Are sales tax rates different for hardware, software and services?
Answer:
That is such a nasty question! I deal with it way too much and I hate it with a passion. Depending on the state, the applicable tax can differ between all three. I can help you narrow it down if you narrow it down a little first.
Added:
California immediately comes to mind. Service contracts are only 50% taxable. Prior to 2003, they were nontaxable, but the state later decided that there was a chance that tangible personal property would change hands in the form of CDs or something with patches, updates, manuals, etc. and the state wanted their cut. So they taxed the service contracts at 50% if the contract is optional. Mandatory are taxable. In the event that the service contract runs and TPP never changed hands, then the purchaser could request a refund of the sales tax from the vendor if it is still within the statute of limitations (3 years). if they remember.
FYI, both software and the contract would be nontaxable if it's all done electronically up to and until TPP gets involved.
I hope that sort of answers your question. I just happen to have WAY too much experience with that one where CA is concerned. As for other states, you would have to investigate them individually as the need arises because some do not tax service contracts of any kind, some do if they are separately stated on the invoice.
BTW, hardware sales would be subject to regular old sales tax.
Sales tax rates depends on the state and in some cases the county within that state. Some states do not charge sales tax on food but I have never heard any such exemption for hardware, software or services.
Sales tax would be the same for hardware and software, but there are no taxes on services, unless it is corporated in a job with parts, etc. and not broken down as services. Take for instance, a mechanic's hourly charge. You'll notice on invoices the items are listed separate from 'labor'.
Sales tax rates vary widely within states. For example, in New York, the tax rates vary between 7% and 9.5%. In Illinois, they vary between 6.25% and 10.75%.
This doesn't take into consideration how each state taxes different things. Some states were not consistent on taxing the same products. New York used to tax marshmellows differently. That has since been corrected.
For anyone to give you a good answer, you would have to list the state(s) that you plan on selling or purchasing these services.
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