Tuesday, July 29, 2014

Life Coaches?

Looking North on the Fox River - Fall I

I got this question the other day, and since it combines a couple of issues, here ya go...

"I am a life coach. I coach people in various states via phone or Skype. Are these services taxable? What if I physically go to a client location?"

First of all, are your services taxable?
There are a few states where what you do is taxable. You need to research those states and see for yourself. Keep in mind that they may not use the term "life coaching".  But look deeper at things like training, consulting and professional services.  And a few states tax ALL services by default. So your services are going to be taxable somewhere.
This doesn't necessarily mean you have to tax the services that you perform over the phone or Skype.  This only is necessary, for right now, if you actually have nexus in the state where the buyer is receiving the benefit of your services.  Based on my assumption about your business model (I actually know a couple of life coaches), your only physical presence in a state is going to be YOU.
Are you required to collect taxes in those other states?
If you GO TO THAT STATE and perform services, do marketing, etc., you probably have nexus in that state.  Which means you may have to collect that state's taxes (assuming your services are taxable in that state.   
And if you subsequently perform your services online or on the phone, then you will need to collect taxes on your services for the states where you have nexus.  
Note that, at some point in time, your nexus in a particular state will "wear out" if you don't revisit periodically.  So you got that going for you, which is nice.
So, to summarize

1.  Your services may be taxable, depending on the state.
2.  In those states, if you go there and do work, you'll have to collect and pay the tax
3.  When you perform the services online after you've been to the state, you'll have to collect and pay the tax.

Life sucks, doesn't it?

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John said...

I am an international Motivational Life Coach. Living in Canada, I have clients from about 9 different countries. Would you say that it's better for me to simply charge taxes based on where I LIVE, or drive myself crazy trying to research taxes for where my CLIENTS live?

Jim Frazier said...

Drive yourself crazy. Where you live is irrelevant.