Are Consulting Services Taxable in California?

Are services taxable in California? No, they are not. Professional services are exempt from sales tax in the state of California, and this includes services provided by attorneys, dentists, and plumbers. However, entities (including consumers) in California do pay taxes for the purchase or consumption of various physical products, such as cleaning supplies, clothing, and school supplies. Certain products are exempt from sales tax under California law.

Examples include most unprepared foods, food stamps, and medical supplies. Sales tax is a tax that is paid to a government body (state or local) for the sale of certain goods and services. Some states, such as Delaware, Hawaii, New Mexico, and South Dakota, tax most of the services. Others, such as Texas and Minnesota, are actively expanding the taxation of services.

Preparing California sales tax returns can be time consuming, especially for larger sellers. If your records don't show the actual cost of an individual delivery, taxes generally apply to the full charge for delivering a taxable sale. Businesses that sell services in multiple states need to know where those services are subject to sales tax. In this case, the product is secondary to the service and taxation is based on the real object of the transaction: the service provided. It's quite common for people to become independent consultants to get a decent discount on a product they like.

As a business owner that sells taxable goods or services, you act as an agent of the state of California by collecting taxes from buyers and transferring them to the appropriate tax authority. Knowing what rate to charge and what sales tax rules apply is especially difficult for businesses that sell goods or services in multiple states. In the growing sharing economy, platforms such as Bonsai are an excellent resource to help you manage your career as an independent consultant. In some states, businesses must collect sales tax on the services provided in conjunction with the sale of physical goods. The first is any service that is so linked to the sale of a property that it is considered part of that sale and, therefore, is inseparable from the tax measure.

Keep in mind that even if you pay these taxes on consulting fees every quarter, you must file your annual tax return by April 15. For more information on your company's specific tax liability in each state, consult the state Revenue Departments for additional information. It is determined by applying the use tax rate (equal to the sales tax rate) to the purchase price of qualifying goods and services.

Dylan Nemecek
Dylan Nemecek

Typical social media ninja. Professional pop culture nerd. Unapologetic bacon advocate. Proud pop culture guru. Incurable social media nerd.

Leave Reply

Your email address will not be published. Required fields are marked *