Currently I live in Oklahoma and have just started doing some software development for a few local businesses. Already registered a single proprietor LLC and obtained my EIN. I have not engaged a tax accountant yet and I just recognized my first revenue. Do I need to collect sales tax on the consulting services? No tangible products, besides code, is being delivered... What about other taxes...?
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1No such thing as a "single proprietor LLC" -- you're either a single proprietor OR an LLC (possibly single member LLC) they are different in the eyes of the law (taxes). Have you asked an Oklahoma accountant about this? Done any research on sales tax in Oklahoma? You might start here: taxjar.com/states/oklahoma-sales-tax-online– ScottAug 11, 2016 at 2:50
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You need to confirm for OK, but most of the time services do not require collection/payment of sales tax. I highly recommend you retain an accountant, at least for your annual filings. It's far easier to stay on top of things rather than play catch up at the end of the year.– Chris ThompsonAug 17, 2016 at 17:18
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Oh, there are plenty of US states that charge sales tax on service. You may also owe an occupational "privilege" tax to your city or county. This is why CPA's exist. You need to ask one about your specific jurisdiction.– Wesley LongAug 17, 2016 at 21:15
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@Scott actually the IRS classifies single-member LLC that is disregarded as a individual/sole proprietor.– KrisOct 19, 2016 at 9:32
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@Kris I own and operate a single-member LLC.. so yeah... sure.. if you say so.– ScottOct 19, 2016 at 9:42
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2 Answers
You likely will not need to pay or collect sales tax for services rendered. That said, you should check with an accountant. Other taxes/filings to watch out for (this is by no means exhaustive, as I said in my comment, I highly recommend checking with a local accountant):
- City/County Business License
- Annual Report
- Payroll tax (depending on how you pay yourself)
- Franchise & Excise tax (if applicable, this depends on the state)
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I highly concur with the suggestion to check with an accountant. While my accountant does my company's annual tax form, the primary value I see in the relationship is getting advice on questions like all of them in this stream as they apply to me specifically. I'll go farther to suggest having a relationship with a lawyer so you can get legal advice when needed (hopefully not often). Be careful with your form of business, too. If a mistake in business can make you lose your kid's college fund or your retirement fund, you need a different business form (maybe an S-Corp or a Corp). Feb 21, 2017 at 4:03
You generally do no add sales tax to products that you buy ( already taxed ). This is classified by the IRS as a pass-through tax.
Similarly you do not tax your own labor. You do however charge your client for taxes paid if you supplied them material that you paid taxes on.
If you engage in the making of raw materials that is sold then that would be appropriate for a sales tax.
Read on up on the IRS pages. It's all there, for free.
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"It's all there, for free." I'm like you: I like reading everything I can. Often I know there are subtleties I don't know; I need an accountant adviser and a lawyer adviser, they can be indispensable if something crazy happens to me. Feb 21, 2017 at 4:16