Taxes on Services from Social Media Platforms

Because the internet has now become an important tool in our daily lives, with more and more of us using it to connect with friends, family, colleagues, and even businesses, and because we’re all spending so much time on the internet, especially on social media platforms such as Facebook, Instagram, Amazon, Google, and Youtube. We’re being entertained by those services while simultaneously being taxed on those services by Social Media Platforms that charge fees to content producers and transactions done on their platforms like Youtube charging fees to uploaders and consumers of video entertainment. Even though we are paying these fees unknowingly while enjoying our entertainment.

Though it is true that the entertainment industry has been flourishing in recent years, it may be surprising to know that many of today’s entertainment giants, like Facebook, Google, YouTube, and Amazon make much of their revenue from selling advertisement space to businesses seeking to sell products and services to consumers. Some have even earned billion-dollar valuations based almost entirely on the advertisements purchased by businesses on their platforms without any compensation to their users or content producers whatsoever!

 

Outline Taxes on Services from Social Media Platforms

  • Whatsapp may have been bought by Facebook, but it still pays taxes
  • A look at Entertainment Industry and Commerce
  • Here’s how you’re taxed when you use social media
  • What is Taxable?
  • The costs of doing business online
  • The way forward

Whatsapp may have been bought by Facebook, but it still pays taxes

Whatsapp may have been bought by Facebook in 2014, but it still pays taxes. In a country where many companies and individuals fail to pay up to $50 billion in taxes annually, WhatsApp is one of a few tech companies that religiously pay their dues every year and support several charity causes. Whatsapp’s model is unique in that it doesn’t sell any ads or data; instead, it sells its service to you – the end-user.

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A look at Entertainment Industry and Commerce

In 2015, Google made $66 billion in revenue, of which $56 billion came from advertising. Facebook made $17.93 billion in revenue during Q4 2016, and that doesn’t include WhatsApp or Instagram. Amazon had a whopping $35 billion in sales during Q4 2016; how much was due to Prime?

Here’s how you’re taxed when you use social media

Each social media platform has its own set of rules for advertising and promotions. Some platforms, like Facebook, make it easy to manage advertising by compiling all your ads in one place. Other platforms are more hands-off with their advertising policies. So, how much do you pay when you use social media? If a company pays for your content, that’s considered royalty, not income or wages. You’re taxed on royalty payments as self-employment income; however, if you make less than $400 per year in royalties or winnings from contests and sweepstakes, it’s not taxable.

What is Taxable?

The Entertainment Industry and Commerce tax is 8% for a service that is provided by a user of a social media platform to another user. Now let’s say you are an Amazon seller and someone buys your product on Amazon, now that would be considered a taxable event. Taxes are applied to purchases, charges, and donations (when they exceed $10).

The costs of doing business online

It is a common misconception that social media platforms like Facebook, Twitter, and Instagram are free. As entertaining as these sites can be, you’re paying for them in more ways than one. Each time you Like something or share an advertisement, a transaction takes place between yourself and an advertising company. Plus, any content you post online could trigger fees from your cell phone carrier.

The way forward

Taxes on Services from Social Media Platforms Recently, tech companies have come under intense scrutiny for how they’ve sought to change how users can share information. Just last week, for example, Facebook announced it will allow posts and videos containing graphic violence to remain on its platform if they are deemed newsworthy. Such a policy is at odds with recent moves by lawmakers to crack down on so-called fake news. Facebook has also been criticized for how much money it makes from ad revenue.

Conclusion

In the US, there are two main taxes that you pay on services rendered by companies in the entertainment industry and e-commerce, one of which has been enacted on all businesses, large and small. These taxes, which are referred to as gross receipts taxes and transaction privilege taxes, are similar to each other in that they both fall under the umbrella of sales tax. Here’s an overview of the taxes you’ll be paying when you use social media platforms and make purchases from online retailers to help you understand how your money is getting taxed.

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