I have been a “domainer” (someone who buys and sells Internet domain names) since 1996. Back then Network Solutions was the only domain name registrar and they charged $100 to register each name. They allowed domain names to be registered without paying up front, and then they billed the registrant who had about 3 months to pay before Network Solutions dropped the names.
During the early days of Adoption.com when money was very tight we were very creative in our methods of generating income to fund the core business we were building. We “boot strapped” our financing at one point by registering domain names for which we had no ability to pay, and then we worked to sell them before Network Solutions dropped them for non-payment.
Even though domainers have been actively buying or selling domain names for more than a decade, this is still a relatively new industry and business practice in terms of IRS standards. As such, very few specific rules have been established by the IRS regarding domain name taxation issues such as appropriate recovery periods for depreciation, and donations of domain names to charity.
Through the years I have been unable to find an accountant with a strong knowledge of domain name issues, and as such we have traditionally treated domain names like trademarks, for tax purposes. However, domain names are not trademarks, and their business purpose is much more like a business asset than a trademark.
This week I was referred by Andrew Allemann of Domain Name Wire to Susan Brooks, an accountant who specializes in domain name taxation issues. Susan used to work at Ernst & Young, one of the Big 4 international CPA firms. Since then, Ms. Brooks has worked as the Chief Financial Officer and a Board Member of several corporations in the Internet and service industries. She has run her own tax practice for nine years and has been in the domaining business since 1998. Susan has a website at DomainTaxGuide.com where she sells an 85-page book she wrote about domain name tax issues.
This week I purchased and read her guide and was very happy to find an accountant who has thoroughly researched and thought through the unique issues faced by domainers. I was even happier to find answers to questions which we have been asking for almost a decade.
Posted on March 30th, 2008 by admin
Filed under: Adoption, Domain Names, Entrepreneurship, Financing
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