Taxes will vary by jurisdiction.

Washington, for example, imposes a duty to collect sales tax on services.

New Mexico has a gross-receipts tax.

California has a sales tax on goods, but not services.

Some places require the collection of sales tax on some services (construction, for example) but not others.

You'll also need to figure out where the nexus of the transaction is if the client is out of state--are you rendering services in your home state or their state?

So, you'll need someone who knows what they're doing in your jurisdiction.

It's not that the OP is getting an hourly rate, he is asking when he gets paid does he have to pay state sales and income tax.

It does depend on the state, and how the deal is structured.

What state is he from and what state the service is rendered.

Again you need a CPA or tax attorney to give you proper advice.

A group of states sales tax business services and a different group tax personal services.

You can bet a lawyers office is going to file a 1099 if it over the minimum amount to file one, and it leaves a trail.

Sounds like your late in the discussion... one suggestion. Make sure your engagement letter says you get $x per hour AFTER any sales, use, VAT, or similar tax. (Google to find specific/more precise language.) That protects against law changes that might happen in the future. Who knows how long the litigation might go on.

You need legal and taxation advice in your jurisdiction. These are state-specific questions. Some corporate form may well be advisable, but which one does what you need can vary from state to state. Obviously, taxes to be collected varies from state to state, too, and even local entities may collect some tax.

quote:

Originally posted by smlsig:
Before we get too deep in the weeds on wether to charge tax, if it is applicable, I have another question...

You agreed on an hourly rate. Why would the attorneys not assume that any taxes are not included in that agreed to fee?

That’s what I was thinking. I figured taxes would be all on me.

I’ll do some digging with some local experts. I freaking HATE how complicated taxes can be.

One thing to consider is that besides a basic Gross Receipts sales tax assessed by the state of New Mexico each county, municipality and or unit of local government can and most likely will add their own percentage.

If for example take two counties, Torrance and Bernalillo. Torrance is presently 6.76% while Bernalillo is 7%. But Albuquerque city which is in Bernalillo county is 7.88% and Estancia which is in Torrance county is 8.19%.

So, depending on where the work is conducted different tax rates and filings may be necessary.

Good luck!