9 replies to this topic

[dannyjenn]

Obviously this is not the forum for legal advice, but I was wondering...
Anyone have an idea of the general amount of money that you can make off of a game (or anything for that matter) before being required by law to include it in your income for tax reasons?
I know stuff can be sold in very small quantities (such as at garage sales / etc.) without being taxed... but what if the game is quite popular and is sold online? How much profit is too much? I really don't have any idea.
Also, legally is a business license required in order to sell stuff (I mean, I know it's not required if you just make a few bucks... but if you do intend on making a profit on the game then is a business license required)?

Edited by dannyjenn, 24 May 2012 - 06:41 PM.

[rinkuhero]

Obviously this is not the forum for legal advice, but I was wondering...
Anyone have an idea of the general amount of money that you can make off of a game (or anything for that matter) before being required by law to include it in your income for tax reasons?
I know stuff can be sold in very small quantities (such as at garage sales / etc.) without being taxed... but what if the game is quite popular and is sold online? How much profit is too much? I really don't have any idea.
Also, legally is a business license required in order to sell stuff (I mean, I know it's not required if you just make a few bucks... but if you do intend on making a profit on the game then is a business license required)?

this depends on your country, or state (if in the US), obviously

you didn't provide any information about your country or state, so there's not much to answer except with "it varies by country and state"

usually a business license is not required, though. it's only required if you want write or cash checks under your company's name, or if you want to set up a physical store. but again this depends on country and state

Edited by rinkuhero, 24 May 2012 - 06:46 PM.

[Jack Indie Box]

im pretty sure you are supposed to tell HM Revenue(if your in the UK) even if its £1. this does not mean you have to pay anything, as you may know you dont pay tax on your total income till its over a certain amount(the game income would combine with any other income you have). If you turn over £75,000+ you have to be VAT registered and charge VAT to customers.

values may be out of date, and i may be wrong on having to mention the £1+ but if u plan to make an ok game you definately need to tell them, not doing so can massively back fire with huge fees or worse

edit:
just like rinkuhero said for the US, in the UK you do not need a limited company to trade, and if you do want a company there are many types and many do not require particular special setup not even registering such. If you were wondering about trade marks and copyright in the Uk, then if you put the relevent clauses on websites and promotional material(like you see copyright and the symbol and date and all rights reserved, or trade mark symbol) you automatically have copyright and trade mark in the uk(not a registered trademark- the "R" in a circle) this is only for the Uk or your region(if its a shop or service) and only for your industry

Edited by Jack Indie Box, 24 May 2012 - 07:24 PM.

[dannyjenn]

this depends on your country, or state (if in the US), obviously

you didn't provide any information about your country or state, so there's not much to answer except with "it varies by country and state"

I see... that's what I thought.

[NakedPaulToast]

Not only is this question flawed, because it disregards country, it's also flawed because it presupposed that income from a game is different from other income. That's typically not the case.

Most countries have a minimum income before taxes are paid, but that minimum applies to all income earned.

For example in Canada the minimum income is approximately $9,000. Now that doesn't mean that if a game I sell earns less than $9,000 dollars I don't have to pay any income tax. What that means is if the total I make with all income is less than $9,000 than I don't pay any income tax.

For example if I had a part time job and earned $8,000, and sold a game earning and additional $1,500 for a total of $9,500 than I need to report my income of $9,500 and pay appropriate income taxes.

And yes, the basic amounts vary from place to place, but the general principle applies to many countries.

[dannyjenn]

For example if I had a part time job and earned $8,000, and sold a game earning and additional $1,500 for a total of $9,500 than I need to report my income of $9,500 and pay appropriate income taxes.

But what I am asking is how much money must be made before being required to report it? (and I realize that it varies from state to state so don't answer that...)
Obviously you don't always need to report everything... small amounts of income made at a garage sale or from craigslist does not need to be reported (and I don't see why game income would be any different from income made off of used furniture or something... both are "income")
An example is... say I had a job and made $8,000... then I made a total of $100 from selling games. Would I have to report $8,100 as my income? I really doubt it, since people sometimes make over $100 on things that they sell at a garage sale (and that kind of stuff does not need to be reported).
And this matter could become a real issue if the tax bracket ended at some point betwen $8000 and $8100 because not reporting it (if required) would make a difference and the government is not going to like that one bit...

Edited by dannyjenn, 25 May 2012 - 02:38 PM.

[NakedPaulToast]

Obviously you don't always need to report everything... small amounts of income made at a garage sale or from craigslist does not need to be reported (and I don't see why game income would be any different from income made off of used furniture or something... both are "income")

No.

Garage sales are not income. And they are not income because the presumption is you are selling your used material at a cost less than you bought it.

Income is the return of sales after expenses. In a garage sale and you are selling a coffee table for $10.00, your paid more than $10.00 therefore it is NOT considered income and therefore not taxable. It is also not expected that we keep detailed books for out personal possessions and that's why things like garage sales uses the presumption that we paid more for it.

The same can not be said for Games that we sell, although if you are selling a game and expected to report income, you can also deduct valid expenses to determine income.

But once again, simply put their is no single magic amount of game sales where all of a sudden income must be reported.

[rinkuhero]

another thing you have to consider is not just how much money you make from a game, but you also have to subtract the expenses -- business deductions

let's say you are making an iphone game. you pay 100$ for the iphone license, 200$ for an iphone, and 700$ for a mac (these are just random numbers designed to be even, not what that stuff would actually cost). you buy them explicitly because they are required to make an iphone game, you don't already own them for your own personal use. so that's $1000 you spent on development costs. the game then makes you $1000 in sales. your net income from that is $0, not $1000

Edited by rinkuhero, 25 May 2012 - 06:03 PM.

[dannyjenn]

That's not income... that's profit. Income taxes apply to total income, not just to profit. (Or at least normally they apply to total income, for example... if I have a job and make $10000 each year but it costs me $5000 in gas just to drive to that job and back... I still have to report it as $10000...)

As for garage sales not counting because you lose money... it can work both ways. You can purchase a $50 item and never use it and sell it for $10 and be losing $40... or you can buy a $50 item and use it for several years (getting $50 worth of use out of it while its value depeciates to practically nothing) and then sell it for $10 and not be losing money at all. Or you can obtain an item for free and sell it at a garage sale and actually make money. I doubt that the law would be written under such an assumption which doesn't even apply in a lot of cases.

Edited by dannyjenn, 25 May 2012 - 08:54 PM.

[Jack Indie Box]

$10000 each year but it costs me $5000 in gas

thats not the same thing as what we are talking about, in games for eg. apple taking 30% of the revenue is not the part you get charged tax for(in the UK) you get charge on the 70%(or what ever is relevant)

but if you ran a business that had a service or you worked in a commercial vehicle or have to pay insurance for driving a car for your work that is different to driving to work, so costs for running the car during business would be part of the revenue not the income.

@dannyjenn
there are laws specifically for resale of your belongings be it on your property or ebay and they have separate but similar rules to income tax, like how much you can resale in one go, in what way you sell them and to what countries. specifically buying things to resell them is different too and

just like you dont need to be verified with paypal before you buy or sell a certain amount of money(£250 or 500 or something) because past that they legally have to confirm you so that you cannot have hundreds of accounts and such gain large hidden incomes.

also you have to declare income after true expenses and such as your income from the game may not be 100% of the profits, eg. 2 people work on the game. and just because you have a company earning 100k doesnt mean you are taking in 100k alot of times you earn an income or take dividents out of the company, else they have no trading capital

Edited by Jack Indie Box, 25 May 2012 - 10:42 PM.