w9, sales tax and selling in Canada

[knight427]

I have a hodgepodge of questions relating to an expansion of my business. I have been consulting for about 8 years but just picked up a new line of business selling a piece of specialized software relevant to my field. I am actually selling this to my competitors, but there is a history of this happening in our field...at least this way you know the sales person actually uses the software. Anyway...the questions:

1) I made my first software sale today and they want a W9. I send W9's to my consulting clients all the time, but I can't figure out why I need to send a W9 to a customer who purchased software from my business. Am I missing something?

2) I am based in MN but I will be selling mostly to business outside MN. I have no presence of any kind in any other state. From what I've read, I do not need to charge sales tax unless I sell to someone in MN. Is it really that simple?

3) I am the distributor of this software to Canada as well. Are there any tax issues associated with this?

EDIT: I forgot some other questions relating to health insurance

4) Until this summer I was getting health insurance as a full-time faculty member at a college. That job ended and I got a plan to cover my family (wife doesn't work) on the open market. I can deduct the premiums as a business write off because neither my wife nor I have employer sponsored coverage, right?

I am organized as a Sole-Proprietor, if that is in any way relevant.

[vangogh]

Welcome to the forum knight24. Your questions aren't in my area of expertise, but I'll try to answer so you get a response.

1. I wouldn't think you'd need one given the situation you described. If you performed services for the company in question then sure, a W9 would be a common request, but if you sold them a product I wouldn't think one is required. By the way if you have a Tax# you can list that on any W9 instead of your social security #. You can get one online (http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-%28EIN%29-Online) too.

2. Yep. That's currently how it works. You're only required to collect sales tax when you sell to MN residents.

3. I have no idea, but I did find an article that may offer some useful information (http://www.inc.com/guides/201101/doing-business-in-canada.html). It is an online article so it's hardly legal advice. Your best bet is to contact an attorney or an account, particularly one who understands selling good across the border.

4. Another one I'm not sure about, though I assume you can deduct part of the premiums at the least. Here's another article, this time from TurboTax (http://turbotax.intuit.com/tax-tools/tax-tips/Self-Employment-Taxes/Deducting-Health-Insurance-Premiums-If-You-re-Self-Employed/INF12128.html) that says you can assuming you meet the eligibility requirements.

Hope something in there helps.

[Freelancier]

For #3, no, because you're not based in Canada, you are not obligated to collect Canadian taxes. Same if you sell into Europe... as long as you have no physical presence, you're not under their jurisdiction for taxes.

As for whether you even need to collect taxes in your own state: check with your state Dept of Revenue/Sales & Use Tax division (or whatever it's called). If you're selling just bits that are downloaded and sending an e-mail with an unlock code -- a common software sales scenario -- you might not need to collect sales tax at all. At least that's the rule here in Georgia... if it's physical, it gets taxed, if it's bits, it's not taxed.

I'm pretty sure you can write off your insurance, but that rule has changed several times in the past 20 years, so your best bet is talk with a local small business accountant to make sure you get the latest information.