Do you need to pay Taxes on your revenue?

Sorry I am asking this question here. I couldn't find any legal or tax category.


I am a developer based out of US. When a user buys an app for $0.99 they have to pay $0.25 tax on it. So Apple collects


App Price: $0.99

Tax: $.25

Total: $1.24


Afterwards Apple pays us developers 70% off $0.99 i.e. $0.69


My question is that do I need to pay Fed & State taxes on $0.69? Hasn't that amount been already taxed and tax taken out of it by Apple ($1.24) or did I miss something?


I searched Apple Dev fourms and only found this answer on the topic - https://forums.developer.apple.com/message/90695#90695


I appologize I am new to this.

Post not yet marked as solved Up vote post of sally732 Down vote post of sally732
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  • I think everybody is missing the point here. The developer said he is "based out of US". Shouldn't he be able to avoid paying the withholding tax thanks to the W-8 BEN-E (W-8 BEN or W-8 IMY) IRS forms? Furthermore SaaS and Software is only taxable in certain states and not in others: https://www.taxjar.com/blog/saas/saas-sales-tax Laura

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Answers

Revenue taxes (income) are the responsibility of the person to whom the dev account is registered, so, yes, you need to pay them.


For more information about tax issues, see “Banking and Tax” in the iTunes Connect FAQ, available in the Resources and Help section of iTunes Connect.


https://itunespartner.apple.com/en/apps/faq/Banking%20and%20Tax_Tax

Apple is taking care of SALES tax, not INCOME tax. INCOME tax, is your responsibility.

I believe the income from Apple is "royalties". I believe you will be able to deduct your expenses against your royalties ($99 yearly fee and that new laptop you needed to run Xcode 7).


from a government website:



Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income.

In most cases you report royalties in Part I of Schedule E (Form 1040). However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc., report your income and expenses on Schedule C or Schedule C-EZ (Form 1040).

Copyrights and patents. Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold.

A royalty is a payment made by a licensee for the use or resale of the licensed property. There is no such licensor-licensee relationship in the Apple developer agreement.

As stated in the developer agreeement, Apple distributes the app on your behalf and receives a commission on those sales. The net amount that Apple distributes to you at the end of each month are retail sales, not royalties.

For clarity, the revenue you receive from Apple is taxable income.


The question of whether payments are 'royalties' or 'retail sales'' can be interpreted either under the terms of the contract with Apple or under the provsions of the IRS code; and which one you use depends on the purpose of the question. The IRS cares only peripherally what the Apple contract calls the revenue they are giving you. The question of whether, for tax purposes, you can call those revenues 'royalty' or 'unrelated business income' or 'income' or 'retail sales' is determined predominantly by IRS code. The nuance is 1) whether they are tax exempt (they are most likely not - it is unrelated business income even if you are a 501c) 2) whether you must pay social security and can deduct your business expenses (like that iPhone X) (you must and can if you call the income business income because you are ongoingly active in the field) - report of Schedule C or 3) whether you do not need to pay social security but can't deduct your business expenses (if it is passive royalty income and you are not actively engaged in the business of writing programs) - report on Schedule E. It's complicated; you will get into deep trouble if you don't report the income; you will get into little/no trouble if you argue for Schedule E and it should be Schedule C.

Post not yet marked as solved Up vote reply of PBK Down vote reply of PBK

As others have already pointed out correctly, the income is taxable. However, what you are required to pay could be zero.


One quick example: Your Apple income is for a side business (sole proprietorship) and you file along with your personal taxes each year. No matter what your ultimate net income is, in the US you should be filing at least Schedule C and Schedule SE. On Schedule C you'll be listing ***** income (basically the list cost of all your apps sold), commissions and fees (Apple's 30%) and any other business-related expenses you incurred in the prior tax year. Schedule C will thus outline your net income (or loss) that is reportable to the IRS. Schedule SE then checks to see if you owe any taxes for self-employment. You file this even if your side business isn't your sole job. Currently, if your net income for the year is around $400 or below, it results in no additional tax being collected.


If your income is a decent amount each year, you may also want to consider doing quarterly estimated payments for both federal and state. This is what I personally do.


If your situation is more complicated (corproration, small business with other employees, etc.), you'll want to talk to a CPA and/or lawyer on what your requirements will be each year.

I am not a tax expert. But I think that listing ***** and deducting Apple's 30% is not necessary and may be incorrect. I list just net (70%) from Apple. If you list ***** then it raises two questions - what about sales taxes (that net to zero just like Apple's 30%)? and is the income earned in your country or in many many other countries? On Scedule C you can deduct the Developer's $100 fee and perhaps other expenses.

Post not yet marked as solved Up vote reply of PBK Down vote reply of PBK

How do you know what State the sales is apportioned to? Is it origin based or destination based? If it is destination based, what report within the apple developer login can be generated in order to view the sales destinations? I can only see the territory based sales (e.g. Canada, USA, etc)

>How do you know what State the sales is apportioned to?


This thread is about income tax, not -sales- tax. Suggest you start a new unique thread with your topic so it can receive the attention it deserves, and you can close if solved, etc.

.69 is considered income to you. Sales tax have nothing to do with it. You absolutely have to pay income taxes on this. These taxes would be on Federal level and also possibly on state level. Read through the blog on this website to learn more about how small business income taxes work. CPADelaware.net gives you great info about how income taxes are calculated.