Paying Taxes on CAD Drawings?

[StruKturdg]

I was told that I have to pay taxes on CAD drawings that my firm produces. Does that sound right?

 

[TheTick]

Sure. Send the checks to my home office.

 

[zdas04]

Does your state have a sales tax? If so then you probably are required to collect sales tax on the invoices you send to your clients within your state (at least). Some states don't require tax on work done for clients outside the state, but that is a state-by-state thing.

It can get ugly if you "have a presence" in several states. In that case you have to collect the local tax in the states that you have an office on the work done for clients in that state. In the case of multiple offices in multiple states/counties, you'd better already have an accountant and you shouldn't be asking a bunch of engineers.

Once you collect the sales tax, you then have to remit it to the state monthly or someone goes to jail. States are really cranky about that.

Another thing they are cranky about is they want their tax whether you collected it or not. If you fail to collect it, you are still liable for it. It can get complex to determine if the $100 check you got is actually a taxable $100 or $93.45 plus $6.55 tax. In the first case you owe the state $7.00 (if the tax is 7% like it is here) in the second you owe $6.55. You can decide how you want to do it, but then you must do it consistently from then on.

I just finished my 2007 taxes and found that the 1099's that I got from companies that I charged sales tax had included the tax amount in the total reported to the IRS. This just means that you have to make sure that you claim the sales tax submitted to the state as a legitimate business expense. It felt really odd to deduct a passthru expense, but that is the way it works.



David Simpson, PE
MuleShoe Engineering

http://www.muleshoe-eng.com

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips Fora.

The harder I work, the luckier I seem

 

[msquared48]

In Washington State, there is no sales tax on professional services, to include prints.

If you do have to pay sales tax on your CADD drawings, then you would also have to do the same on your calculation sets.

The way to get around this is to not charge for the calcs or drawings, but have a set number of sets of drawings and calculations paid for within the bid price. Anything beyond this can be sent out of house to print electronically, and the owner can pay the bill there.

Mike McCann
MMC Engineering

 

[TheTick]

StruKturdg: Where did this bit of information come from? Also, what country?

 

[MiketheEngineer]

In Missouri - there is no sales tax on services. All states have their own rules. But in actuality I suppose I should charge tax on the paper used - BUT I already paid tax on it!! Isn't that like taxation w/o representation. Didn't somebody famous say that already?? Or didn't we have a war about that??

So what happens if you e-mail it and they print it out on their own paper????

 

[MacGyverS2000]

It's on the license plates for D.C.


Dan - Owner

http://www.Hi-TecDesigns.com

 

[DonPhillips]

In Ohio, and when I prepare my state and local taxes, the cost for providing prints is subtracted from the "income" for those reimburseables. This net income is then taxable. No sales taxes is due in Ohio for professional services and the instruments of service.

If I charge for CAD drawings, this is tyoically for the labor to prepare the files and perhaps some consumables like a CD and packaging, plus the cost of postage - all instruments of service, and only the net income is taxes. Again, no sales tax.



Don Phillips

http://worthingtonengineering.com

 

[zdas04]

What you can see from the range of responses, this is not a question that should have been put to engineers--talk to your accountant and/or attorney.

David

 

[StruKturdg]

I agree with zdas04, I am in Texas. I will contact an accountant. Thank yall for the responses.