Regarding sales tax: I operate my business in Florida, and some of the services I offer are taxable and some are not. I was wondering if any VA's who have same-state clients could help me figure this out:

I just got off the phone with the Florida Department of Revenue. They told me 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. But this means the client ends up paying unecessary taxes ... on a $1,000 invoice he/she is paying $60 tax even though the taxable services may only come out to $200 which would be $12 sales tax.

The only other option is to create separate bills for taxable and non taxable services. So on this $1,000 project he/she would get an invoice for $800 of services with no sales tax and $200 of services + sales tax ($12).

Both ways seem odd to me. But my real question is: do they seem odd to the client? How do I know which one to go with?

What do you guys do in these cases?

Thanks!
zippy

I will be taxing on separate invoices and will bring this to my clients' attention. If you tax on some invoices and not others than it will make the client question your credibility, so I thing that putting taxable services on separate invoices is a better way to go...more paperwork but more credibility. I am still struggling with what is taxable and what isn't. If you have a list you can share I would appreciate it greatly.

Boy, this seems odd to me that FL would tell you to do separate invoices. In my past life with a corporation, I had itemized taxable and non-taxable items on the same invoices and never had a problem with any state sales tax. This was a multi-million $ corp with sales tax to pay in multiple states to boot.

One would think if the taxable and non-taxable items were itemized on the invoice that you would be fine. I mean, if you go to the grocery store and get taxable and non-taxable items, are they not itemized, but you get one sales receipt (sort of like your "invoice")?

I'm curious as to what others say regarding this.

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Jules, SunRise Virtual Solutions - WordPress Customization & XHTML/CSS Web Sites

Originally Posted by Business-Bytes

Boy, this seems odd to me that FL would tell you to do separate invoices. In my past life with a corporation, I had itemized taxable and non-taxable items on the same invoices and never had a problem with any state sales tax. This was a multi-million $ corp with sales tax to pay in multiple states to boot. One would think if the taxable and non-taxable items were itemized on the invoice that you would be fine. I mean, if you go to the grocery store and get taxable and non-taxable items, are they not itemized, but you get one sales receipt (sort of like your "invoice")? I'm curious as to what others say regarding this.

I agree with Jules, it seems odd to preapre two separate invoices. I would suggestion two things:

1. make sure that it is in your service agreement and/or contract and even some of your welcome aboard information that you offer taxable and non-taxable items
2. If you feel like option one is not enough, find some documentation that explains what is taxable and nontaxble items from the State's website or small business center and develop and write a disclaimer for all invoices. You know the pesky fine print no one really reads. i would place the discliamer on the back or bottom of your invoice.

Hope this helps you !!

Dembo Inc:
"If you have a list you can share I would appreciate it greatly."

The Florida Dept of Revenue website is pretty confusing, that's why I have to call and speak to a person. I did find this rule on there to explain why a client has to pay tax on documents we produce for them:

12A-1.024 Fabrication of Tangible Personal Property for Others.

(1) The producing, fabricating, processing, printing or imprinting of tangible personal property is taxable.

I would highly suggest calling the D.o.R. and taking notes so that you understand clearly what the law requires. The way it was explained to me was that if I'm furnishing a tangible property item, it's taxable. Anything delivered electronically/digitally is non-taxable. If I lump taxable and non-taxable services in one invoice, the entire total becomes taxable because services are taxable if there is a tangible product attached to it. In the case of billing for an $800 website (non-taxable) and $200 worth of typed documents all in the same invoice, the website would become taxable because it was "attached" to the taxable stuff. (Very goofy, I know.)

I just have to keep calling the D.o.R. and asking specifics, like "can I just tell you some of the services I perform and you can tell me if they're taxable or non-taxable?" Then I run down the list one service at a time and write down yes or no next to it. I put those notes in my Sales Tax file so I can refer to it when it's time to bill the client. Hope that helps, Dembo Inc!


Business-Bytes:
"One would think if the taxable and non-taxable items were itemized on the invoice that you would be fine. I mean, if you go to the grocery store and get taxable and non-taxable items, are they not itemized, but you get one sales receipt (sort of like your "invoice")?"

Good one! I actually called back to ask that and they said while it may seem the same, it's actually different. Everything you buy at the grocery store is a tangible item. What I'm doing in my business involves a mixture of tangible and intangible. Services and products delivered electronically are intangible. Producing documents is tangible. Tax is charged on tangible items -or- a service that has a tangible product attached to it. So there has to be separate invoices, otherwise the tangible product(s) on my invoice would be "attached" to everything else on the invoice, making the intangible/non-taxable become taxable. (Again, a very strange law.)


teel03:
Great ideas, thanks! Because I've now decided to bill with two invoices in these cases, I will mention in my contract something like this: "Some services are subject to 6% Florida state sales tax. In order to comply with state regulations, such services will be billed on a separate invoice from the non-taxable services. Both invoices can be paid with one check, however."

Does someone have a better way of wording that, or does it sound okay?

I'm really glad I raised this question, everyone's input helped me understand it better, seek clarification, and come up with my policy. Thanks!!

Great post...looks like I'm on to the NJ Department of Revenue for some "light" reading!

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Jána :daisy:
www.virtually-supporting-you.com

And I thought out tax laws were bad. Makes you wonder - who dreams up with this stuff. Here in Ontario we recently merged our provincial sales tax with our federal sales tax. So it eliminated goofy stuff like yours but has opened up a whole new can of worms.

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Jenn Kubilis http://jkbusinessservices.ca/blog/
Bookkeeping Solutions

I have been using Freshbooks for some of my invoicing with certain VAs I have done sub work for. In that program you can specify which tasks are taxable and which are not. I use paymo for my regular clients, but as all services in Ohio are taxable unless it is web design, and don't feel the need to change at this point.

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Serita Diana, the List 2 Close Assistant
REVA Academy

Well I will do you guys one better. In Texas some of my services are taxable and some are not, but to make it even more confusing is that Texas offers a discount on Data Processing services - to which I'm still trying to pin down a complete list on - we don't have to pay taxes on 20% of these services. I'm still trying to determine the best way to bill my clients. I do however, bill taxable and non taxable services on the same invoice.

In my area of Texas (Houston) the tax rate is 8.25%, so to help me with my discounted sales tax issue suchas to not have my clients over paying, I have created a Data Processing Sales tax at 6.6% for those service in QuickBooks. Now I've asked my CPA and I've spoken with several State Comptorller Officers regarding if this was okay and all seem to think whatever works best for my company is fine just as long as the payment is correct.

There is still much debate among Texas CPA about VA services being taxable at all, but I'm one of those that likes to "pay" is safe; render unto Cesar what is due Cesar ..... I would rather them owe me then the other way around.

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Katrina
KRB Administrative Resources, LLC