Sales Tax on Services

Not sure if this helps, but I'm an engineer and I don't add sales tax to my hourly rate.

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At any point are you selling them any electronic parts or is it always specifically IT services with nothing physical being sold?

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This is the key. If it can be called labor you don't charge sales tax for it. Your time is labor.

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sales tax has already been paid once for that item.

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But did you mark that item up?

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I figured sales tax has already been paid once for that item.

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Yes and no. The logic makes sense, but the state can be ridiculous with the way they handle sales tax.

Ideally you personally wouldn't pay sales tax on anything you're buying that you will then "resale" to the customer (hence the "resale certificate" that exempts you from paying sales tax). However you don't seem to do enough business reselling anything to warrant going through all the hassle to set yourself up for one.

That's the funny thing about sales tax, more than half of the rules are nothing but grey areas. You could call the LA Dept of Revenue 5 different times, talk to 5 different people and you would get 5 different answers.

In a lot of cases it all comes down to how your auditor interprets the rules in the event they decide to look into your financials.

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However you don't seem to do enough business reselling anything

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That is right, I pretty much resell about 1 or 2 "things" a month. The rest is support/maintenance/etc. I make the clients buy anything they need on their own like servers, computers, network equipment, etc...

Yours is a complex situation. Strict compliance with the law imposes a serious administrative burden determining exactly which sales and services should be subject to sales tax, collecting and remitting the appropriate amount of tax. Most businesses resort to substantial compliance, a good faith effort to comply, for purposes of efficiency. Just remember that it is better to err on the side of caution if you anticipate any problems with your state and/or local taxing authorities.

I would advise you to seek guidance from an attorney or accountant experienced in sales tax matters. You should review the typical transactions you engage in to isolate items that are taxable and how you price those items to your customers.

I'd seriously consider consulting with another CPA or attorney. The following document should cause you to question your CPA's advice. LINK

"The following document should cause you to question your CPA's advice"

I am not a software developer. I do not buy and sell software. So that link does not apply. I am a consultant only that very rarely has to purchase a part and get refunded for it.

The fact that all these IT consulting companies have to have a degree in the tax code and a law degree proves it is a bunch of BS. If they can't make it clear, then frick em. I will go with the fact I am number 113 on the sales tax code meaning I am exempt.