[HELP NEEDED] - How sales tax should be calculated in the US & Canada ???

I'm writting a time tracking software, which will enable people to record time spent on a given task and then generate a sales invoice based on the billable hours. I'm aware that there's a different sales %tax rate% for each US state, but I wonder how this should apperas on a sales invoice My questions

  1. If I'm a Californian based company which issue a sales invoice to a Massachussets based company, should the sales tax be calculated for the invoice? If sales tax should appears which rate should I put on the sales line (The MA or CA rate?)
2. Imagine I've got a sales invoice which contains those 3

lines: (The quantity are hours of work, and the description are services)

___________________________________________________________

Qty Description Unit Price Amount Amount inc Tax

8 Programming 100 800 ??? 1 Support Call 100 100 ??? 1 Design Spec 100 100 ??? ___________________________________________________________ TOTAL 1000 2.a: Should I add the tax rate on each line to work out the Amount Inc TAX per sales invoice line or should I only add it to the $1000 TOTAL? 2.b: Could you take my example and calculate the tax on this simple invoice?
  1. Does any other kind of tax should appears on a sales invoice ? governmental? federal? provincial (for Canada)?? Well I just hope calculating sales tax for North America (USA & Canada) is not a too complex process Thank you in advance for your help

The Night Blogger

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Reply to
The Night Blogger
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First of all, most (but not all) states only impose sales tax on goods, not services. So if it's services you're talking about, it's much less of a problem.

Should, yes. Required, not necessarily. A company based in one state is only required to collect sales tax on sales in another state of the company has as "nexis" with the other state. That is, do they have sales locations there? Do they store goods there? Do they have sales or administative employees there? If not, they are not required to collect the tax.

Assuming it's all taxable, to the total. If only part is taxable, have a taxable subtotal, and calculate the tax on it.

Depends on the state but not that I'm aware of.

Look around for programs that already do that. Because the tax is different in each state (and in fact sometimes in each county), it's probably fairly complex. Stu

Reply to
Stuart A. Bronstein

Sir/Madam:

I believe that you are biting off more than you can chew.

NY has a sales tax and a county sales tax. Not to mention NYC's sales tax. Each county is different GA has again a state and county sales tax. Again each county is different. MI has a state sales tax and a sales tax on hotel accomadations and restraunts. Our sales tax does not tax wholesale sales nor food (except for immediate consumption and then except vending machine sales) or Prescription drugs. It appears that we will soon have a service tax on haircuts, tax returns, medical services, etc. that will also include insurance premiums paid. This service tax would be

2% vs the 6% sales tax on other sales. I think you get my point with these few examples.

Rgs,

Mark Rigotti, CPA

Reply to
Mark X. Rigotti, CPA

"The Night Blogger" wrote:

If there's ANYTHING I learned about sales & use taxes while implementing enterprise systems, it is that it's complex, confusing and filled with a myriad of jurisdictional issues. It's far more than the state. Counties, cities, and in some cases local tax jurisdictions have a part in this. Some locales apply taxes to labor, some do not, some only apply it to specific labor TYPES. It is in a simple word, a MESS! As a general rule, "presence" in the jurisdiction means you must collect the taxes. What "presence" means can also vary by jurisdiction. Typically it's some sort of retail/wholesale location but it is possible that even having an agent in the locale means your firm qualifies. The OTHER thing I learned about sales taxes is to ensure, in fact above and beyond ensure, you're in compliance. You, or your accounting folks, need to contact the State Board of Equalization (in California) and begin there.

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Depending on the size of the business, I'd engage a consultant familiar in the area. There are also vendors that can assist with solutions, although I know there's others the only one with which I'm familiar is Vertex
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sales_tax.asp) I have personally seen what happens when the state auditors get into this with a business and verifying compliance. You might think that tending to all of this now s too much time but believe me, it dosen't even come close to the time you'll spend with the auditors if they get engaged!

Reply to
BeanTownSteve

Well, the good news is that the services you describe are not subject to sales or use tax in either California or Massachusetts, unless the services are provided in connection with a transaction in which the primary purpose, or true object, is the sale of tangible personal property (e.g., computer hardware). So you are probably home free in those states. As others have said, there may be issues in other states.

Katie in San Diego

Reply to
Katie

Build an open interface using web services. In addtions to Vertex, you can look at: Sabrix -

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Taxware -
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Avalara -
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Since you are looking Canada, you should go ahead and think global. Canada has both VAT (Federal and Quebec) and sales tax (other provinces). Most of these vendors can now handle sales tax and VAT globally. The key is to build an invoice structure with relevant attributes. Stu is dead on with his analysis.

Reply to
Goat Rodeo

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