Many startups that run crowdfunding campaigns fail to consider that the money that they are raising may be taxable. Money generated from crowdfunding campaigns is usually classified in one of two ways: income, or a non-taxable gift. Income, of course, is taxable. Generally speaking, if a user is provided with a reward whose market value is generally comparable to the size of the contribution, the contribution will be considered income. However, if a contribution is provided without the promise of any reward, or the reward is minimal compared to the size of the contribution (i.e. a t-shirt for a $100 donation), then the contribution will be considered a gift. The first $14,000 of gifts in any year made to any person or entity other than the donor’s spouse will be exempt from federal gift tax. Therefore, if your crowdfunding campaign is essentially conducting pre-sales of your company’s products or services, the money contributed will likely be considered taxable income. In addition, if you are conducting a “pre-sale” crowdfunding campaign, the transaction may also be subject to sales tax. Every state has different sales tax laws, so you will need to confirm where your contributors are located to know what your obligations are. Some states put the onus on paying the tax on the purchaser if the seller does not collect the tax; other states require the seller to collect the tax. Other states’ laws will not require a sales tax on the transaction. The general rule of thumb is that sales tax must be paid on internet sales where the seller has a physical presence, but some states have much broader internet sales tax statutes. Therefore, if you are conducting a “pre-sale” crowdfunding campaign, you should consult with a tax advisor who can help you understand your tax obligations and help you to set up collection and remittance of taxes.