How should I report earning from Apple App Store (from iTunes Connect) in Washington state?
If you're waiting for Apple to send you a 1099 for the 2008 tax season, well, you shouldn't be. App Store payments are not reported to the IRS and you will not be receiving a 1099 in the mail from anyone. App Store payments are treated as sales commissions rather than royalties, according to the iTunes Royalty department of Apple. You are responsible for reporting your earnings and filing your own payments for any sums you have earned from App Store.   – https://arstechnica.com/apple/2009/01/app-store-lessons-taxes-and-app-store-earnings The closest thing to sales commissions in WA state seems to be Service and Other Activities described at  http://dor.wa.gov/content/FileAndPayTaxes/BeforeIFile/Def_TxClassBandO.aspx#0004. When you dig a little deeper into the tax code, WAC 458-20-224 (Service and other business activities) includes: (4) Persons engaged in any business activity, other than or in addition to those for which a specific rate is provided in chapter 82.04 RCW, are taxable under the service and other business activities classification upon gross income from such business.   - http://apps.leg.wa.gov/wac/default.aspx?cite=458-20-224 I am not a lawyer or accountant, so caveat emptor.
"I believe that an understanding of the taxation system can help to understand our place in it, and how that impacts each of our personal finances. I will try to remain unbiased here but this is a somewhat subjective question, so please bear with me if you disagree on any point. Some of these tax savings are well-advertised, and can be used by many people, such as tax credits for mass-transit passes which exists in some countries. But some of these tax savings are things you never heard of before, until it winds up on the news. Why do some people seem to get tax savings that you and I cannot get, and why do those people always seem to have so much more money than us? A simplistic answer can show this in three parts: (1) The source of one's income; (2) Transaction costs; and (3) ""tax loopholes"". Tax savings occur proportionately to one's income, and if the savings apply to investment income, they occur proportionately to one's wealth. If someone living paycheck to paycheck with a minimal amount in a bank account ""saves tax on investment income"", they might reduce their taxable interest from $50 to $0. That's because they simply don't have any other investment income to reduce. All of their income comes in the form of employment, which is typically very hard to save taxes on. Most governments have a very firm grasp on the taxation of employment income, because it is a huge proportion of income in the country (and therefore has the largest amount of tax associated), and because it is very straightforward (work for someone = employment income). A more cynical person than I might point out that investment income is earned by the very wealthy, who can afford to lobby for politicians to pass favourable investment income laws. Even very straightforward tax saving opportunities may cost money to enable. The simplest example would be: if a tax saving opportunity is so complicated that an average person can't understand it themselves, then an accountant, lawyer, or banker will need to be the one to explain it. And that can cost you money. If your tax isn't so much to begin with, then the transaction costs to achieve the tax savings could be higher than the tax savings themselves. For example, most countries have tax savings / deferrals if you start a corporation. These rules typically exist to promote investment in the local economy. But someone who earns $10k in a side-business might not be able to afford the $3k in incorporation costs just to save $2k in taxes. The more income and wealth you have, the more these transaction costs become worthwhile. I'm going to generally define ""tax loopholes"" for the purposes of this answer as something where a somewhat arbitrary situation allows for taxes that a layman would consider unfair or unexpected. This often occurs with good intentions but poor legislation - the government tries to provide a benefit to a deserving group or to promote an activity, but ends up allowing another group to take advantage.  For example in Canada, there existed until a few years ago tax saving rules about passing on wealth to children at lower tax rates, only when a close family member is near-death [setting up a 'testamentary trust' between a grandparent and a grandchild could in some circumstances allow that trust to be created with additional 'tax brackets', meaning more income would be taxed at a less-than top tax rate before being distributed to the grandchildren].  The rules were put in place with the idea that ""oh gee, a family member has died, and the dang ol' family is grieving so hard they can't distribute the wealth to the next generation for a few months on account of all the crying. We should make it so that the estate is taxed like a person, and if they earn only a little income, they have a low tax rate, and they only get taxed at the full rate if they have a lot of income"". Seems reasonable enough, but if a family is ready to pass on wealth at the same time as someone is nudging the bucket with their foot, a morbid discussion with your lawyer and accountant could set your children up for life with forever reduced taxes on massive inheritances.  In the case of the Panama / Paradise leaks, tax savings are due to all 3 of the above: Those who have massive wealth (and therefore earn the majority of their income from investments instead of employment) can afford the transaction costs associated with taking advantage of specific ""tax loopholes"". The simplest example of which is just that income earned in a foreign country might have a lower tax rate than income earned domestically. This is often a result of ""cracks"" in the foreign tax treaties between countries, which exist generally to promote business between countries and prevent double-taxing individuals who need activity in both countries for whatever reason. Take for example the ""Apple loophole"". Apple has operations around the world. Some activity occurs in low-tax jurisdictions. Apple reports a high percentage of the value of R&D as being associated with those jurisdictions. Those branches in low-tax jurisdictions charge the high-tax branches (such as the US) with fees for use of their valuable research. So much of Apple's income is reported in those foreign jurisdictions. It won't be taxed in the US until Apple ""repatriates"" the cash back to the US. Until then, the cash sits in the foreign jurisdiction, accruing less tax. This and similar rules can be used by individuals wealthy enough to hold corporations in foreign jurisdictions with low tax rates. How each particular rule / ""loophole"" works will depend on the nature of a specific case - tax law is complex, and the rules between countries are even more so. These foreign tax loopholes are closing every year. It is getting harder and harder to hide money offshore, and it is getting less and less likely that you will be able to find a country with juuuust the right loopholes for your own offshore wealth. These types of news leaks will only help to expedite those changes." "Excellent sagacious analysis, Whale. I agree with every single thing you have stated; however, I took great heed to one remark you made: Apple ""[is] a great company.""   Apple is NOT a great company. Apple may be worse than Amazon. The only difference between Apple and Amazon is that Apple knows its strength (technology) and does not veer away from it one iota.   Apple has been vying for a stronghold on the technology industry since its inception. Oh yea, another thing that makes Apple a shitty company--keep in mind, I am typing all of this on an Apple phone (the irony)--is the fact that they store a majority of their revenue offshore--in countries that practically have a ZERO tax on money--which has allowed Apple to dodge taxes in the U.S. for years. It's sad that a multi-billion dollar company that operates in the U.S., with $250 billion in cash, dodges paying their fair share of taxes to the U.S. Treasury just because they'll be taxed at 35%.   Could you imagine what would happen to average-Joe citizens like you or me if we avoided paying taxes? HINT: this isn't a trick question." "Does the money lending between us need to be reported in our tax   reports? No. Will he be taxed more because of lending the money to me? Yes. Will I be taxed more because of borrowing the money from him? No. How shall we report it so as to minimize our taxes? You cannot. What is reported on your tax returns is the income. A loan is not an income, so nothing gets reported. However, when you repay the loan, assuming it has interest, the lender has income: the interest. Interest income is reported on schedule B of the regular (1040/1040A) tax return (or, in the case of non-resident for tax purposes, on line 9 of 1040NR). It is taxed as ordinary income, and since you're both foreigners - the lender should look into the treaty provisions that might be relevant. Generally it is not exempt from taxable income based on treaty exemptions for students (which is only for earned income), but there might be other rules in the treaty regarding interest income. If there's no (fair market or higher) interest, then there's ""assumed"" interest at the IRS mandated rates, which is considered a gift. If it amounts to more than the yearly gift exemption, the lender may be liable for gift tax (depending on the lender's and your status, and again - see treaties). ""Loan"" without an obligation to repay and without actual repaying will also be considered a gift for tax purposes. If the lender has no intentions of having the loan repaid (i.e.: making a gift), it will be better to pay your tuition bills instead of actually giving you the money: tuition is exempt from gift tax. Talk to a CPA/EA licensed in your state for a proper tax advice on this issue." "It is if you want apps. The platform is stuck in a Catch-22, where people won't buy the phone because it has no apps, and devs won't make apps for it because no one is buying the phone. Windows 8 will probably ease the problem with its app store and presumed port channel, but given how MS has handled potential devs so far, the future is not bright. They should have been pursuing aggressively and digging into their massive warchest to basically throw money at devs to get hem on board and kick-start the ecosystem.  I personally couldn't give a crap about apps, as I just want my phone to  make and take calls, guide me with map directions, and let me Google quick bits of information on-demand. It's not a ""platform"" to me. It's a tool. But I'm apparently in the minority." In Germany you can register a Einzelunternehmen and receive payments into your personal bank account with a German bank. Apple will certainly be able to transfer to accounts in Germany as payments go via the European SEPA standard. Tax wise if you are living in Germany you will need to pay tax in Germany, so this is really the easiest way of doing it. "First and foremost - make sure where you are purchasing the product is a reputable organization.  Secondly (coming from a biased computer geek) - be aware that Apple is a content trap.  Now on to my answer to your question... How do ""Preferred Account"" programs work? They're ""Preferred"" because they tend to bring in more money to the lender.  It may say No payments for 6 months but the fine print may have you being charged interest during those 6 months, meaning your new shiny computer will be costing more than the sticker price.  The good side is that you don't have to send in any actual payments for 6 months, but be aware that you'll probably be paying more than advertised. What are the different ways I can do it? Your listed options 1 & 2 are both good ways to pay for your new computer.  Yes, option 1 will charge you sales tax, but are you sure paying online excludes sales tax?  Some states mandate it.   Option 2 is a viable option too - probably your best option. 1st - there is possibly no sales tax with purchases made online, although there may be a delivery charge.   2nd - you're not committing to an additional monthly bill, you are essentially paying with cash, just directly from your bank account.  No interest charge! 3rd - that little Visa logo is your friend.  Purchases made through Visa & MasterCard (whether it's a credit or debit card)  normally have an auto-extended warranty feature (you may want to verify with Visa before taking my word on it).  Typically they double any manufacture's warranty.   Lastly - you can always set up a PayPal account and link it to your bank account.  Assuming the site you plan on purchasing the computer from accepts PayPal." MoneyDance Is the way to go.  I've been using it for years and it works well.  It keeps getting better, and best of all, it's completely cross platform!  Mac, Windows and linux! I'm assuming this was a cashless exercise because you had income show up on your w-2. When I had a similar situation, I did the following: If you made $50,000 in salary and $10,000 in stock options then your W-2 now says $60,000. You'll record that on your taxes just like it was regular income.  You'll also get a form that talks about your stock sale.   But remember, you bought and sold the stock within seconds.  Your forms will probably look like this: Bought stock: $10,000 Sold stock: $10,000 + $50 commission Total profit (loss): ($50) From the Turbotax/IRS view point, you lost $50 on the sale of the stock because you paid the commission, but the buy and sell prices were identical or nearly identical.