State taxes on distribution fees

[chuTzPA]

Wondering how other TPA's handle this - distribution fees that are paid by the recordkeepers directly from participant accounts to the TPA are generally round numbers.  For some states though, this is revenue that taxes must be paid for as a Sales Tax, and this is indeed detailed in the contract.

We have always passed this on to the plan (ie line item lists distribution fee, and later line item after sales tax calculation lists round paid amount, netting just the tax due payable for that item).

Just had a client complain about this, first time one ever noticed this.