I'm in PA and we're required to charge Sales Tax for administrative services. I'd like to move my client over to a retainer agreement but I'm wondering how you would add in the sales tax? I'm assuming that I would just take the retainer fee and add the % of sales tax to the total. I didn't know if I should just assume sales tax is included in the retainer fee and be sure that I'm charging enough to cover the tax.
I think I just answered my question but I'd still love to know how others handle it.
I always explain to my clients that I have to add sales tax onto services. I have never had an issue with it. I give them my flat fee for retainer services and say that it's plus tax.
At this time professional services are not taxed in PA, however there are some exemptions to this rule. Administrative and business consulting services are not sales and use taxable.
This may change soon however as our Governor is looking to start taxing services to generate funds for the budget but it has not yet been passed.
It does state that secretarial and editing services are taxable. I really hope I have the right information!! EEK!
C. SECRETARIAL OR EDITING SERVICES (72 P.S. § 7201(K)(13), (o)(11); 61 Pa. Code § 60.8) – services including, but not limited to, editing, letter writing, proofreading, resume writing, typing or word processing performed for a purchaser in Pennsylvania are taxable. Such taxable services do not include court reporting and stenographic services.
If they are in state, then some services may be taxable. However it depends on the service itself. Here is another section which describes and gives examples.
If they are out of state, no sales tax charged.
If they are a PA business then simply add the sales tax onto the invoice at time of billing. If they are not in PA then you do not add it.
In Florida, many of the services I offer are only taxable IF I produce tangible property for someone in my state. For example, if I create a spreadsheet for a Florida client ... it's taxable if I put it on a disk and give it to the client. It's not taxable if I email it to the client because it's considered a digital product.
I would suggest calling the Department of Revenue in your state so you can speak to a live human and ask a lot of specific questions. These laws are very discombobulating sometimes.
I just found out that if I invoice a client for several different tasks and some are taxable and some are not, the entire total of the invoice becomes taxable. Weird law! The D.o.R. told me on the phone that the only other option is to create separate bills for taxable and non taxable services. I don't know if I like that, it may seem odd to clients. But it will save them money so maybe they would be okay with it. What do you guys do in these cases?
Charging Retainers and Sales Tax
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