| Let me explain: Direct taxes and indirect taxes. Indirect taxes. These are paid by customers on purchase of goods or services. Vat and gst or hst are examples. For a service provider, or a seller, there is no way to avoid this tax. If you sell something, you HAVE TO COLLECT THIS TAX AND REMIT TO GOVERNMENT. Direct taxes. This is whats "income tax". You sell something, you buy goods to sell, you earn a markup, you subtract expenses and your PBT (profit before tax) is subject to 15-25-30% income tax and you are left with Pat (profit after tax). Now, usually this Pat is exempt from subsequent tax because the owner gets this money but many jurisdictions now charge taxes on this "income" as well for individuals or other owners There are creative accounting ways to reduce this PBT but you cant just show $X on your financials and then say I dont owe any income tax.. Income tax is usually calculated on PBT |