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Thread: [U.S. / CA ] do you charge tax on web services?

  1. #1
    Senior Member flipsideguy's Avatar
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    Hi, I've been designing a webs ite for a client and it is just about the time to send them the bill. Do I add the california Sales Tax onto the total? How does it work?

  2. #2
    general rule bender Gloomycus's Avatar
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    Your not selling anything. You are providing a service. I wouldn't add it on because thats going and changing the agreement with the client without their consent. I think that if you were going to charge a tax on it that you should have told the client this when you gave them a quote.

  3. #3
    Senior Member Black_phoenix's Avatar
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    Hi in the uk u can only add VAT (value added tax) if u or your company makes over approx 50.000 a year

    so if u are making big bucks u can add 17.5% on top

    if u have said it will be 3000 dollars, i would be choked if u tried to charge me more and might cancel the job with u

    best to stay friends u never know who they will talk to and what the future will bring

    mb they have 1 friend who wants a 5000 dollar site doing

    up 2 u at the end of the day

    be careful tho

    bp

  4. #4
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    I'm in Canada and I charge GST (goods and services tax) for all my development work. And it's 7%. I think you need to be making $30 thousand plus to charge GST. When I do my initial estimate, I give them my rate, and then say "plus GST".

    Though I really don't think it's necessary to say 'plus GST'. It's like selling a can of soup: a pricetag is essentially a contract, but it doesn't include tax. The tax is something that the government applies ontop of any transaction between two individual parties. What you quote on your contract is like a price-tag. That's what you're charging.

    Really, you need find out from somebody who knows the local laws. Should be a government number you can call. It would also depend on if you've got an existing contract. But if they're a legitimate business, they should expect to pay applicable taxes. Besides, if it's like most business taxes, they'll be able to deduct it.

    Good luck;

    -#

  5. #5
    Senior Member Black_phoenix's Avatar
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    Originally posted by octothorp
    When I do my initial estimate, I give them my rate, and then say "plus GST".

    Though I really don't think it's necessary to say 'plus GST'. It's like selling a can of soup:
    as long as u state plus tax in the contract its ok

    if i get to the till with my can of soup and the guy says oh, u have to pay extra $XXX its soup tax i would be gutted, mb i dont have the money on me...

    mb i just dump the soup and leave




  6. #6
    Senior Member flipsideguy's Avatar
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    hmm...
    Read this by the borad of equalization!

    http://www.boe.ca.gov/pdf/reg1540.pdf

  7. #7
    Senior Member dlowe93's Avatar
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    Originally posted by flipsideguy
    Hi, I've been designing a webs ite for a client and it is just about the time to send them the bill. Do I add the california Sales Tax onto the total? How does it work?
    fortunately, i live and work in CA, so i might actually be able to help you with this.

    as long as everything you do is "fee based", that is, you never actually hand anything off to the client, then you are not required by the state board of equalization to charge sales tax.

    that is, if you don't actually charge them for anything physical you deliver, a disk, a printed style guide or site architecture, etc., you will not have to pay state sales tax on your invoices.

    HOWEVER, and this is a big one, if one item on the invoice, any item on any invoice, is taxable, then the entire invoice is taxable, including your fees, etc., and if and when the state franchise board comes looking for their cut, you'd better have it.

    now, you can submit a separate invoice with just the taxable items, but if this is done as an obvious way to avoid taxes, you'll still get pinched. however, since most of what we do is fee based, it's generally ok to have the occasional invoice that is taxed, while the others are not.

    finally, one tricky part: taxes are only collected once. so if you have part of a project that you paid taxes on (assuming that you don't have a reseller's license), you can pass this directly on to the client, labelled as "sales tax" and you are covered. essentially the client is paying your vendor's sales tax, and the state franchise board won't come looking for you to pay that tax. it's been paid (or should be paid by the vendor, but at least you are off the hook).

    one final word of advice, taxes suck, but not paying them is even worse. i've been extremely fortunate that my wife and accounant have both kept me on top of things, but i have colleagues who let it slide, and they are still paying for it. i'd rather pay $2,000$3,000 a quarter than have uncle sam looking for a $15,000 check, plus penalties, at the end of the year.

    hope this helps.

    d.

  8. #8
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    looks like there's your answer = )

  9. #9
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    Originally posted by Gloomycus
    Your not selling anything. You are providing a service. I wouldn't add it on because thats going and changing the agreement with the client without their consent. I think that if you were going to charge a tax on it that you should have told the client this when you gave them a quote.
    my accountant would disagree with you...
    I know that you don't HAVE to register a VAT number if you bring in less than 50,000GBP, but you are still liable for VAT even without a registered number, it just makes it harder to claim back!

    as for adding it to a bill... in UK, if you do not have "plus VAT" the purchaser can refuse to pay quite legally as the assumption is that the price includes VAT unless specified. But, as I understood sales tax in Washington at least, there is no assumption, a price is quoted excluding sales tax.

    However, it is always nice to talk to your client if possible, before you shock them...

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