An invoice is a payment request for products or services that outlines the price and amount for each item. Invoices are generally ‘due upon receipt’ even though most businesses allow up to 30 days to pay before charging late fees. 

Contents

• Invoice Templates: Blank
  • Simple
  • Service
  • Sales
• Invoice Templates: By Type (18)
• What is an Invoice?
  • History
  • Is Shipping Taxed?
  • Sales Tax (USA only)
  • Value-Added Tax (VAT)
• Are You an Employee?
  • Employee vs Independent Contractor
• How to Make an Invoice
  • Send to the Client
• How to Write an Invoice
• Maximum Late Fees | Penalties
  • USA (50 States)
  • By Country (top 25)
• How Long to Keep an Invoice

Blank Templates

By Type (18)

 

 

 

 

 

What is an Invoice?

An invoice is a document that outlines service or goods provided in exchange for payment or trade. The party requesting payment (“payee”) creates the invoice writing their details, client’s details, description of goods or services, and the total amount owed. The preferred payment method should be included and once complete should be sent to the client (“payer”) via e-mail, standard mail, or text message.

Invoice Cover Sheet – For a more professional look and acts as a Table of Contents for the itemized list of charges.

History

The oldest known human writing is actually a 7,000 year old sales receipt. While we know the sales receipt was for clothing, the oldest known form of payment was made in beer in the same ‘cuneiform’ writing.

Is Shipping Taxed?

Most likely no but depends on the final destination of the product. For example, in the USA shipping is taxed in about half the States as long as the shipping charge is separate from the sale (see table below).

Sales Tax (USA only)

A sales tax is calculated as a percentage of goods sold and is determined by the location where the sale took place. Sales taxes are administered by each State, County, and District(s) in the USA.

• Use TaxJar to find a sales tax by zip code.

STATE	SALES TAX	SOURCE
Alabama	4%	§ 40-23-2(1), § 40-23-61(a)
Alaska	No sales tax	N/A
Arizona	5.6%	Arizona Dept. of Revenue
Arkansas	6.5%	Arkansas Dept. of Finance and Administration
California	7.25%	California Dept. of Tax and Fee Admin.
Colorado	4%	Colorado Dept. of Revenue Taxation Division
Connecticut	6.35%	Connecticut Dept. of Revenue Services
Delaware	No sales tax	N/A
Florida	6%	Florida Dept. of Revenue
Georgia	4%	Georgia Dept. of Revenue
Hawaii	4% (General Excise Tax)	Hawaii Dept. of Taxation
Idaho	6%	Idaho State Tax Commission
Illinois	6.25%	Illinois Revenue
Indiana	7%	Indiana Dept. of Revenue
Iowa	6%	Iowa Dept. of Revenue: Sales and Tax Guide
Kansas	6.5%	Kansas Dept. of Revenue
Kentucky	6%	§ 139.200
Louisiana	4.45%	Louisiana Dept. of Revenue
Maine	5.5%	Maine Revenue Services
Maryland	6%	Comptroller of Maryland
Massachusetts	6.25%	Masschusetts Sales and Use Tax
Michigan	6%	§ 205.52
Minnesota	6.875%	Minnesota Dept. of Revenue
Mississippi	7%	Mississippi Dept. of Revenue
Missouri	4.225%	Missouri Dept. of Revenue
Montana	No sales tax	N/A
Nebraska	5.5%	Nebraska Sales and Use Tax
Nevada	6.85%	Nevada Dept. of Taxation
New Hampshire	No sales tax	N/A
New Jersey	6.625%	New Jersey Division of Taxation
New Mexico	5.125% (Gross Receipts Tax)	Taxation & Revenue New Mexico
New York	8.875%	NYC Dept. of Finance
North Carolina	4.75%	North Carolina Dept. of Revenue
North Dakota	5%	North Dakota Tax
Ohio	5.75%	Ohio Dept. of Taxation
Oklahoma	4.5%	Oklahoma Tax Commission
Oregon	0%	Oregon Dept. of Revenue
Pennsylvania	6%	Pennsylvania Dept. of Revenue
Rhode Island	7%	Rhode Island Dept. of Revenue Division of Taxation
South Carolina	6%	South Carolina Dept. of Revenue
South Dakota	4.5%	South Dakota Dept. of Revenue
Tennessee	7%	Tennessee Dept. of Revenue
Texas	6.25%	Comptroller of Texas
Utah	4.85%	Utah State Tax Commission
Vermont	6%	Vermont Dept. of Taxes
Virginia	5.3%	Virginia Tax
Washington	6.5%	Washington Dept. of Revenue
West Virginia	6%	West Virginia State Tax Dept.
Wisconsin	5%	Wisconsin Dept. of Revenue
Wyoming	4%	Wyoming Dept. of Revenue

Value-Added Tax (VAT)

A value-added tax (VAT) is a tax that is calculated based on the cost of the goods or service charged. This tax is administered by most countries and usually is targeted at imported items.

• Use Avalara to find the VAT .

Are Services Taxed?

Services are taxed based on the service provider’s country. In most countries, services are taxed at the Value-Added Tax (VAT).

In the USA, only four (4) States charge taxes on general services:

• Hawaii – 4% (tax.hawaii.gov)
• New Mexico – 5% and will be 5.125% on July 21, 2021 ( www.avalara.com)
• South Dakota – 4.5% (dor.sd.gov)
• West Virginia – 6% (tax.wv.gov)

Are You an Employee?

There are two (2) classes of employment; employees and independent contractors.

Employees

An employee, or “W-2 employee” in the USA, is an individual who performs a service on an employer’s behalf in exchange for payment, commonly hourly pay. The employer can control what services to complete and how it will be done. Also, the employer can control, in most cases, where the employee performs the services.

• IRS Form W-2 – Required to be completed by the employee and given to the employer prior to employment.

Independent Contractors

An independent contractor, or “1099 contractor” in the USA, is an individual who performs a task for an employer in exchange for payment, commonly a fixed price. The employer cannot control how the task will be completed but only the result of the work. The employer also cannot control, in most cases, where the employee performs the services unless the work is at a specific location.

• IRS Form W-9 – Required to be completed by the independent contractor and given to the employer prior to employment.

Employee vs Independent Contractor

Each State determines ultimately determines its definition of an employee. Although, most States rely on the IRS 20-Point Test to determine if an individual is an employee. The table below is an overview of the two (2) classes of employment:

How to Make an Invoice

The following guide is how to make a generic invoice.

• Download: Adobe PDF, MS Word (.docx), MS Excel (.xlsx)
• Export: Google Docs, Google Sheets, Dropbox, MS OneDrive
• Online: Invoice Generator

Step 1 – Upload a Logo

Upload a logo from your device that will be placed on the invoice. It’s best to use a logo with square dimensions.

Step 2 – Company Details

• Email Address* (required*)
• Name
• Company Name
• Mailing Address
• Phone
• Business Number

Step 3 – Client’s Details

• Email Address
• Name
• Company Name
• Billing Address
• Phone Number

Step 4 – Invoice Details

• Number (#)
• Invoice Date
• Payment Terms (payment is due by)
• Invoice Due Date

Step 5 – Description of Goods / Services

• Goods/Services Description
• Quantity/Number (#) of hours
• Cost per Item/Per Hour ($/hr)

Step 6 – Calculate Total

• Subtotal
• Taxes (if any)
• Discount (if any)
• Shipping (if any)
• Total Amount

Step 7 – Notes / Comments

• Penalties / Interest if payment is not made.
• Installment dates (if any)
• Bank Information (so the customer can initiate a wire)
• Credit Card Details (so the customer can pay by writing their credit card information)
• PayPal E-Mail
• Venmo Profile
• CashApp Hashtag #
• Bitcoin Address (receiving)

Step 8 – Send to the Client

• E-Mail (sending through InvoiceMaker)
• Standard Mail (USPS, FedEx, etc.)
• Fax

Maximum Late Fee | Penalties

Below are the maximum penalties that can be charged if an invoice is not paid. Any late fees must be written in the invoice at the time of sending it to a client. The late fee is calculated by the total amount owed multiplied by the interest rate (%) on a per annum basis.

By Country (Top 50)

Usury Rates by State (USA)

How Long to Keep an Invoice?

At least 3 years for USA residents. According to the Internal Revenue Service (IRS), an individual or company is required to keep an invoice under the following circumstances:

• 4 years for invoices related to the payment of employees. The 4-year period begins after the date the tax is due or is paid, whichever is later;
• 6 years for invoices that are not reported on your income taxes and represent more than 25% of gross income;
• 7 years if filed the invoices are related to a claim for a loss from worthless securities or bad debt deduction; and
• Indefinitely if the invoice was made in a tax year where no filing was made or if a fraudulent return was filed.