Taxes on transactions of services
Do Alice and Bob have to figure out the fair market value of their services and report that as income or something? Yes, exactly that.  See Topic 420.   Note that if the computer program is for Bob's business, Bob might be able to deduct it on his taxes.  Similarly, if the remodeling is on Alice's business property, she might be able to deduct it.  There might also be other tax advantages in certain circumstances. It's called bartering and the IRS has a page titled Four Things to Know About Bartering. The summary is -  The bottom line is this is taxable.
All Bank fees were included in the service tax ambit [For example Check bounce, issue of duplicate statement, fees charged for remittance etc]. However as quite a few Banks structured the Remittance Business to show less charges and cover the difference in the Fx rate involved, the Govt has redone the service tax and one needs to pay Rs 120 for an amount of Rs 100,000.  There is no way to avoid service tax on remittance if you are using a remittance service. If i am not wrong, any business activities such should be declared on Year End Tax filing. If your friend is going to own that website either it is commercial or nonprofit, he has to declare in the year end taxation. "In most jurisdictions, both the goods (raw materials) and the service (class) are being ""sold"" to the customer, who is the end user and thus the sale is subject to sales tax. So, when your friend charges for the class, that $100 is subject to all applicable sales taxes for the jurisdiction and all parent jurisdictions (usually city, county and state). The teacher should not have to pay sales tax when they buy the flowers from the wholesaler; most jurisdictions charge sales tax on end-user purchases only. However, they are required to have some proof of sales tax exemption for the purchase, which normally comes part and parcel with the DBA or other business entity registration paperwork in most cities/states.  Wholesalers deal with non-end-user sales (exempt from sales tax) all the time, but your average Michael's or Hobby Lobby may not be able to deal with this and may have to charge your friend the sales tax at POS. Depending on the jurisdiction, if this happens, your friend may be able to reduce the amount the customer is paying that is subject to sales tax by the pre-tax value of the materials the customer has paid for, which your friend already paid the tax on." Such activity is normally referred to as bartering income. From the IRS site - You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or Form 1040, Schedule C-EZ (PDF), Net Profit from Business (Sole Proprietorship). If you failed to report this income, correct your return by filing a Form 1040X (PDF), Amended U.S. Individual Income Tax Return. Refer to Topic 308 and Amended Returns for information on filing an amended return. Australian Goods and Services Tax is charged on the sale amount. Whatever internal accounting you do before billing the customer is of no interest to the Australian Tax Office. I am an Israeli based citizen who represents and Indian company who sells its products in Israel. As an agent I am entitled to commission on sales on behalf the Indian company who advised that. Any commission paid to you will be applicable to TDS at 20.9% of the commission amount, the tax will be paid and a Tax paid certificate will be given to you.   According to a Bilateral Double tax avoidance treaty if the tax has been deducted in India you will get credit for this tax in Israel. If it's a legitimate cost of doing business, it's as deductible as any other cost of doing business. (Reminder: be careful about the distinctions between employee and contractor; the IRS gets annoyed if you don't handle this correctly.) Its one of the main points.  Transfer pricing includes discretionary decisions and is part of BEPS.  Its also completely unnecessary:  Pay taxes on revenue in country earned/sold.  Get tax credits/refunds in country were spending is made.  The reason why already profitable companies consider BEPS/tax arbitrage for HQ locations is because they get discretionary power over accounting profit allocation.  Tax policy should serve the society though, and this proposal encourages the spending that benefits society.  Its the usual case that the right answer is different than that being lobbied for. "Keep in mind that all of the information below assumes: That being said, here are some examples of national tax laws relating to barter transactions. Obviously this isn't an exhaustive list, but based on my grossly non-representative sample, I think it's fairly safe to assume that barter transactions are more likely taxable than not.  You're referring to a barter system; in the United States, the IRS is very specific about this (see the section titled Bartering).  Bartering is an exchange of property or services. The fair market   value of goods and services exchanged is fully taxable and must be   included on Form 1040 in the income of both parties. The IRS also provides more details: Bartering occurs when you exchange goods or services without   exchanging money. An example of bartering is a plumber doing repair   work for a dentist in exchange for dental services. You must include   in gross income in the year of receipt the fair market value of goods   and services received in exchange for goods or services you provide or   may provide under the bartering arrangement. Generally, you report this income on Form 1040, Schedule C (PDF),   Profit or Loss from Business or Form 1040, Schedule C-EZ (PDF), Net   Profit from Business. If you failed to report this income, correct   your return by filing a Form 1040X (PDF). Refer to Topic 308 for   amended return information. So yes, the net value of bartered goods or services is most likely taxable. According to the Australian Tax Office: Barter transactions are assessable and deductible for income tax   purposes to the same extent as other cash or credit transactions. Her Majesty's Revenue and Customs states that: If you supply services or goods (new or second-hand) and receive other   goods or services in payment, there are two separate supplies: You must account for VAT, and so must your customer if they're   VAT-registered. The VAT treatment is the same as for part-exchanges.   You must both account for VAT on the amounts you would each have paid   for the goods or services if there had been no barter and they had   been paid for with money. Searching the website of the Federal Tax Service for the Russian/Cryllic word for barter (бартер) doesn't yield any results, but that might be because even between Google Translate and the rest of the internet, I don't speak Russian. That being said, I did manage to find this (translated from the first full paragraph of the Russian, beginning with ""Налог на доходы..."": The tax on personal income is paid by citizens of the Russian   Federation with all types of income received by them in the calendar   year, either in cash or in kind. Since bartering would probably qualify as an in kind transaction, it would likely be taxable.  The South African Revenue Service includes barter transactions in the supply of goods taxed under the VAT.  The term “supply” is defined very broadly and includes all forms of   supply and any derivative of the term, irrespective of where the   supply is effected. The term includes performance in terms of a sale,   rental agreement, instalment credit agreement or barter transaction. Look for section 3.6, Supply and Taxable Supply, found on p17 of the current version of the linked document." Disclaimer: I am not a tax specialist You probably need a sales tax permit if you're going to sell goods, since just about every state taxes goods, though some states have exemptions for various types of goods.  For services, it gets tricker. There is a database here that lists what services are taxed in what states; in Wyoming, for example, cellphone services and diaper services are taxed, while insurance services and barber services are not.  For selling over the internet, it gets even dicier. There's a guide on nolo.com that claims to be comprehensive; it states that the default rule of thumb is that if you have a physical presence in a state, such as a warehouse or a retail shop or an office, you must collect tax on sales in that state. Given your situation, you probably only need to collect sales tax on customers in Wyoming. Probably.  In any event, I'd advice having a chat with an accountant in Wyoming who can help walk you through what permits may or may not be needed. Tax Deducted at source is applicable to Employee / Employer [contract employee] relations ... it was also made applicable for cases where an Indian company pays for software products [like MS Word etc] as the product is not sold, but is licensed and is treated as Royalty [unlike sale of a consumer product, that you have, say car] ... Hence it depends on how your contract is worded with your India clients, best is have it as a service agreement. Although services are also taxed, however your contract should clearly specify that any tax in India would be borne by your Indian Client ... Cross Country taxation is an advanced area, you will not find good advice free :) "I'll assume United States as the country; the answer may (probably does) vary somewhat if this is not correct.  Also, I preface this with the caveat that I am neither a lawyer nor an accountant.  However, this is my understanding: You must recognize the revenue at the time the credits are purchased (when money changes hands), and charge sales tax on the full amount at that time.  This is because the customer has pre-paid and purchased a service (i.e. the ""credits"", which are units of time available in the application).  This is clearly a complete transaction.  The use of the credits is irrelevant.  This is equivalent to a customer purchasing a box of widgets for future delivery; the payment is made and the widgets are available but have simply not been shipped (and therefore used).  This mirrors many online service providers (say, NetFlix) in business model.   This is different from the case in which a customer purchases a ""gift card"" or ""reloadable debit card"".  In this case, sales tax is NOT collected (because this is technically not a purchase).  Revenue is also not booked at this time.  Instead, the revenue is booked when the gift card's balance is used to pay for a good or service, and at that time the tax is collected (usually from the funds on the card).  To do otherwise would greatly complicate the tax basis (suppose the gift card is used in a different state or county, where sales tax is charged differently?  Suppose the gift card is used to purchase a tax-exempt item?)  For justification, see bankruptcy consideration of the two cases.  In the former, the customer has ""ownership"" of an asset (the credits), which cannot be taken from him (although it might be unusable).  In the latter, the holder of the debit card is technically an unsecured creditor of the company - and is last in line if the company's assets are liquidated for repayment.   Consider also the case where the cost of the ""credits"" is increased part-way through the year (say, from $10 per credit to $20 per credit) or if a discount promotion is applied (buy 5 credits, get one free).  The customer has a ""tangible"" item (one credit) which gets the same functionality regardless of price.  This would be different if instead of ""credits"" you instead maintain an ""account"" where the user deposited $1000 and was billed for usage; in this case you fall back to the ""gift card"" scenario (but usage is charged at the current rate) and revenue is booked when the usage is purchased; similarly, tax is collected on the purchase of the service.  For this model to work, the ""credit"" would likely have to be refundable, and could not expire (see gift cards, above), and must be usable on a variety of ""services"".  You may have particular responsibility in the handling of this ""deposit"" as well." If you are being paid money in exchange for services that you are providing to your cousin, then that is income, are legally you are required to declare it as self-employment income, and pay taxes when you file your tax return (and if you have a significant amount of self-employment income, you're supposed make payments every quarter of your estimated tax liability. The deposit itself will not be taxed, however. "Of course. The rationale is exactly the same as always: profit is taxed. The fact that you use intermediate barter to make that profit is irrelevant. To clarify, as it seems that you think it makes a difference that no money ""changed hands"". Consider this situation: So far your cost is $10000. How will the tax authority address this? They will look at the fair market value of the barter. You got gold worth of $20000. So from their perspective, you got $20000, and immediately exchanged it into gold. What does it mean for you? That you're taxed on the $10000 gain you made on your product X (the $20000 worth of barter that you received minus the $10000 worth of work/material/expenses that you spend on producing the merchandise), and that you have $20000 basis in the gold that you now own. If in a year, when you plan to sell the gold, its price drops - you can deduct investment losses. If its price goes up - you'll have investment gain. But for the gain you're making on your product X you will pay taxes now, because that's when you realized it - sold the merchandize and received in return something else of a value." The HST is a sales tax levied on most goods and services. It is important to realize that in both BC and Ontario, the new HST does not (in most cases) result in an increase in sales tax paid. For example, in Ontario the PST is 8% and when combined with the GST the sales tax is 13%. With the HST, the GST and PST are replaced by a single HST of 13% so the tax bill does not change. Some services that were previously not subject to PST (such as mutual fund service fees and labour) will now be subject to the HST. So some things will increase. Over time, this should not have a material impact on the consumer due to the way businesses remit GST/HST.