Do you invoice for sales tax?

[dcarstens]

After doing my taxes this year, I received a notice from the Los Angeles Business Tax board notifying me that I should be paying business taxes on all income. This can be somewhat complicated due to the fact that rental costs are included in my invoices, inflating my stated income on my 1099s. I spoke to a rep from the tax board, who said to me that I should be including sales tax on my service invoices, which in LA will be 9.75% come July. Is this standard practice for many of you out there?

[JonathanLB]

No... I've never done that. I don't see how that matters really, it's selling a service, I've never been charged sales taxes on any service, only goods. And taxes are paid on income so I pay based on actual profits.

I did get a notice I am not responding to from those idiots at Los Angeles County saying they suspect that I did business last year in their city and didn't pay them taxes, so if that's true they will grant me "amnesty" and let me not pay penalties, but if not I should send them a statement saying why I don't owe them money. LOL, yeah right, take a hike you farthammers. I don't owe an explanation for why I DON'T owe money. If they were at all technologically sophisticated they would know the company was based out of Burbank, paid taxes in Burbank and for California, and is all paid up. What a bunch of retards.

[Richard J. Johnson]

I'm a flat fee under the table guy myself

[Jokerswild]

Oh boy, here we go again..Folks, folks. Yes you need to charge tax on your invoice..I know of a company here in the Northeast that didn't for years. When he got audited, he could not come up with the thousands he owed and went out of business. I was audited a few years ago but thankfully I always charged and paid the sales tax on my invoices. They consider us "manufacturers" and therefore anything that went into the final product is taxable. So, yes your labor IS taxable, if you rent a helicopter to do the shoot, IT is taxable. The works. Here is more bad news..The Sales and USE tax. The USE tax is the part of the taxable income that is our equipment. So don't think just because you bought a piece of equipment thru the mail and didn't pay tax on it, you are in the clear...If you get audited, you will have to pay the sales tax on that..Now there are some points about this issues that I fought and won but I basically had to teach myself tax law and I am not about to get into it here.

I just wanted to say if you are not charging tax now, you should start as soon as you can to avoid any possible problems if you get audited. Just a word to the wise. I don't like it but I do it and have for the last 32 years.

Oh and BTW....Sales tax in California is going to be 9.5% HOLY SMOKES!!!!

[Jokerswild]

Oh, one more thing...There are exceptions. Example, a customer bought a frame from you and you charged them to put the picture in it..All taxable, including your labor..If that same customer brought you "their own frame" and just paid you the labor to frame their photo, you would not need to charge them the labor tax because you did not manufacture and sell them something, you just used their material and did not create or manufacture a product, you just preformed a service for them..

Over the years I had some clients question the sales tax. What I did was have the State's tax people send me a letter stating the policy. I made copies of that letter and occasionally provide that to the clients that ask..Usually ends the debate. I then state that it is the law, and I don't like it but have to abide by it.

[Jordan_S]

take a hike you farthammers.

Evocative compound word.

Definitions, in case anyone else is interested.

[Kit Hannah]

They consider us "manufacturers" and therefore anything that went into the final product is taxable. So, yes your labor IS taxable, if you rent a helicopter to do the shoot, IT is taxable. The works.

Hrmm, I guess it depends on what you're doing and how you're doing it. If you are producing videos and selling them, gotta charge tax on the videos. If you're doing freelance work or providing a service, it's a service, which is not taxable. At least in California, Labor is rarely charged sales tax, only in very specific circumstances.

Oh and BTW....Sales tax in California is going to be 9.5% HOLY SMOKES!!!!

BTW, it varies by County.... Could be A LOT more depending on where you live.

[Steve House]

It's been said before but it bears repeating. What taxes you have to collect and pay on what part of your revenue depends on where you live and where you do business. Some places require you to charge sales tax on both goods and services, other places on goods sold at retail only. Some places require you to collect and pay tax on rentals, other places don't. Some states don't even HAVE a sales tax. Here in Canada we have to deal with both Federal and Provincial sales taxes and the requirements for the two as to what is taxed and what isn't are completely different. This is not something where "what do you guys do?" can get you any meaningful answers. What someone working in Nevada has to do is completely irrelevant if you're doing business in Los Angeles, New York, or Toronto or vice versa. Heck, it can happen that what have to do is different if you're in Burbank or Culver City - I don't know anything about their laws but there could be entirely different requirements for business licenses and fees. Whatever it is, it's not an option for you to decide what you're going to pay and what you're not or whether you're going to charge it or not. The law is what it is and you have no option except to comply with all of the laws that apply to you. Complying with all the applicable laws and regulations is just as much a necessary part of running your business as is maintaining your gear. You need to consult with a tax accountant or tax attorney familiar with the industry who can advise you on the laws that apply in your jurisdiction.

[JonathanLB]

9.5% now huh... jesus you gotta be kidding me. I guess I heard about that, but I'm almost at the point where I am considering moving out of California, back to a smaller market where I have more connections and where my skills would be more valued, i.e. rarer, because the cost of living here in L.A. is extremely high and the taxes are also extremely high. It's a state in a horrible financial ruin. I am not saying I don't enjoy living in Los Angeles, I definitely do, but unfortunately you can't always afford to do everything you like. The amount of money I need to make to break even and basically pay the bills is very, very high. I'm just not sure I can really swing it in the future, I'm kind of getting to the point where I have to get some sort of break soon or switch gears and think about something else while doing film on the side.

It sucks...

[Jokerswild]

Hey Jonathan. I feel your pain my friend. Everybody out here on the "other" coast are tightening their belts. It's funny though, my still photo business has gone flat where I see the video and filming end of it, on an uptick. Good luck with your decisions. I am sure it will all work out in time.