That’s a very good question. And I think this is the first time I’m delving into this topic. So this should be fun. Maybe moreso for me than for you, but hopefully for both of us.
As a side hustler, maybe all your fees and services are cash based. There is no tax to charge because it’s, well — to put it frankly – you get paid under the table. We’re not reporting the income we’re earning on the side because maybe it’s not worth reporting. Now the IRS will tell you something different. They will say that ALL income needs to be reported. I say (but please do what’s in your best financial interest and to avoid jail time) that IRS needs to prove there was income before I report anything. I mean, a few years ago I found $25 in the street on the way to work and on the way home. The cash I found that totalled $25 in that one week. That wasn’t income. That was finders keepers!
But in all seriousness, there is a reason why cash based businesses still exist. They can report higher losses and keep more of their money because they have “less” receipts to produce if audited or for whatever reporting purposes. But the question is, should you charge sales to clients tax at all?
I’ve done/do both. When I was providing resume services, and clients were paying via online, I charged sales tax with the expectation that I would have to report it on my taxes. And I explained to the clients that because California will charge me a tax, I needed to charge them a tax. Poor reasoning but people legitimately went along with it.
With my part time notary business, I don’t charge a sales tax at all. And it could be because I also charge a travel fee. But a flat rate has helped me – I feel – continue to get clients and have repeat clients.
So… should you charge sales tax? I say yes, if you’re going to be collecting a lot of online payments. No (but you still can), if you’re going to remain a cash based hustle. The decision is yours.