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So, how many of us include Kickstarter purchases when calculating our use tax? I was dismayed at first to see the numbers balloon, but then I remembered that Kickstarter is not a preorder but rather a donation that may or may not be rewarded. This will be an even bigger issue next year, with KDM 1.5 on the form. What is your take?

For that matter, how do you calculate use tax for trades via the swap shop?

Turns out there's a silver lining in Hobby Link Japan's personal warehouse shipping that Miniature Market and the like's free or included shipping just doesn't have: it's not taxable.



I didn't know where else to post about this. If this should be folded into a broader thread, please feel free.

So you...actually claim/report/etc. use tax on your forms?!?

Although Kickstarter purchases are akin alike donations, they aren't actually donations. This will vary of course based on country and state tax laws. You should always consult a tax consultant and I'm not one. However Crowdfunding services have to report to the IRS campaigns that total at least $20,000 and 200 transactions. Money collected from crowdfunding is considered either income or a gift. Income vs Gift tends to determine if something can fit into the "donation" category vs Income which is not a donation.

What is classified as income?
For most campaigns on Kickstarter, the majority of pledges will fall into this category, as the website forbids charity fundraisers. On Indiegogo, I still think the majority of pledges will fall into this category, but there are likely more that could fall into the “non-taxable gift” category.

According to CrowdfundCapitalAdvisors, “If the rewards issued are tangible and comparable to what the market price would be for that good, then it is a business transaction, and any profit derived from the sale is considered taxable income.”

This means that if you are raising money for a cool new watch and are offering the watch or accessories for the watch as perks for a price that is comparable to its retail price, then any profits made from those pledges would be considered taxable income.

What is classified as a non-taxable gift?
There are two circumstances where pledges received could be considered gifts:

1. A backer pledges and chooses not to receive a reward.

2. A backer pledges and the reward is diminutive compared to the amount given (considered a gesture of gratitude).

“For example if a funder were to donate $50 and they were to receive a mug or a calendar as a thank you, this would not count as a transaction but rather a gift.” – CrowdfundingCapitalAdvisors.

Currently federal law exempts the first $14,000 of gifts made during the course of the year to anyone other than a spouse from the federal gift tax (this amount is indexed for inflation but can only increase by $1,000 increments)

 Alpharius wrote:
So you...actually claim/report/etc. use tax on your forms?!?

I'm a law abiding citizen who respects the social contract.


Up to a point. I'm not too proud to admit that I use Turbotax, and I followed Turbotax's advice to use the state's estimated use tax rather than the much larger number I had calculated.


Automatically Appended Next Post:
PS: I calculated my use tax based on the city I live in, which is a percentage less than the tax for the city my shipping address is in. I almost feel like I'm laundering mob money.

Aaahhh we're talking about "Use Tax", something specific. Nevermind then I have no experience with that then. I live in Oregon so everything I buy is without "sales tax" or a "use tax".

 Alpharius wrote:
So you...actually claim/report/etc. use tax on your forms?!?

Haha Bob is really a mole for the IRS. This thread is a trap!

 Dark Severance wrote:
Although Kickstarter purchases are akin alike donations, they aren't actually donations. This will vary of course based on country and state tax laws. You should always consult a tax consultant and I'm not one. However Crowdfunding services have to report to the IRS campaigns that total at least $20,000 and 200 transactions. Money collected from crowdfunding is considered either income or a gift. Income vs Gift tends to determine if something can fit into the "donation" category vs Income which is not a donation.

What is classified as income?
For most campaigns on Kickstarter, the majority of pledges will fall into this category, as the website forbids charity fundraisers. On Indiegogo, I still think the majority of pledges will fall into this category, but there are likely more that could fall into the “non-taxable gift” category.

According to CrowdfundCapitalAdvisors, “If the rewards issued are tangible and comparable to what the market price would be for that good, then it is a business transaction, and any profit derived from the sale is considered taxable income.”

This means that if you are raising money for a cool new watch and are offering the watch or accessories for the watch as perks for a price that is comparable to its retail price, then any profits made from those pledges would be considered taxable income.

What is classified as a non-taxable gift?
There are two circumstances where pledges received could be considered gifts:

1. A backer pledges and chooses not to receive a reward.

2. A backer pledges and the reward is diminutive compared to the amount given (considered a gesture of gratitude).

“For example if a funder were to donate $50 and they were to receive a mug or a calendar as a thank you, this would not count as a transaction but rather a gift.” – CrowdfundingCapitalAdvisors.

Currently federal law exempts the first $14,000 of gifts made during the course of the year to anyone other than a spouse from the federal gift tax (this amount is indexed for inflation but can only increase by $1,000 increments)

That's information for project creators, right? Does it apply to backers?

Also, since the market value for Sedition Wars is $18 per box, does that mean McVey could have counted all of the sweet spot pledges as gifts and been exempted from paying taxes on the first $14,000 of his campaign?

 BobtheInquisitor wrote:
That's information for project creators, right? Does it apply to backers?

Also, since the market value for Sedition Wars is $18 per box, does that mean McVey could have counted all of the sweet spot pledges as gifts and been exempted from paying taxes on the first $14,000 of his campaign?

It is based on both creators and backers. For backers though according to "TaxAct" and "Liberty Tax" a backer cannot list their pledges and amounts as a donation because crowdfunding campaigns are not a legitimate "charitable organization". Normally contributions would need to satisfy one or more of the requirements in the tax code for charitable deductions. If the recipient is a qualified 501(c)(3) charitable organization then it very well could be deducted. And if the Project Creator lists it as a income, then it wouldn't be a donation from their backers.

For all intents and purposes anyone can claim anything they want... until they get audited. Then they have to prove it fits into how they filed.

When McVey would have put Sedition Wars on his tax returns would not have been when the Sedition Wars market value was at $18, it would have been based on the pledge level. Some of that depends on if it was his account the money went into or if it went to another company who then paid him. It would have been paid on the market value at that time which would have been determined by the pledge level at the time. Now he could have probably claimed the business loss on his taxes based on the current market value of $18 a box or whatever it was when he closed that chapter of his book.

Considering my pledge for RRT, I should put it down as a loss, just like Kevin.

 BobtheInquisitor wrote:
So, how many of us include Kickstarter purchases when calculating our use tax? I was dismayed at first to see the numbers balloon, but then I remembered that Kickstarter is not a preorder but rather a donation that may or may not be rewarded. This will be an even bigger issue next year, with KDM 1.5 on the form. What is your take?

For that matter, how do you calculate use tax for trades via the swap shop?

Turns out there's a silver lining in Hobby Link Japan's personal warehouse shipping that Miniature Market and the like's free or included shipping just doesn't have: it's not taxable.

If you ask the Soviet Republik of Kalifornia, you owe use tax on ALL of that stuff, and you should definitely consult with your accountant for something specific to your personal situation.

For my non-accounting take:

Kickstarter purchases are only donations if you don't get anything out of it; my understanding is that Kickstarter *is* a store, and payments *are* preorders as far as consumer protection law is concerned, although getting the law enforced is not the same as not having the law apply... Robotech Wave 2 (and Journey Wave 2) might well be classified as donations to offset actual product and/or services received. KDM 1.5 is a big preorder that will be delivered over time, and you owe a proportionate amount of use tax as each wave is delivered.

For trades, you would calculate use tax based on the fair market value of your trade items. If either of you actually used dollar values in assessing your trades, then that would be the agreed value. Failing that, you'd need the items formally appraised by an neutral party that specializes in wargame collectibles. Of course, if you're cheap, you'd use median eBay values instead of paying an appraiser.

Please tell Soviet Republik of Kalifornia that your overseas purchases via MM or HLJ are not subject to use tax, and let us know how it goes. I think they will tell you that you need to convert the entire thing to USD and pay use tax on the USD amount.

Again, that's what I believe Kalifornian law requires, but as a non-accountant, it's merely my best guess.

So we don't have to pay the use tax on anything that hasn't arrived yet, and by the time the items do arrive we can write off most of their value due to depreciation? "No one plays DFC because Hawk Wargames was late. These minis have no value."?

If Dark Sevarance is correct that Kickstarter funds count as income, doesn't that exclude it from the use tax altogether?

And I was kind of thumbing my nose at the schadenfreud vampires who show up every time a funded kickstarter fails, gleefully blaming the backers for believing a pledge made us entitled to anything.

Shipping charges, if they are itemized on your receipt, are not subject to a use tax, so HLJ's shipping(half the cost of what I buy from them) doesn't count.




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I mistakenly counted the shipping charges on my Amazon marketplace items. Now that I think about it, buying a book for $1 and spending $3.99 for delivery should only hit me for eight cents.

If you want legal advice, you should probably go talk to a tax expert or lawyer rather than a random internet forum.

For Amazon, double check on whether you paid tax. All states now do, and most states did during 2016.

 troa wrote:
If you want legal advice, you should probably go talk to a tax expert or lawyer rather than a random internet forum.

For Amazon, double check on whether you paid tax. All states now do, and most states did during 2016.

I'm looking for amusing conversation. Sharing grievances over paying taxes is a bonding rite.

 BobtheInquisitor wrote:
If Dark Sevarance is correct that Kickstarter funds count as income, doesn't that exclude it from the use tax altogether?

Unfortunately I have no experience from or with it because we don't use "Use Tax". However I have included Kickstarter has income because we receive a 1099-K. Well if the gross amount is $20,000 in a year and more than 200 transactions then you receive a 1099-K from Stripe. When dealing with business taxes though I don't do them personally, I only do my personal tax returns (well my wife does the personal tax returns. ^_^). For business taxes I have a professional do them.

When in doubt always have a tax professional do them. However if you are using Turbo Tax, using their prompts to validate answer the questions... then you probably could claim ignorance if you got audited. That doesn't mean you might have to repay something incase of an audit though. We did have a fauxpa a few years back due her working for Google. She had a full time job with benefits but also was working with google telecommuting. Essentially she ended up being classified as self-employed, independent contractor and not an employee so she was supposed to pay a self-employment tax even though she was already paying Social Security, Medicare with her full time job. They wanted "more money", but according to TurboTax she had a "employer/employee relationship" not a "self-employed independent contractor". But technically these things only matter if you get audited... I guess that is like most things, the requirement to prove it is on us/you.

 troa wrote:
For Amazon, double check on whether you paid tax. All states now do, and most states did during 2016.

Not all States, most yes but not all. ^_^ Alaska, Delaware, Montana, New Hampshire and Oregon don't have a sales tax.

@Brian:

You wouldn't pay use tax on things that haven't arrived. If the item depreciates, you still pay on the purchase price - like a new car. A brand new $30k car for is taxed at $30k, not the depreciated $27k it's worth the instant you drive it off the lot. It's not like you paid extra use tax when Kingdom Death finally delivered the $90 core game that now goes for $600.

KS funds are income to the creator, who will pay income tax instead of use tax, but you're not launching any KS projects. You're buying KS items, which are subject to use tax.

Shipping charges taxability depends on the locality. Some places charge tax on freight.

John, my ignorance on the finer aspects of use tax law is an important financial instrument for me. Also, I can look up when I paid Kickstarter, but who can remember when the packages arrive?

Supposedly, there's an email giving you a tracking number.

 JohnHwangDD wrote:
Supposedly, there's an email giving you a tracking number.

I think Shieldwolf is the only company ever to send me any shipping information.

Really? I've gotten advance tracking numbers from practically all of my KS projects.

“For example if a funder were to donate $50 and they were to receive a mug or a calendar as a thank you, this would not count as a transaction but rather a gift.” – CrowdfundingCapitalAdvisors.

For more fun, an article I read gave an example of a $35 pledge for a $25 item. The use tax would be based on the $25 and the balance would-slash-could be considered a donation!

If Dark Sevarance is correct that Kickstarter funds count as income, doesn't that exclude it from the use tax altogether?

No. KS funds count as income for the creator so are taxed. The payment processor, such as Stripe, PayPal, etc., sends the creator a 1099-K with this information. The backer also pays his sales tax (when the product is shipped). In effect, it's just like retail, where you pay sales tax at the register, and the seller pays income taxes.

So we don't have to pay the use tax on anything that hasn't arrived yet, and by the time the items do arrive we can write off most of their value due to depreciation?

On pre-orders, you (usually!) pay sales tax when the product is shipped. Now, what amount you base the tax payment I dunno, but I haven't read anything about depreciation.

For Amazon, double check on whether you paid tax.

fwiw, While Amazon collects sales tax on retail stuff they sell, and, iirc, don't charge you for a pre-order until it ships (and therefore, I think, you don't pay sales tax on an Amazon pre-order until it ships), KS transactions are something else. Another article I read is that Amazon doesn't get involved with collecting sales tax, because KS transactions are not alike. Going back to shipping, one creator may charge shipping separately from the campaign in the pledge manager, another may charge it in addition to your pledge, and another may include it as part of your pledge (so-called "free shipping". Well, guess what. Although Amazon may collect the $100 in each transaction (in the second one, you pledged $95 and the dropdown menu says $5 shipping is charged), it's up to you to keep track of what part of the money was pledged, and what part was for shipping. EDIT: And, of course, KS collects your money long before product is shipped, so that may or may not be important.