Paying Franchise Tax As An Interior Designer In Texas?

Interior design services in Texas are taxable under the Service Tax, which is 6 percent of the total charge for the services. When combined with the sale of tangible personal property, the entire transaction may become taxable. The Texas Franchise Tax is the state’s primary tax on businesses, and the No Tax Due Threshold is currently set by the Texas Comptroller.

The Texas Franchise Tax applies to all taxable entities operating within the state and is based on the margin. A separate stated charge for interior design services is not taxable, but a fee for design services included in a lump-sum billing is. Sales tax applies to interior designers when they purchase goods and sell them to their clients, who are the end-users.

Texas Sales and Use Tax Principles apply to the construction industry, but this paper limits its discussion to the construction industry. Purely consultative services, where an interior designer provides advice or plans without any sale of tangible personal property, are generally not taxable. However, when the services include the sale of tangible goods, such as furniture, fabrics, or accessories, these items are subject to sales tax.

Tax is due when a draftsman or designer uses a customer’s specifications to create delineations, blueprints, designs for printed circuit boards, or other types of designs. A reimbursable expense occurs when the interior designer pays tax to the furniture or supply vendor and passes the charge on to their customer.

Taxes can be complicated, but this article provides taxation tips on sales tax, income tax, payroll taxes, and tax write-offs for interior design businesses. All states have different requirements and thresholds for reporting sales, and the Texas franchise tax burdens taxpayers without generating sufficient tax revenue.

Can you practice interior design without a license in Texas?

Texas has unconstitutionally censored interior designers through “titling laws” due to lobbyists representing a small, pro-regulation faction of the industry. These laws allow anyone to practice a trade, but only a select few state license holders can call themselves “interior designers” or use the words “interior design” to describe what they do. This is a significant challenge for entrepreneurs, especially those starting a new business and attracting customers.

The internet has made it easier for entrepreneurs to find clients, but if the government decided that they couldn’t truthfully and accurately describe their business, they would be out of work quickly. The state of Texas is doing this to individuals in the interior design field, as it allows only a select few state license holders to call themselves “interior designers” or use the words “interior design” to describe their profession.

What businesses are exempt from sales tax in Texas?

Texas law allows certain customers, such as government agencies, nonprofit organizations, and merchants purchasing goods for resale, to be exempt from paying sales tax. These customers are required to collect a valid exemption or resale certificate from buyers to validate each transaction. Sales tax, first adopted in 1961, is paid to state and local tax authorities for the sale of certain goods and services. As a business owner selling taxable goods or services, you act as an agent of the state by collecting tax from purchasers and passing it along to the appropriate tax authority.

As of March 2019, sales and use tax in Texas is administered by the Texas Comptroller of Public Accounts. It is your responsibility to manage the taxes collected to remain in compliance with state and local tax laws, as failure to do so can result in penalties and interest charges.

Are interior designers licensed in Texas?

The Texas Board of Architectural Examiners (TBAE) has extended the test-passing deadline for “grandfathered” Registered Interior Designers (RIDs) by 10 years, from September 1 of this year to September 1, 2027. This change was made during the 85th Texas Legislature Regular Session. House Bill 1657, signed into law by Governor Abbott on June 15, allows current registered RIDs who have not yet passed all sections of the NCIDQ exam to pass all sections until September 1, 2027.

Those who pass the exam can continue to renew their registration until that date, regardless of whether they pass the exam or not. Once they pass the exam, they can continue to renew their registration indefinitely. This change aims to improve the registration process for RIDs in Texas.

Are interior design services taxable in Texas?

Interior design services and furniture sales are subject to taxation when included in a lump-sum billing for tangible personal property. A mark-up fee, based on a percentage of the taxable item, is subject to the collection of sales tax. This authority offers guidance on the aforementioned fees.

Who is exempt from Texas franchise tax?

The list of entities exempt from the franchise tax includes sole proprietorships, general partnerships, and limited liability partnerships, with the exception of single-member limited liability companies (LLCs) and those with direct ownership entirely of natural persons.

Can you call yourself an interior designer in Texas?

In accordance with the Texas Administrative Code, duly registered interior designers in the state are permitted to utilize the title “registered interior designer” in describing their professional status.

Are remodeling services taxable in Texas?

In Texas, services to repair, remodel, maintain, and restore tangible personal property are generally taxable under Rule 3. 292. The taxability of a contractor’s labor charges depends on whether the property is residential or nonresidential. Residential real property includes family dwellings, housing complexes, multifamily apartments, nursing homes, condominiums, retirement homes, and common areas for tenants’ use. It does not include hotels or other facilities subject to hotel occupancy tax. Contractor services to repair, remodel, or improve nonresidential real property are generally subject to sales tax.

How much do you have to make to pay franchise tax in Texas?

The Texas Franchise Tax Report is required for businesses making over $2. 47 million per year, including business trusts, corporations, joint ventures, LLCs, partnerships, professional and business associations, S-Corporations, banks, savings and loan associations, and state limited banking associations. Businesses must qualify as operating or doing business in Texas by meeting certain activities, such as having employees, real estate, holding companies, or inventory in the state. Non-taxable entities, such as banks, savings and loan associations, and state limited banking associations, are exempt from filing and paying the tax.

Do interior designers need a license USA?

It is notable that no U. S. state currently mandates the acquisition of a license for those engaged in interior design work. However, there are exceptions, namely in the states of Louisiana, Florida, Nevada, Washington, D. C., and Puerto Rico. In these jurisdictions, the undertaking of unsupervised work in commercial spaces necessitates the registration of the individual concerned.

Are consulting services taxable in TX?

Sales tax is generally not taxable on consulting services in Texas, but it can be taxable when combined with taxable services. For instance, hiring an IT consultant to design computer systems architecture, plan networks, servers, disaster recovery, and computer equipment may not be taxable if the same professional configures servers, installs equipment, and sets up software. In summary, consulting services in Texas may be subject to sales tax depending on the specific situation.

What services are not taxable in Texas?

In Texas, certain services are taxable, including amusement services, cable television services, credit report creation or delivery, data processing services, debt collection, information services, insurance services, laundry, cleaning, garment services, motor vehicle parking and storage services, labor and materials to rebuild, replace, alter, modify or upgrade existing nonresidential realty, personal services, pest control and extermination, garbage and other waste collection or removal, janitorial and custodial services, landscaping and lawn maintenance and surveying, certain security services, telecommunication services, receiving and relaying of telephone messages by a human operator, services provided by a transmission and distribution utility, and labor services like photography, artistry, and tailors.

Satellite television service provided directly to a customer’s premises is exempt from local sales and use tax, while credit reporting services are taxable if the applicant’s address is in Texas at the time of the request and the person who requested the report is in Texas or doing business in Texas. However, 20 of the charge for data processing services is exempt from tax. For an in-depth look at sales tax in Texas, consult with a sales tax professional.