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Collecting Sales Tax

  • 1.  Collecting Sales Tax

    Posted 15 days ago
    In my state, Nebraska, we have to collect sales tax on our services. Are there other states that do the same thing? I ask because I'm trying to figure out how to report the sales tax I collect when I take an electronic payment like Venmo or PayPal. Maybe others here have experience with that and I'm having trouble finding that information online.

    I mostly take checks or cash so that's not a problem, but with the electronic payments I'm not sure what to do with the fee they collect. For instance: If my tuning fee is $100 I collect $6.76 in sales tax (7.25% here), that's easy enough. But, if my tuning fee is $100 and the fee from the credit company is 1.9%, they get $1.86 and the actual fee I get is $98.14. Is it okay to calculate the sales tax based on $98.14? Hope this is making sense.

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    "That Tuning Guy"
    Scott Kerns
    www.thattuningguy.com
    PianoMeter, TuneLab & OnlyPure user
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  • 2.  RE: Collecting Sales Tax

    Registered Piano Technician
    Posted 15 days ago
    Scott

    The fee for your Pay-Pal is the same as all the other expenses related to the business. So you should not treat it as anything different than the gas in your car to get to the customer. The cost of the the credit card fee is an expense that comes off the top, just like your telephone bill, car expenses, etc.  

    Wim





  • 3.  RE: Collecting Sales Tax

    Member
    Posted 15 days ago
    Your fee is your fee. Sales tax is added onto that. The credit processing fee is a percentage of the total, so you're loosing a little extra percentage due to this service charge. If anything, you should charge 5% more for the credit transactions' portion of the sales tax.

    Otherwise raise your price and have it include sales tax.

    Check out my website for fees...

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    Regards,

    Jon Page
    mailto:jonpage@comcast.net
    http://www.pianocapecod.com
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  • 4.  RE: Collecting Sales Tax

    Registered Piano Technician
    Posted 15 days ago

    Technically no. If your fee is $100 and the sales tax you bill for is $7.25, when you file your sales tax report with the state you owe them $7.25 no matter what you actually net because of credit care fees.  As far as bookkeeping you'll have to track sales tax charged.

    Your gross income is the amount billed (and paid) with credit card charges as a business expense.  If you add a percentage for credit card fees you will have to collect sales tax on the total amount billed but double check that with an accountant  in case there's a work around. 

    California does not charge sales tax on labor (so far) and I don't accept credit cards so it's not really an issue for me. But if I bill for sales tax on parts I owe the sales tax billed for regardless of what I collect due to CC fees. I don't take PayPal because the fee applications seem somewhat random. Venmo does not charge a fee if you aren't asking them to provide other services and aren't registered then as a business.  Zelle also doesn't charge a fee. Checks and cash are my preferred payment options. 

    Runnit by an accountant or call the state board of equalization.  



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    David Love RPT
    www.davidlovepianos.com
    davidlovepianos@comcast.net
    415 407 8320
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  • 5.  RE: Collecting Sales Tax

    Registered Piano Technician
    Posted 15 days ago
      |   view attached
    > I mostly take checks or cash so that's not a problem, but with the electronic payments I'm not sure what to do with the fee they collect.

    "They" are responsible for the taxes on the fees they collect since that is "their" income. You are only responsible for the taxes on the money you collect. If you bill $100 and they take $4, your actual taxable gross income is only $96. That $4 loss you then get to write off as a business expense.

    If you would like to use PayPal and have the customer cover the fees, (which, since it's not a credit card is legal), attached to this post is a handy little Excel PayPal reverse fee calculator I developed. You plug in what you want to take home in the "To get" cell and the "Amount billed" cell will calculate how much you need to charge the customer in order for you to actually take home that amount after PayPal fees. I've never had a customer be anything but sympathetic and agree to cover those fees. The math is accurate as of PayPal fee schedules checked today, 9/11/21.

    Interesting tidbit on credit card fees. Legally you are not allowed to increase your charges to compensate for charges imposed on you for taking, specifically, a credit card. The way the law is written, however, makes it a case of pure semantics. Using gasoline as an example, the gas station can't say the price is more if you pay by credit card. However, it CAN say the price is less if you pay with cash. In other words, "regular price" vs "cash price". Semantics, but true. 


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    Geoff Sykes, RPT
    Los Angeles CA
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    Attachment(s)

    xlsx
    ReverseFeeCalculator.xlsx   10 KB 1 version


  • 6.  RE: Collecting Sales Tax

    Posted 14 days ago
    Thanks for help everybody! So, if I'm understanding correctly, it's okay to give a discount for cash or a check, but not charge extra for a credit card, PayPal, Venmo, etc... I am also checking with my accountant but you all have been very helpful. I'm looking to the future and thinking about taking more electronic payments so I'd like to figure this out.

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    "That Tuning Guy"
    Scott Kerns
    www.thattuningguy.com
    PianoMeter, TuneLab & OnlyPure user
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  • 7.  RE: Collecting Sales Tax

    Registered Piano Technician
    Posted 14 days ago
    Scott,
    First, I believe David Love is correct. If you collect a certain amount of sales tax money at the time of the transaction you must pay that amount to the state. Conversely, I believe your understanding is incorrect about not charging extra for credit card transactions.  I believe a few years ago, congress passed a law that allowed merchants to charge extra for credit card transactions.
    Roger

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    Roger Gable
    Gable Piano
    Everett WA
    425-252-5000
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  • 8.  RE: Collecting Sales Tax

    Posted 14 days ago
    So as a slight diversion but still  a sales tax  conundrum, relating to sales  of 'restored Steinway grands' and to 'save' the potential buyer $$$ of sales tax , A restored Steinway with  for example a projected price tag of $30k could be 'sold' to a serious buyer in the final stages of negotiations for $10k plus sales tax plus $20k  for the labor of the full restoration and no sales tax.
    www.snowpianos.com

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    Martin Snow
    South Burlington VT
    617-543-1030
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  • 9.  RE: Collecting Sales Tax

    Registered Piano Technician
    Posted 14 days ago
    Better check with a tax accountant. I know of one state where there's no tax on labor, but if you add a part, part and labor are both taxed.

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    Larry Messerly, RPT
    Bringing Harmony to Homes
    www.lacrossepianotuning.com
    ljmesserly@gmail.com
    928-899-7292
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  • 10.  RE: Collecting Sales Tax

    Registered Piano Technician
    Posted 14 days ago
    State laws vary about whether or not you can charge a "Convenience Fee" for taking payment by credit card.

    However, every credit card agreement you entered into has a clause about not charging extra. If the catch you, they could cancel your ability to take cards. I don't thing they have many people looking for piano tuners charging extra.

    I decided it was ok for me to charge a convenience fee when I had to pay a convenience fee to the State of Washington for using a credit card in order to give them the sales taxes I had collected.

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    David Stocker, RPT
    PNWRVP
    Olympia WA
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  • 11.  RE: Collecting Sales Tax

    Posted 12 days ago
    In New Mexico you owe the tax on the full amount charged regardless of expenses or credit card fees

    They just changed the Gross Receipt Tax to being based on the location of the service.
    There are 21 different tax rates for my county alone.
    So you have to look up the tax rate of the address of the piano before you get there so you can charge them the right amount of tax for their address.

    I think they changed to a location based tax because of Amazon not paying as much as the local stores.
    We are one of the poorest states and I guess they really need the money so while I gripe about it I do understand.
    I have a few clients who have outhouses. And one this week had an outhouse and didn't have electricity.
    But having to pay tax on services is a pain.

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    Gannon Rhinehart
    Santa Fe NM
    505-692-8385
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  • 12.  RE: Collecting Sales Tax

    Registered Piano Technician
    Posted 14 days ago
    I'd like to point out here that everything varies by state. Some states require you to charge tax on labor; others don't. Some allow you to charge extra for credit card / discount for cash; others don't. It varies based on your state. A simple internet search should allow you to find the information related to your state fairly easily. If you need to you can always consult with an attorney, though that can get very expensive quickly.

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    Benjamin Sanchez, RPT
    Piano Technician / Artisan
    (256) 947-9999
    www.professional-piano-services.com
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