Discover the Best Sale Tax Invoice Format for Support

Sale tax invoice format for Support

hi my name is Diane yetter and I'm the founder of the sales tax Institute and today I want to talk to you about the importance and the impact of how you represent your invoice in order to minimize taxes particularly when you are selling something that is taxable along with some related services and so to do that we're going to take a look at a transaction and we have two versions of the same invoice one where we separately state the components and one where we do not and let's take a look at what happens when we do that to the tax amounts so on this first invoice which is for electronically delivered software to Indiana and electronically delivered software happens to be taxable in Indiana the invoice shows the software license along with a separate charge of $50,000 for the installation and a separate charge of $25,000 for the training and when we go to determine the tax on this because we have separately stated all three components we are able to tax only the hundred thousand dollars of the software license and you'll see down here we've got tax of just seven thousand dollars by seperately stating the installation and the training were able to determine the tax ability of those components independently of the software license however let's look at another invoice that is for the exact same transaction however in this case we offer the customer a bundled software license agreement which includes the installation and the training and so you can see here that we have a total price of a hundred and seventy-five thousand dollars and that results in tax of twelve thousand two hundred and fifty dollars so you can see that by separating out these non-taxable services on an invoice and you should also make sure you do this in your contract you can save your customer a significant amount of money and so that is one of the things that we want to make sure that you do so I hope you found this helpful and I hope you will take this into consideration as you setup transactions and invoicing and contracts if you are in the business of selling goods so whether it's software as we showed in this example or any other type of tangible property but you also have other services like installation or training sometimes delivery maintenance contracts different types of services if you separately state them you have the ability to determine the taxability of those independently again I'm Diane Yetta with the sales tax Institute thanks for listening and for more information about us please visit sales tax institute calm thanks and have a good day