When drafting a contract, it is important to include a clause that addresses sales tax obligations. This clause outlines the responsibility of each party in terms of collecting, reporting, and remitting sales taxes.
Here is a sample sales tax clause that you can consider including in your contracts:
Sales Tax Clause:
(a) “Sales Tax” means any and all sales, use, goods and services, value-added, excise, or similar tax that may be imposed by any governmental authority, whether foreign, federal, state, or local, upon the sale or use of the Goods or Services provided under this Agreement.
(b) The Supplier shall be solely responsible for collecting Sales Tax from the Client on the Goods or Services provided under this Agreement, if applicable.
(c) The Client shall be responsible for remitting all Sales Tax to the appropriate governmental authority within the time required by applicable law.
(d) The Supplier shall provide the Client with a valid Sales Tax exemption certificate if the Supplier is exempt from Sales Tax collection and remittance.
(e) The Supplier shall indemnify, defend, and hold harmless the Client from any and all claims, damages, expenses, and liabilities arising out of or in connection with any failure of the Supplier to properly collect, report, or remit Sales Tax as required under this Agreement.
(f) The Sales Tax obligations set forth in this Clause shall survive the termination or expiration of this Agreement.
It is important to note that the specific language and requirements for sales tax clauses may vary depending on the jurisdiction in which the contract will be enforced. Consulting with a legal professional or tax advisor can help ensure that your contracts comply with applicable laws and regulations.
By including a clear and thorough sales tax clause in your contracts, you can help prevent disputes and ensure that each party understands their responsibilities when it comes to sales tax obligations.
