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Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I am a self employed day trader. I also am developing trading

Resolved Question:

I am a self employed day trader. I also am developing trading software. My main office is in Florida. I also have a part time office in Chicago where I meet with my devoloper. The Question: When I sell my software what state will the sale be taxable in? Is it my main office in florida? Is it partially in chicago where the development also occurs? Is it the state I sell the software in? Thank you
Submitted: 3 years ago.
Category: Tax
Expert:  Merlo replied 3 years ago.

Hello Customer,

 

Sales tax is only based on any state where you have a sales office or shipping location, and it is only charged on sales you make inside of that state borders. Sales tax is not based on where the product is developed. Only on where it is sold from and sold to.

 

Sales that you make to customers outside of the state of FL are not subject to FL sales tax, which is the only tax you are required to collect. If you make a sale to someone outside of the state of FL, then unless you have another sales office or shipping warehouse that happens to be located in that customer's state, you would not charge any sales tax on the transaction.

 

 

Thank you Customer

 

 

Customer: replied 3 years ago.

Thank you for the sales tax answer as that is helpful as well. My question relates to income tax. Is the answer the same?

Expert:  Merlo replied 3 years ago.

Hello again Customer,

 

State income taxes are paid to the following states:

 

1. The state where you are a resident and

2. Any state where you physically work and have income

 

State income tax is not based on where your sales are made.

 

If you are physically working in the state of FL, then your income is not subject to any state tax since FL has no state tax, regardless of what state you make your sales to. You said you have a part time office in Chicago. If you also physically work out of the Chicago office, then a percentage of your income would be subject to IL state tax. You would need to file a return with IL as a nonresident and report only the income you had from the days you physically worked in the state of IL. You would not owe IL tax on your entire income.

 

 

Thank you Customer

 

 

Customer: replied 3 years ago.

 

Thats what I thought. The only snag is that while I develop the software in my main florida office, I will be going back and forth to my developer in Chicago. Once the software is up and running, I will be selling it from my florida office. When I sell the software, does that make it a florida sale only?

Expert:  Merlo replied 3 years ago.

Hello again Customer,

 

You have two different issues here

 

1. Sales tax and

2. Income tax

 

Those two taxes are based on totally different concepts.

 

Sales tax is based on where the sale is made from and where it is made to. Since your office is based in FL and your sales are made from FL, you only pay sales tax on sales you make to customers inside the state of FL.

 

Income tax is not based on where the sale is made from. It is based on where you earned your income. If you physically perform all of your work from your FL office, then you owe no FL state income taxes.

 

If you perform some of your work out of your IL office, then you owe income tax to the state of IL for the days you physically worked in IL. You would have to figure your total income for the year on a percentage basis, and allot a percentage of your total income to being IL source income based on the actual number of days you worked in the IL office. And you would then pay IL state income tax on that percentage of your income.

 

If this was helpful please press the Accept button. It is the only way we receive credit for helping with these questions.

 

Thank you Customer

 

 

 

 

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 4 other Tax Specialists are ready to help you

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