1099 Independent contractor pays sales tax?

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Michael Hayes

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Jan 4, 2011, 1:57:56 PM1/4/11
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I am set up as a sole-proprietorship in the state and file my sales tax
quarterly. If I am working for another company and paid hourly as 1099
independent contractor (iphone/ios app programming) do I have to file
sales tax for that income? Just wondering if anyone knows. I plan to
check with an accountant.

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Michael Hayes
http://mhayesdesign.com
512-300-7142

Michael Hayes

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Jan 4, 2011, 2:12:15 PM1/4/11
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I should have noted that I'm not working on one specific project.

Paul O

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Jan 4, 2011, 2:12:34 PM1/4/11
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95% certain you do not
Sales tax is levied on consumer products, not between wholesalers and not for
services (of which development of a product is considered)

Two sources I'd encourage you to check with for a more qualified answer
http://entrepreneurs.outright.com/ - community of sole proprietors powered by an
online accounting application for sole proprietors.
http://needacfo.blogspot.com/ - a fantastic CPA I'd HIGHLY recommend - he's up
in Dallas (feel free to mention I sent you)

Unrelated note... I'm looking for a mobile app developer. Interested?

Paul

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415-683-7630 or seobrien.com on your smartphone

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Rusty Fincke

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Jan 4, 2011, 2:14:17 PM1/4/11
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Michael,

You should be good on your 1099.  The IRS treats the 1099 as being self-employed and your taxes (not sales tax) are taking out of your 1040 at the end of the year (or paid with your quarterly estimated tax payments).  Sales tax is not collected or paid for work done as a contractor no matter if you have a sole-proprietorship or not.  If you completed a W-9 for the work you are doing, you do not need to collect or pay sales tax.

Rusty Fincke
rusty....@gmail.com


Pat Ramsey

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Jan 4, 2011, 2:19:31 PM1/4/11
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Hi all,

The 1099 discussion is great & timely, given the ever-changing world of US tax law. 

I should state for the list that unless specifically noted by a poster, none of this should be taken as legal advice. I'm curious, as I know others in similar self-employed, work-for-hire setups are, what are the best methods to navigate the rocky shoals of tax-law paperwork.

But if you get to that point where you're stuck & need something more, please consult a tax specialist, attorney, etc.

Cheers!

Pat

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Web Design and Accessibility Specialist
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Code that works,… beautifully

David Brockman

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Jan 4, 2011, 2:31:53 PM1/4/11
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I would definitely check with a tax advisor on this. I don't know the current tax law but many years ago I worked on a small project for a client and that client got audited a couple of years after the project was done. The state of California then audited me because they saw I hadn't charged sales tax for the trade show signs I designed. The problem was that the client had me design the signs, get them printed, pick them up and deliver them to the trade show. The state considered the sign and the work I'd done in producing it to all be taxable (yes, sales tax) because it was a physical item that I'd physically delivered (as opposed to entirely digital delivery).

Tax law can be bizarre and confusing so definitely double-check with an accountant or other tax professional.

~ Dave

On Tue, Jan 4, 2011 at 12:57 PM, Michael Hayes <tassl...@mac.com> wrote:

Warren Cardinal

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Jan 4, 2011, 2:33:23 PM1/4/11
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If you check with the state, as I did, the would probably tell you
that Web Development work is considered 80% "data processing".

http://www.window.state.tx.us/taxinfo/taxpubs/tx94_127.html unless
they give you an exemption or resale form.

My assumption is that a sole proprietorship is no different than any
other type of entity. One person selling jewelry, for example, would
still have to charge sales tax.

-Warren

Dean Nixon

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Jan 4, 2011, 4:04:29 PM1/4/11
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If you call the state comptrollers office, they will clarify everything for you.

All 1099, independent contract work as a sole proprietor. Graphic design, web design, etc. - You need  to charge state tax for, Its a taxable service.

However, Unless you are working under a W2, or as a 3rd party contractor, You do not have to charge state sales tax: example: if you are working for a large media firm who has a client, and they sub contract work out to you. Since they are ultimately billing the client, you do not need to charge sales tax. That would be double taxing. Think of it this way, whoever is finally selling the service/product to the client has to charge the state tax. If you are selling your services directly to a client then you charge $8.25% sales tax.

Also, if you are a broker for print materials, like for business cards for example, and you have it printed out of state for a client and the client pays you for it here in Texas, you need to charge sales tax for the amount of that products you sell.

You need to file quarterly or yearly depending on your total sales. The State will determine that for you.


---------------------------------


www.DeanNixonDesign.com

Phone: 512.771.7658

Fax: 1.952.516.0404


From: David Brockman <dbro...@clicktime.com>
Reply-To: <refresh...@googlegroups.com>
Date: Tue, 4 Jan 2011 13:31:53 -0600
To: <refresh...@googlegroups.com>
Subject: Re: [Refresh Austin: 5684] 1099 Independent contractor pays sales tax?

[ More Info ]
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Dean Nixon

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Jan 4, 2011, 4:10:49 PM1/4/11
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Also, in addition to this, when filing your state taxes quarterly. List in the Total sales line This is all the money you earned as a contractor -  taxable or not (including your hourly earnings for your 1099 work, even if a 3rd party contractor,-but not w2 earnings). Then under Taxable sales line, just put the amount that is subject to tax. (that would be the total sales minus your 3rd party contract work: your hourly 1099 work). Just pay taxes on that much, but you do need to list your total sales even if its not taxable.
---------------------------------


www.DeanNixonDesign.com

Phone: 512.771.7658

Fax: 1.952.516.0404


From: dnd <de...@deannixondesign.com>
Date: Tue, 04 Jan 2011 15:04:29 -0600
To: <refresh...@googlegroups.com>
Conversation: [Refresh Austin: 5684] 1099 Independent contractor pays sales tax?
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Keith Aric Hall

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Jan 4, 2011, 4:33:20 PM1/4/11
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Just to clarify, you keep saying state taxes, where I am sure you mean sales taxes as we do not officially have a state income tax here in Texas. Franchise tax for qualifying organizations yes, but no state tax.
On Jan 4, 2011, at 3:10 PM, Dean Nixon wrote:

Also, in addition to this, when filing your state taxes quarterly. List in the Total sales line This is all the money you earned as a contractor -  taxable or not (including your hourly earnings for your 1099 work, even if a 3rd party contractor,-but not w2 earnings). Then under Taxable sales line, just put the amount that is subject to tax. (that would be the total sales minus your 3rd party contract work: your hourly 1099 work). Just pay taxes on that much, but you do need to list your total sales even if its not taxable.
---------------------------------

Phone: 512.771.7658

Fax: 1.952.516.0404


From: dnd <de...@deannixondesign.com>
Date: Tue, 04 Jan 2011 15:04:29 -0600
To: <refresh...@googlegroups.com>
Conversation: [Refresh Austin: 5684] 1099 Independent contractor pays sales tax?
Subject: Re: [Refresh Austin: 5684] 1099 Independent contractor pays sales tax?

If you call the state comptrollers office, they will clarify everything for you.

All 1099, independent contract work as a sole proprietor. Graphic design, web design, etc. - You need  to charge state tax for, Its a taxable service.

However, Unless you are working under a W2, or as a 3rd party contractor, You do not have to charge state sales tax: example: if you are working for a large media firm who has a client, and they sub contract work out to you. Since they are ultimately billing the client, you do not need to charge sales tax. That would be double taxing. Think of it this way, whoever is finally selling the service/product to the client has to charge the state tax. If you are selling your services directly to a client then you charge $8.25% sales tax.

Also, if you are a broker for print materials, like for business cards for example, and you have it printed out of state for a client and the client pays you for it here in Texas, you need to charge sales tax for the amount of that products you sell.

You need to file quarterly or yearly depending on your total sales. The State will determine that for you.


---------------------------------

Dean Nixon

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Jan 4, 2011, 4:37:28 PM1/4/11
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Yes, State Sales Tax not income tax, correct. Sorry for not clarifying.

---------------------------------


www.DeanNixonDesign.com

Phone: 512.771.7658

Fax: 1.952.516.0404


From: Keith Aric Hall <khal...@gmail.com>
Reply-To: <refresh...@googlegroups.com>
Date: Tue, 4 Jan 2011 15:33:20 -0600
To: <refresh...@googlegroups.com>
Subject: Re: [Refresh Austin: 0] 1099 Independent contractor pays sales tax?


Just to clarify, you keep saying state taxes, where I am sure you mean sales taxes as we do not officially have a state income tax here in Texas. Franchise tax for qualifying organizations yes, but no state tax.

--
Keith Aric Hall

http://keitharichall.com/
http://twitter.com/keitharichall






On Jan 4, 2011, at 3:10 PM, Dean Nixon wrote:

Also, in addition to this, when filing your state taxes quarterly. List in the Total sales line This is all the money you earned as a contractor -  taxable or not (including your hourly earnings for your 1099 work, even if a 3rd party contractor,-but not w2 earnings). Then under Taxable sales line, just put the amount that is subject to tax. (that would be the total sales minus your 3rd party contract work: your hourly 1099 work). Just pay taxes on that much, but you do need to list your total sales even if its not taxable.
---------------------------------

Date: Tue, 04 Jan 2011 15:04:29 -0600

Conversation: [Refresh Austin: 5684] 1099 Independent contractor pays sales tax?
Subject: Re: [Refresh Austin: 5684] 1099 Independent contractor pays sales tax?

If you call the state comptrollers office, they will clarify everything for you.

All 1099, independent contract work as a sole proprietor. Graphic design, web design, etc. - You need  to charge state tax for, Its a taxable service.

However, Unless you are working under a W2, or as a 3rd party contractor, You do not have to charge state sales tax: example: if you are working for a large media firm who has a client, and they sub contract work out to you. Since they are ultimately billing the client, you do not need to charge sales tax. That would be double taxing. Think of it this way, whoever is finally selling the service/product to the client has to charge the state tax. If you are selling your services directly to a client then you charge $8.25% sales tax.

Also, if you are a broker for print materials, like for business cards for example, and you have it printed out of state for a client and the client pays you for it here in Texas, you need to charge sales tax for the amount of that products you sell.

You need to file quarterly or yearly depending on your total sales. The State will determine that for you.


Date: Tue, 4 Jan 2011 13:31:53 -0600

Subject: Re: [Refresh Austin: 5684] 1099 Independent contractor pays sales tax?

I would definitely check with a tax advisor on this. I don't know the current tax law but many years ago I worked on a small project for a client and that client got audited a couple of years after the project was done. The state of California then audited me because they saw I hadn't charged sales tax for the trade show signs I designed. The problem was that the client had me design the signs, get them printed, pick them up and deliver them to the trade show. The state considered the sign and the work I'd done in producing it to all be taxable (yes, sales tax) because it was a physical item that I'd physically delivered (as opposed to entirely digital delivery).

Tax law can be bizarre and confusing so definitely double-check with an accountant or other tax professional.

~ Dave

On Tue, Jan 4, 2011 at 12:57 PM, Michael Hayes <tassl...@mac.com <x-msg://1436/tassl...@mac.com> > wrote:
I am set up as a sole-proprietorship in the state and file my sales tax quarterly. If I am working for another company and paid hourly as 1099 independent contractor (iphone/ios app programming) do I have to file sales tax for that income?  Just wondering if anyone knows. I plan to check with an accountant.

--
Michael Hayes
512-300-7142

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Bill Erickson

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Jan 4, 2011, 4:41:50 PM1/4/11
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I recently spoke to a Sales & Use Tax analyst and here's what I was told:

As I focus solely on WordPress development, and specifically on modifying existing premium themes like Thesis and Genesis, I'm exempt from sales tax as described in (b)(4) here:  http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=34&pt=1&ch=3&rl=308

(b)(4) Charges to create a program or modify an existing program not sold by the person doing the modification are not taxable.

If I provided Web Design services to clients, 80% of it would be taxable. Consulting and training are exempt from sales tax as well.

Note that this isn't legal advice and you should seek the opinion of your accountant (and whatever else I'm supposed to say...).


---
Bill Erickson
Wordpress Consultant
http://www.billerickson.net
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Marina

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Jan 7, 2011, 6:40:23 PM1/7/11
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But what about (2) Sales tax is due on the sale, lease or license of a
computer program. Charges for the installation of the program are
taxable whether or not separately stated.
Aren't you licensing/installing WordPress?

(I'm mostly playing devil's advocate, some of these regulations make
very little sense!)

On Jan 4, 3:41 pm, Bill Erickson <bill.erick...@gmail.com> wrote:
> I recently spoke to a Sales & Use Tax analyst and here's what I was told:
>
> As I focus solely on WordPress development, and specifically on modifying
> existing premium themes like Thesis and Genesis, I'm exempt from sales tax
> as described in (b)(4) here:http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_...

Bill Erickson

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Jan 8, 2011, 9:37:14 AM1/8/11
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You'll need to speak with a tax attorney, as I'm not qualified to
answer. I can only share what I've been told.


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Bill Erickson
Wordpress Consultant
http://www.billerickson.net

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