While sales tax is usually a state issue and our disconnect may be the result of working in different states (I am in NY), you can see from the American Bar web

While sales tax is usually a state issue and our disconnect may be the result of working in different states (I am in NY), you can see from the American Bar website that it's clear that sales tax is not usually levied on lawyer fees: http://www.americanbar.org/advocacy/governmental_legislative_work/resources/state_legislative_clearinghouse/tax_on_professional_services.html http://www.americanbar.org/advocacy/governmental_legislative... That link shows the American Bar saying 'Don't start charging sales tax on legal fees' which implies that they don't currently charge them. "Currently, only three states have a tax on legal services – Hawaii, New Mexico and South Dakota" So where do you work? I think the myopia here is you assuming that VCs don't normally pay legal fees because it's a sales tax problem and they don't want to waste money.