Accounting question

[catnapper]

I should be asking my accountant this, but I don't feel like getting a $50 bill right now!

I have a new person who wants to hire me for design services, and I'll be giving him invoices per project, instead on a bi-weekly basis like I do with the nutty lady, and will not be filling out any 1040 forms (or whatever number forms they make you fill out)

So, when I submit my bill to him, do I include state sales tax? Anyone know?

[lizbud]

I'm not an accountant but, I wouldn't include sales tax if you have no
intention of reporting in for tax purposes.

[catnapper]

Even if I did not collect sales tax, it would still be recorded as income. I just need to know if this type of service is something the state thinks is taxable, or is it something that is not. I have no idea where to find the answer on my own and like I said, right now, the bill for this guy is only $18 (was only a two second drawing) so asking my accountant this question would make me in the hole saince I know he'd have to charge me for the information.

[Tubby & Peanut's Mom]

Usually labor does not incur sales tax, only material. However, every state is different so you should check with your state. Most of this type of information can be found on your state's department of revenue web site.

Also, I'm assuming you now this part, since you are a contractor and not an employee, at the end of the year you should get a 1099 from this person that shows the amount he has paid you throughout the year. You need to claim that as income and pay income tax on it. Again, depending on your state laws, you are more than likely required to pay estimated income tax on a quarterly basis.

[Laura's Babies]

Wouldn't you have to have a state tax number to charge tax on any item? (Just a thought)

[gini]

Debbie is right - labor ONLY is not taxable. However, if you give your client anything tangible then you need to charge sales tax.

Do you have a resale license from your state?

At the end of the year your client (s) should give you a 1099 if you earned over $600.00 in the year. You then need to report that income for the year. And also deduct your related business expenses.

I can't believe your accountant would charge you for asking a question.
I get asked theses types of questions all of the time and I never charge
my clients.

Each state is different, so I would go online and so some research for your state.

[Cataholic]

In Ohio, some services ARE taxed...it is a recent change in the law.

Easiest answer to your question- Don't charge him anything! A two second drawing for 18.00 doesn't seem worth the hassle, IMO.

[beeniesmom]

This info is correct. I am a office manager / book keeper.

Debbie is right - labor ONLY is not taxable. However, if you give your client anything tangible then you need to charge sales tax.

Do you have a resale license from your state?

At the end of the year your client (s) should give you a 1099 if you earned over $600.00 in the year. You then need to report that income for the year. And also deduct your related business expenses.

I can't believe your accountant would charge you for asking a question.
I get asked theses types of questions all of the time and I never charge
my clients.

Each state is different, so I would go online and so some research for your state.

[lv4dogs]

In my state labor on fabrication of tangible personal property is taxable, so are a few other services. But most labor is not taxed.

We have to charge sales tax on our labor (installation of glass on automobiles, residential & commercial property).

To be safe I'd check it out with your state, you should be able to look it up online.

And I can't believe your accountant charges you for questions like either. We've had a couple in the last 5 years & none would even think about charging for something like that.

[beeniesmom]

And I can't believe your accountant charges you for questions like either. We've had a couple in the last 5 years & none would even think about charging for something like that.

You'd be surprised! We got a bill this morning for 50 dollars from our registered accountant for a 5 minute phone call about a simple matter.
MIND BLOWING.

[gini]

In defense of accountants - they have many clients and if each of them call the accountant with "just a little question" soon you can find your whole day is gone - no billable hours. So perhaps this is their way of discouraging too many calls from people.

For me, it just seems like good will to answer their questions and not bill them.

[lv4dogs]

You'd be surprised! We got a bill this morning for 50 dollars from our registered accountant for a 5 minute phone call about a simple matter.
MIND BLOWING.

WOW

[catnapper]

Well, thanks for the replies everyone! I am now more confused than ever and will have hubby check out the state's website --- all these financial things make my mind go numb. I am good at what I do, and for as good as I am at my work, I am equally awful in all things financial.