to have it set up where if you have a CD sent to you with the software, that it is subject to sales tax; but if it's downloaded exclusively online, there is no sales tax. This isn't a hard "rule", but is in place in some states. You need to determine whether your business will be operating in certain states, and accordingly whether that requires collecting and remitting sales tax to the appropriate government agencies.

Business Attorney
12-21-2010, 11:11 PM
I'll second (or third) what has already been said. Sales and use tax obligations vary considerably between states, so you need to determine which state or states you are "doing business" in and then comply with the specific laws of those states.

skoster
12-22-2010, 05:11 AM
Thank you all, I was kind of figuring that's what I needed to do, but I figured that since I'm not at all versed on tax codes I should ask first just in case it was a simple answer which I was just missing.

Patrysha
12-22-2010, 11:19 AM
It's taxes...it's never a simple answer...