Sales tax in the United States is a tax levied by the government on the sale of goods and services within the country. Collection of state and local sales tax varies depending on the state and local jurisdictions where you and your client are located.
Sales tax amount
Sales tax is traditionally assessed on goods and services and applied at the point of sale. Sales tax may also be charged on services provided by Upwork and fees such as membership costs, if we are required to collect it in your state.
If we are required to collect sales tax, you will be charged taxes based on the tax residency you entered in your Upwork account under Settings>Tax Information.
If you have not listed a tax residency, your taxes will be assessed based on the address registered to your account under Settings>Contact Info. You are required to keep your address and tax residency current, even if you move temporarily. Unexpected tax-related activity may occur if your tax residency setting is not up-to-date. We recommend you regularly review and update the tax information in your account settings.
A note about marketplace facilitator sales tax
We also collect marketplace facilitator sales tax in states where it is required, and your client will pay this tax. Learn more about the taxes your U.S.-based client may pay.
Frequently Asked Questions
Generally, sales tax is imposed by the government on a sale of tangible property products, digital goods, and services purchased in the United States. As a result, freelance’s service fees or Upwork’s fees may be subject to sales tax if your state requires us to collect it.
The marketplace facilitator sales tax is a type of sales tax, and freelancers do not pay it. If your client lives in a state that requires us to collect the marketplace facilitator sales tax, it will only be assessed on the payments they make to you.
Keep in mind, both clients and freelancers may be assessed other sales taxes based on their location and other factors.
Only the client is assessed the marketplace facilitator sales tax.
We do not keep any taxes we collect, they are forwarded to the government entity that requires us to collect it.
When sales tax is imposed, it will appear as a separate line on the invoice or receipt that is generated for the payment being taxes. Additionally, the collected tax will appear as an individual line labeled as sales tax in the transaction history in your account.
If your client is a tax-exempt business, they can submit a sales tax exemption certification to firstname.lastname@example.org and then make purchases without paying sales tax. Alternatively, they may be able to get a credit for sales tax paid to Upwork directly from their state. We suggest they consult a tax advisor or contact the Department of Revenue for more details, as policies are different for each state.
We are assessing a sales tax on certain services and fees on Upwork as required by state laws. As a result, you should not be paying this tax elsewhere. We suggest talking to a tax advisor in your area to review the matter
You may be able to deduct these taxes, depending on your situation. Please check with a tax advisor as we cannot advise about your specific situation and don’t want to provide inaccurate info.
You’ll be able to see the amount of tax charged on your Upwork invoices. Unfortunately, we can’t list the tax amounts for all cities, counties, states, etc,. here, as there are thousands across the country and tax laws change frequently. We suggest talking to a tax advisor in your area if you have questions, or checking with your state’s tax department.
We recommend referring to your state’s, county’s, or municipality’s tax website or a tax consultant if you are unsure if we are required to collect sales tax from you.
We suggest making sure your address is correct in two places:
- In Settings, under Tax Information “Tax Residence”
- In Settings, under Contact Info “Location”
Please note that you must use your real, permanent address.
In some cases, depending on your location, you may be charged sales tax on freelancer service fees. Freelancer service fees are the percentage (20%, 10% or 5%) you pay to us on your earnings. For example, say you earn $100 from a client and your freelancer service fee is 20%, meaning you’ll pay $20 as a freelancer service fee. The sales tax, which can vary based on your location, will be assessed only on that $20.
Please note that we may assess sales taxes on other fees and services, such as memberships or Connects purchases, depending on where you live.
You can find your total earnings and expenses in your transactions report. Go to Reports Transaction History, and then filter for “All debits” and the date range that you want. The taxes you paid will be displayed as line items.