Episode 020: Q&A 9

On this episode, I answer the question "Am I supposed to be adding/charging sales tax to my virtual assistant invoices?"

Episode Transcript

Braden: (00:00)
Hello friend and welcome to episode 20 of the unfuck your biz podcast. Today we will be tackling another question just like we do every Tuesday. If you are new to the podcast. The way this works is I take questions in my Facebook group so you can join and ask one, it's called Brayden's besties, B, R, a, D, E. N. so search that on Facebook, join the group and you can ask a question that I may eventually tackle here on the podcast. So today's question is, am I supposed to be adding slash charging sales tax to my VA invoices? I am in California. If you don't know, VA stands for virtual assistant. So virtual assistants will typically do any kind of small business management tasks. They work on social media management, they can do email management, calendaring, all that kind of stuff. Some graphic design, you get the picture.

Braden: (01:00)
So should I be adding or charging sales tax to IBA invoices in California? Great question. This is actually going to be a little bit of a primer for Thursday's episode because Thursday's episode I will be interviewing my friend Amy who works exclusively in the area of sales tax. She is a sales tax expert. I kind of dabble in sales tax. I know a little bit about it. I help clients with some basic areas of sales tax by Amy is the real pro, so I'm going to give you the short answer on this podcast and then you can make sure to tune in Thursday for all of the real juicy stuff. The answer to this question is no in California, so it States will typically fall into one of two camps. The majority of States do just as a blanket rule as the general rule, do not charge sales tax on services.

Braden: (01:52)
Rather they charge sales tax on tangible personal property or tenant tangibles. Anything that you can touch. It's like right now I see in front of me my phone, my podcast, Mike, my computer, my lamp, a book, a notebook. That's all tangible personal property, I can touch it. So those are subject to sales tax services and the state of California are not except under certain exceptions, so we have exceptions where you are providing a service in order to create a good, an example of this would be, I know specifically in the code they talk about refurbishing furniture for interior designers, so if you charge them three hours of labor and then the sofas, $2,000 both the service and the sofa are subject to sales tax. So that's one example and that's how we operate here in California. Some other States do charge sales tax on services and then they have narrow exceptions based on the industry.

Braden: (02:56)
And we're going to talk a lot more about this on Thursday. This is just kind of the synopsis. My tip is first figure out which type of state you're in. Do they generally charge sales tax on services or no, and then look to see if there is an exception. For my experience, and this is the question I can ask Amy on a future episode, but from my general experience, States that have low or no income taxes tend to have stricter rule on sales taxes. For example, this morning I was just chatting with one of my friends who is a marketing consultant in Nashville, Tennessee and she shared with me that they have pretty strict sales tax rules, but that's because they don't have normal income tax. I know in Tennessee it's weird. I don't think they have income tax on a regular income, but they do have it on other types of income.

Braden: (03:50)
We don't need to get into those nuances, but that's just an example. It makes sense, right? The States need money to run themselves, so they might have a high tax in one area, low tax and another maybe high property taxes, low income taxes. You get the picture, but that's the way I typically recommend looking at it. You're typically not going to find a state that just has low to no tax across the board unless they get a shit ton of money from tourism. I'm kind of getting off track here, but to really wrap this up again, the question was am I supposed to be adding sales tax to my virtual assistant invoices? That is purely a service based tasks, so here in California and less you are performing a service that falls into an exception where the predominant purpose is to end up producing a good, which an MBA circumstance would be pretty unlikely.

Braden: (04:40)
Then you wouldn't need to be charging sales tax. That's the quick answer. This is a pretty short episode. Make sure that you listen on Thursday for more information. As always, I would love for you to subscribe if you want to get notified when the new podcasts come out and leave a review as well. Always super appreciative if anyone leads a review. I really am thankful for that. Last thing, uh, don't forget to join the Facebook group so you can ask a question and if you want to review the show notes on this episode or on any of the other episodes, you can find those that unfuck your biz.com. Thanks for tuning in and I will be back in your earbuds on Thursday with Amy. Have a good one.