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[HELP NEEDED] - How sales tax should be calculated in the US & Canada ??? The Night Blogger 03-04-2007
Posted by The Night Blogger on March 4, 2007, 8:50 pm
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 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?

3. 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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Posted by Stuart A. Bronstein on March 6, 2007, 5:06 am
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> 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

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.

> 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?)

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.

> 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?

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

> 3. Does any other kind of tax should appears on a sales
> invoice ? governmental? federal? provincial (for Canada)??

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

> Well I just hope calculating sales tax for North America
> (USA & Canada) is not a too complex process

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

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Mark X. Rigotti, CPA on March 6, 2007, 5:06 am
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> 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?
>
> 3. 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


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

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by BeanTownSteve on March 7, 2007, 4:29 am
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> 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

<snip>

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.
http://www.boe.ca.gov/sutax/sutprograms.htm

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
(http://www.vertexinc.com/Products/ 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!

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Katie on March 7, 2007, 11:45 pm
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> 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?
>
> 3. 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

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

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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