Is Selling A Domain Name Taxable. Appeals Court Judge Alex Kozinski. Seller is in the 25 income bracket so they pay a 15 capital gains tax on the profit.
If youre looking to offload your extra domains to make some spare cash or if youre sitting on a premium domain name worth a goldmine see Step 1 below to learn how to sell it. Internet domain name registration services are generally subject to retail sales or use tax. If youre a seller on Amazon youll need to collect sales taxes on behalf of the government depending on the products you sell and where your sales tax nexus is located.
The Internal Revenue Service treats assets differently from expenses and which category your domain name falls into will affect your tax situation.
Selling your domain is going to be a lengthy process and you might not get any bids straight away. If the domain name was used in a business and you deducted or deprecated the cost then you must recapture this deduction on Form 4797. Licensing of domain names allows for greater financial flexibility and tax planning than allowed by the sale of a name. So domain name costs can be included if domain name collecting is the tax filers hobby but the expense cannot exceed the total income earned from the activity.