Starting a web biz...but what do I charge in tax if customer is out of state? (collection, sales)

[doss1]

Hi all,
I'm thinking of starting my web design business. I am based in St. Louis at the moment, but have some potential customers in Texas. My question is: When sending an invoice to the Texas customers, what do I charge them for sales tax? Would it be the STL rate or the Texas rate? I'm basically providing a digital service, so there is no shipment of physical goods or anything like that. Just web hosting (that server is located in another state) and design services.

Thanks!

[doodlemagic]

i thought you only have to charge tax within your own state people out of state i was under the impresion and are required to file out of state purchases

[MrRational]

Originally Posted by doodlemagic

i thought you only have to charge tax within your own state
people out of state... are required to file out of state purchases

Unless you have a brick and mortar presence there.
Enjoy it while it lasts.

Soon the states will organize their 20 levels of sales taxation to one uniform statewide rate
and by that remove the last futile argument to not have sellers charge for and collect taxes.

[Free-R]

Originally Posted by doss1

Hi all,
I'm thinking of starting my web design business. I am based in St. Louis at the moment, but have some potential customers in Texas. My question is: When sending an invoice to the Texas customers, what do I charge them for sales tax? Would it be the STL rate or the Texas rate? I'm basically providing a digital service, so there is no shipment of physical goods or anything like that. Just web hosting (that server is located in another state) and design services.

Thanks!

Out-of-state customers are subject to their state's use tax, not your state's sales tax, on any tangible goods. A digital service in a non-tangible good and is generally** not subject to sales/use tax.

You cannot charge someone sales tax unless you have a sales tax license--needed to sell tangible goods or provide taxable services.

No person responsible for the collection of taxes under section 144.080 shall make sales at retail unless such person is the holder of a valid retail sales license.

Link: Section 144-083 Retail sales license required for all c

But you aren't selling tangible goods. Here's a quote from the Missouri Department of Revenue's Web site:

If you do not sell taxable tangible personal property at retail or provide taxable services in Missouri, you do not need to register for sales/use tax but you will need to follow step two below [Link]: Missouri State Vendor Sales/Use Tax Compliance.

What Missouri considers a taxable service might be found here in Missouri's sales/use tax legislation--somewhere--or with a phone call to your accountant. It sounds like you'd be OK, but if you're going to be an officially registered business, keep in mind that there's a host of other compliance matters and regulation, such as zoning laws and reporting requirements.


**More reading: Digital Goods Taxation: The Legal Framework | STOP THE DOWNLOAD TAX! | Unfair Download Taxes