I'm an Android developer, but this question is pretty much the same for an iPhone dev.
I'm based in the USA, and I'm looking for any tips regarding taxes for app sales. Since apps sell in over 30-90 countries, the precedent for this must be a small software developer selling their software on the internet and charging through paypal.
Any advice/tips are welcome.
Taxes for online transactions are tricky because the law hasn't caught up with the internet age, but here are a few concepts to take away that will help.
Depending on if you form a corporation or not, you might have to pay corporate taxes. This will usually be 1) To the IRS and 2) In the state in which you are operating out of. There are a couple of exceptions, but for a new startup Android/iPhone developer that's it, pretty much.
You might ask, but what about all of those other states/countries you sell in that you don't have a physical presence in? Well right now, those U.S. states won't tax you unless you have a "physical presence" there, meaning 1) An office 2) A bank account 3) Web Servers 4) A Store, etc... Therefore, online sales have a advantage in the tax world if they don't have an office, employees, etc.. where they sell to.
The same thing goes for foreign countries... no physical presence, generally no tax.
If you're not operating as a Corporation and/or you form an LLC/S Corporation, you'll likely owe Individual Taxes on your profits. Here, the rule is basically the same 1) To the IRS and 2) To the State in which you operate out of.
The same "physical presence" test applies as with corporate tax to determine which state you operate in.
You may owe sales tax if you are selling a "good" such as things sold on Amazon but not if you are selling a service. You also won't owe sales tax in the states in which you do not have a physical presence.
The main thing to take away is, if you are just starting up, pay taxes to the IRS and the state in which you operate out of. Once you get bigger and have more physical presence in other states, then you should seek the advice of a tax lawyer or other tax professional.
Note: This is not legal advice and does not constitute an attorney-client relationship.
I don't know about how it works on the Android side, but for iOS devs Apple handles most taxing, no matter in which country you sell the app. This means: