California Sales Tax for Interior Designers - Professional Services Fees

Many designers and decorators charge a fee for professional services.

Typical services include consulting, design, layout, selection of color schemes, coordinating furniture and fabrics, supervising installations, etc.

The fee may be a negotiated fixed amount or a percentage of the selling price of furnishings, labor, and installation charges.

Tax does not apply to charges for professional services that are not directly related to the sale of merchandise. Be sure to list those charges separately on your invoice.

However, tax does apply to your charges for fees that are directly related to acquiring and providing furnishings and other merchandise you sell to a client.

For example, when you charge fees to accompany a client to a showroom to select furniture the client is buying from you, those fees are taxable.

Normally, an interior decorator’s selling price of furnishings should be the retail price — that is, the cost to the decorator plus a reasonable markup.

However, decorators sometimes invoice for sofas, tables, chairs, carpets, or other goods at their cost and then add a separately stated fee that includes their overhead and profit.

If you bill in this manner, your total fee will be considered taxable unless you can clearly establish that a portion of the fee is for nontaxable professional services.

A client contacts you and expresses interest in renovating his office. You show him different carpet, wallpaper, fabric, and paint samples. You also spend a substantial amount of time developing alternative color schemes, colors, and looks. Tax would not apply to your fee for these services because you have not yet sold any merchandise to your client.

Now, after reviewing your proposals, the client makes his choice and places an order with you for merchandise. To complete the job, you spend time measuring for draperies, shopping for furniture, and accompanying your client to showrooms. Your charges for those services are taxable because they are a part of your taxable sale of merchandise.

 

Source: California Department of Tax & Fee Administration (CDTFA)

Course: https://salestaxsolutions2000.com/california-sales-tax-interior-designers


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