Do You Pay Taxes on Passive Income? - STDetector
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Do You Pay Taxes on Passive Income?

Last modified: November 17, 2022

Do You Pay Taxes on Passive Income?
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When it comes to building a website for passive income, there are lots of things to think about. One of those is whether or not taxes should be collected. So do you pay taxes on passive income? Here is a quick analysis of whether that is something that you should be focusing on.

Are Passive Income Streams Taxable?

Many people think that passive incomes aren’t taxable. After all, there is no physical product, customers can be based anywhere in the world and you can sometimes see very little passive income, especially when it starts.

However, these reasons aren’t really strong when it comes to taxable elements of passive income.

There are many ways that passive income is taxable.

Income Tax

The first way that you are going to find passive income taxable is when it comes to your taxable income. All the profits that you make from the business should be declared for tax. In most cases, this is based on the tax rules of the area where you are based.

There might be some differences to this. For instance, when it comes to print on demand or dropshipping, some US states have laws that you must pay your taxes based on how much you earn in that state.

Sales Tax

Sales tax or VAT is often dependent on where you’re selling from or where your products are being delivered. You need to check on the laws that are relevant to your sales. There are ways that you can calculate this with tax apps that are available on Shopify. There are also tax calculators on the Shopify website.

Be sure that you’re keeping your website’s sales tax income in a separate account or on the side to help you when it comes to paying the tax.


There are numerous advantages of having to pay tax on your passive income. For one, you can claim costs for your business such as website hosting, app subscription, product costs, etc. that allow you to reduce the tax burden.

This means that while your income is slightly lower, you don’t have as much tax to pay.

How to Keep Track of Taxes

There are numerous ways that you can keep track of your taxes on Shopify. You can use one of the top Shopify tax apps. These are easy to install and then you can ensure that you don’t worry about whether or not you’re saving enough tax for the end of the year.

You might also want to check with an accountant. They can often help you to find ways to cut tax burdens by finding new options that allow you to claim back some expenses.

Another option is to speak to your local tax office to see if there are schemes that can help you.

Final Word: Do You Pay Taxes on Passive Income?

Do you pay taxes on passive income? Yes. That is why you need to ensure that you’re calculating and saving that tax income.

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