What are the tax ramifications of selling a website?

I have a website I want to sell. As the website is an e-commerce site it is basically my whole business. I carry no inventory so the website and my customer list are my business.





What would the tax ramifications be for selling a business that is in essence, only a website? The yearly revenue for the site is in low hundreds of thousands of dollars

What are the tax ramifications of selling a website?
There are a number of factors that will need to be taken into consideration from a tax standpoint.





1) What is the structure of your business? (Sole Proprietor, Partnership, S-Corporation, C-Corporation, etc. - Assuming we are talking about US Taxes, remember there is no such thing as an LLC for Tax purposes...they are all either Sole Prop., Partnerships, or Corporations (if so elected))





2) The country and state/county/city (if applicable) that the business is located in (yes, we are speaking about a website, but you/your employees are maintaing and operating it).





3) How you have handled revenues and costs from a tax standpoint in the past?





4) Are you selling ALL of the assets of your business, or only MOST of the assets?





5) How will the sale be structured? Cash, Stock, etc





6) How long have you been in business?





I am going to make the following assumptions for the remainder of my comments:





You reside somewhere within the US, and are operating as a Sole Proprietor. You have been operating the business for more than 1 year, and have included the business results on your previous year's tax return (on Schedule C). Further, you treated some of your startup costs as Assets (meaning you have not taken them as expenses right away). Finally, assume that you sell your business on December 31, and you are a calendar year taxpayer.





From a federal standpoint, you will have the following tax burdens:





1) For the current year, you will have to pay income taxes based on the net profits of your business (counting the sale as a separate transaction - take your revenue, subtract your business expenses - the net is taxable for income purposes) - moreover, you will also have some level of self-employment tax to pay, based upon your net income and employment income from other sources





2) You would end up paying (long term) capital gains tax on the gain on sale of the business. Since it is a capital gain, it would be at a somewhat more favorable tax rate. Your gain would be calculated as Net Proceeds (Cash received less selling expenses) minus your Basis (your business Asset Cost, minus any depreciation that you previously claimed).





If you fully depreciated your Business Assets on Previous Tax Returns, then your Basis is 0, and your gain is simply Net Proceeds. In a similar vein, if you originally expensed your startup costs, then your basis is likely 0, and your gain would be calculated as net proceeds.





States are even more variable...Some states do not tax capital gains at all, others allow you to claim a deduction for capital gains, and in still others, capital gains are fully taxable.





You definitely want to speak to a qualified tax advisor/tax planner on this one...
Reply:Dang, girl, what are you selling on that website?





Contact your tax advisor. Depending on your state, it could be the same as selling a bricks-n-mortar business OR something entirely different.