If you are undergoing a sales tax audit in Washington D.C., at the very least, you are just looking at a 6% sales tax without the worry of local and county additional rates. Our firm focuses on taxable versus non-taxable transactions. This helps the auditor understand your transactions to help determine what is or is not taxable.
What’s Usually Taxable
Tangible products are taxable in Washington D.C., with a few exceptions. These exceptions include:
- Certain groceries
- Certain equipment sold to businesses
Sales Tax on Services
Sales tax is applied at the rate of 5.75% on charges for providing information services.
If you are undergoing an audit, then your invoices must clearly state what kind of services you offer. If you do not itemize your invoice, then there is a good chance that the auditor will conclude that the services are taxable.
Examples of Non-Taxable Services
Services to individuals and businesses things like:
- Haircuts
- Medical bills
- Consultant fees
These are not considered “personal property” and most services are not subject to sales tax.
Note: Residential house cleaning services are taxable in D.C. Cleaning services must collect and send sales taxes to the Office of Tax and Revenue.
Frequently Asked Questions
What is the sales tax rate in Washington D.C.?
The base sales tax rate in Washington D.C. is 6%, with no additional county or local taxes. However, certain services may be taxed at a different rate, such as 5.75% for information services.
Are all services taxable in Washington D.C.?
No, most services are not taxable. Common non-taxable services include haircuts, medical services, and consultant fees. However, some services like residential cleaning are subject to sales tax.
How can I ensure my services are not taxed during an audit?
Clearly itemize your invoices to describe the specific nature of your services. This documentation helps auditors determine whether your services fall under non-taxable categories.
What types of tangible products are exempt from sales tax?
Some tangible products, such as certain groceries and business-related equipment, may be exempt from sales tax. These exceptions are narrowly defined and subject to interpretation during an audit.
Is sales tax applied to digital or information-based services?
Yes, Washington D.C. imposes a 5.75% sales tax on information services. It’s important to differentiate these from non-taxable consulting services when preparing invoices or responding to an audit.