Monday, August 20, 2007

Should you tax your services?

Part of a series on essential actions you need to take

If you sell services, are they taxable? You might think they aren't, but are you sure?

I was doing a seminar in Pennsylvania a couple of months ago and participant asked me during one of the breaks, "Are headhunting fees taxable?"

I said, "Yes, as a matter of fact they are here."

"Dang!" This was not the actual word used, but I'm paraphrasing for our delicate readers.

She has been a recruiting firm in Pennsylvania for 10 years and had just gotten notified she was about to be audited, which was kinda why she was at the seminar. Since she had never filed any kind of sales tax return, thereby kicking in the statute of limitations, she might be looking at a 10 year liability on ALL of her sales for the last 10 years.

Bummer. You'd think this would have come up in one of the monthly meetings, but maybe she missed that one.

So don't assume what you do isn't taxable.

Now, here's the other problem. What about what you do in other states? Just about any service you can name is taxable someplace. Even if you provide professional services, it's taxable in a couple of states. Heck, in South Dakota, what I do is taxable!

If you actually perform the taxable service in a state, you need tax it.

What do you do?

At the very least, check the web page for the state you're working in, and see what they define as taxable services. If you want to look further, there are books on sales and use tax from RIA and the American Bar Association that I highly recommend.

I see businesses in almost every seminar that aren't taxing their services like they should. Solve the problem now by checking... in every state where you do work!

The Sales Tax Guy

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