Tax Law (Questions About Taxes)/iTunes store

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Question
Hey Richard,

Maybe this is a simple question, but when an artist or app developer sells their music/app on iTunes, what percentage do they actually make once Apple takes their cut and income taxes are paid? I believe iTunes automatically charges the sales tax to the consumer, so the artist/app developer wouldn't be burdened with a monthly state sales tax. Say you're located in Nebraska and your app ($1.99) is downloaded 20,000 times, what do you stand to make after Apple / State (6.5%) / and Federal taxes are taken out, assuming it's your only income? Look forward to hearing from you soon!

P.S. This is a hypothetical question. I'm not asking you to do my taxes for me...

Answer
Let's ignore taxes for a moment. Apple Itunes signs an agreement with the Artist/Developer. In that agreement both parties determine how much apple will get and how much the other party gets for each sale.

I don't know what that agreed amount is and quite possibly it is not the same for all parties. While the music industry has been heavily managed by the RIAA and Radio Air Play even roller rinks pay a prescribed fee per song they play regardless the song. The software industry does not have a single party determining rates. Those are each negotiated individually.

If a song is 99 cents Apple negotiated a set fee at the inception of the itunes store. They may have renegotiated a better rate now that CD sales are almost non-existent. How much goes to the artist?

I don't know. The RIAA gets a gut, Apple get a cut, the record label gets a cut the song writer gets a cut, the producer get a cut, and the artist gets what is left. All based upon agreements.

As far as taxes:

Sales tax is always collected and paid by the retailer wherever the purchase is made. That is not income nor calculated in and cut of the sale.

As for income tax. . . Apple doesn't pay any of that for the artist/developer. of the 99 cents, if apple keeps a dime then that is the only income that Apple will be dealing with. The other 89 cents gets passed to others that must account for it.

If you were a developer and your product was $1.99 and apple kept 40 cents and paid you $1.59, a thousand times, then your income would be $1,590.

You would have to apply that to your personal tax return and pay the taxes on it.

Richard  

Tax Law (Questions About Taxes)

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Richard Fritzler

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Specializing in Business and Corporate taxation. Comparing the advantages and requirements of different business entities, such as Sub-S Corporations, LLC`s, Partnerships (Both Limited and General), Doing Business as a Sole Proprietor, or Using a C-Corporation. Issues regarding K-1 distributions, 1040, schedule C, 1120, 1120s. Are you considering domiciling a Corporation in a low tax state? I can review the benefits and misinformation that exists.

Experience

I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

Organizations
National Small Business Owners Association.
Publications
Contributing author to "The Corporate Standard Newsletter".


Publications
Contributing author to "The Corporate Standard Newsletter".
Ezinearticles.com articlesbase.com

Education/Credentials
I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

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