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.

0 Votes
Jan 7, 2013 by Alejandro
Category: Tax Planning

Linard Williams
0 Votes
Linard Williams
Jan 7, 2013  
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.
Kurt E Giebel
0 Votes
Advisor: Kurt E Giebel, Accounting
Jan 7, 2013  
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.
Marilyn K Ratliff, EA
0 Votes
Advisor: Marilyn K Ratliff, EA, Tax Planning
Jan 7, 2013  
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.