Taxability of paper statement fee
The taxability of the paper statement fee depends on your state's sales tax laws. In general, sales tax is applied to services that are provided in exchange for a fee. However, some states exempt certain services from sales tax, such as professional services.
If you are unsure whether the paper statement fee is taxable in your state, you should consult with a tax advisor.
Categorizing the paper statement fee
If the paper statement fee is taxable, you should categorize it as a service income. This will ensure that the income is properly reported on your tax return.
If the paper statement fee is not taxable, you can categorize it as a non-taxable income. This will keep track of this income separately from your taxable income.
Recommendation
I recommend that you categorize the paper statement fee as a service income. This is the most conservative approach, and it will ensure that you are in compliance with your state's sales tax laws.
Additional considerations
You may also want to consider the following:
- Is the paper statement fee a recurring charge? If so, you may want to consider setting up a recurring invoice in your accounting software. This will make it easier to track the income and to ensure that it is properly reported on your tax return.
- Do you have a significant number of clients who are not providing an email address? If so, you may want to consider discontinuing paper statements altogether. This will save you the cost of paper, envelopes, and postage. It will also simplify your accounting and tax compliance.
