Legal for Freelancers

[dean123]

Dear all,
I am very excited because this is the first time I actually give my point of view in a Forum. I was talking to a couple of friends a few days ago and both of them are freelance web developers. They were pretty scared when we talked about their taxation fees and that dirty talk. One of them didn’t even know that he should pay taxes even though he was a freelancer. The truth is, you get a lot of that tax fee returned once they know you are a freelancer but you definitely have to pay them complete, otherwise you will just get in trouble. I want to help developers with this because not everyone knows the tax laws and fees applied to specific activities. Feel free to post your questions!

 

[InLikeALion]

Um, I don't think you get it back. I had to pay $1400 (lets be specific, since this is site has international participants) this past April, and I didn't get anything back.

 

[CanadaRAM]

The post is essentially meaningless without specifics of where you are located and which taxes you are talking about: Income tax, sales tax, GST, VAT, city or state taxes. The laws will be different in each jurisdiction.

For example in BC, Canada
If you have billings higher than a certain amount, then you have to register for GST (Federal tax) and PST (Provincial tax). Then, you collect these taxes from the client in addition to your billing.

However, different types of work have different tax application. If you do intangible or intellectual work -- web design, graphic design, writing, training, consulting -- then it is exempt from PST and only GST has to be charged. If you deliver goods in a physical form, such as printed materials, posters, software on CD, then it does attract PST.

The GST (Goods and services tax) in Canada is a value added tax, which means you total up all the GST you spend on materials and tools needed to do your job, and deduct that from the GST you collected from clients, and remit the net balance to the government. In some circumstances, this means that you get a refund from the government.

Sales outside the country are not taxed at all. Sales within Canada to other provinces are taxed at the GST rate, except in NF, NS and NB who have harmonized their Provincial tax with GST, and so the HST rate is the combination.

But don't listen to me.
Consult with an accounting professional in your area to get the real information on your obligations around tax.