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Alejandro 1/7/2013 08:36
I am doing freelancing for two different companies and I have several questions. I deliver for them digital files, such as research, PowerPoints or excel files. Do I need to add sales tax to the invoices? When and how do I file taxes? I have never worked before in California and just started working in October last year.
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4 Answers
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By: Linard Williams on 1/7/2013 18:21 Comment
You do not need to charge you client sales tax, it does not look like your a retailer. You are an online business that is providing a service, however, your fiscal stationary building is viewed as you are working in another state, so you will not be required to charge sales tax to your California client.

Your company will be responsible for filing a tax return for the sales produced in California at the end of the year. Your company will need to file with The Franchise Tax Board.

Now, depending if your a sole proprietorship, your company will need to file a Schedule C, but if you have a corporation you will need to file other forms with the schedule K, depending on your structure.

I hope this information helps.
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By: Kurt E Giebel on 1/7/2013 15:54 Comment
Your professional services are not taxable in California for sales taxes but your income is subject to income tax for both California and federal income taxes. You will report your income to both governmental bodies at the end of every tax year and you will deduct any expenses related to those services to arrive at a pretax income amount upon which you will be subject to income taxes.
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By: Marilyn K Ratliff, EA on 1/7/2013 15:23 Comment
Hello Alejandro

This question is very complicated and the best way to get an answer is to contact the Board of Equalization. My website has the links for the BOE so go to BTIProfessional.com.

Ask them the question and if for some reason, there is a problem, you can reply that you got the info from them and they should stand behind their answer. The answer below is for the income tax not the sales tax. CA likes to tax everything and there are a lot of special rules for sales tax.

In addition to the federal tax you will need to file a CA return for the money earned in CA.
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By: Lynette Royster on 1/7/2013 15:15 Comment
If you are not a retailer, you do not need to add local sales tax to your invoices. During the year, you should be making quarterly tax payments to the state and federal government based on the net income that you have received. In January, both companies will send you a form 1099 which will include all the income that you have received for the year. Each company is required to send you a 1099 if you received more than $600 in income for the year.

You report your 1099 earnings as your income for the year by filing Schedule C on your 1040. If the business activity was the same for both companies, you only need to file one Schedule C, if the activities were not the same, then you need to file two separate schedule Cs.
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