When does sales tax become relevant?

[JTB515]

Hello everyone,

I've been lurking on the forum for a few months now and I've found it helpful on a multitude of topics. I have a question or two that I was hoping someone could help me with though.

After I put together my portfolio, for job hunt purposes, I showed it off to some of my friends. Most of it involves my athletic team from college and I received a pretty strong urging from many of those friends to sell prints. This immediately made me question the whole sales tax and "declaring yourself a business" issue. I'm based in NYC but I haven't found any specific numbers for New York as to when I need to start collecting sales tax. I've heard many different responses from family and friends but was hoping for some advice from people-in-the-know before I sought the advice of an accountant/lawyer type person.

Any advice or help would be greatly appreciated. Even a nudge to the right person would be great.

Thanks,

John

 

[Big Mike]

Welcome to the forum.

I'd suggest calling up your local city/state office and asking what is required to start a small business. They might be able to help you out with all the tax info, but you might also want to talk to an accountant.

For example, up here in Canada we have national sales tax, but a business is not required to register and collect it until they earn a certain amount per year. It's either $20,000 or $30,000, something like that.

However, you still have to declare any money that you earn, and probably pay income tax on it. There might be a limit threshold on that as well.

Of course, if you are claiming income, you can also write off expenses, so it's a really good idea to talk to someone who knows the rules in your area, an accountant would be a really good person, but you may be able to get a lot of free information from the local government offices as they are usually pretty keen on helping out small businesses.

 

[KmH]

In the US it's different for each state.

You don't want the state coming after you for back taxes, the penalties can be brutal.

Like Mike suggested, your state should be able to give you more info and it should be readily available online too.

 

[flyingember]

This depends on the exact state and it's super confusing. It took me a bit to figure this out for Missouri

If I ship to a Missouri address I owe sales taxes.

If I take payment inside Missouri I owe sales tax.

If I make a sale over the internet to someone in a different state and ship the item outside the state I don't owe sales taxes.

If I travel outside the state and sell at an art show where the product changes hands outside Missouri, it's an export sale and I don't owe taxes.

If I sell to someone from outside Missouri, regardless of where the order was placed, and they pickup the product inside Missouri I owe sales tax.

 

[bennielou]

I know this from experience:

Each state is different, but the moment you set up a website and charge your first client, regardless of whether you charged sales tax or not.....you are liable to the State.

My state (TX) has become brutal about the issue, and has begun a "turn your competitors in" program, wherein they are sending out letters to paying photogs to turn their non paying photogs in for not paying. In exchange the tattle tale gets a quarter off. The busted party gets a huge fine and penalties.

The State of Texas is also doing photographer searches, and when they find a website with an owner/photographer is not paying, they are giving them the riot act.

The reason you WANT to pay....is when you get caught, and you eventually will, you will be paying outrageous fines with INTEREST. I myself owed $28,000 payable in 30 days. I have a friend who owed $120,000.

Don't pay? They seize your bank account as well as your assets.

 

[c.cloudwalker]

Very good question which might benefit more than one member.

I know this from experience:

Each state is different, but the moment you set up a website and charge your first client, regardless of whether you charged sales tax or not.....you are liable to the State.

Are you sure about that? I thought internet businesses were not required to collect sales tax. So far. Changes are coming in the future but, is the future already here?


One thing that is for sure is that sales tax are a local to state thing and you need to check with your local, up to your state government, to figure it out. They are all different and I sure wouldn't go by what anyone here tells me. The fines can be too hefty to trust someone on a forum.

Basically, when you start a business, if your area has a sales tax, you are supposed to collect it and pay it to the proper government agency. There are also a million exemption to that rule which vary depending, again, on your location so it's better to check with your local tax agency.

 

[bennielou]

Very good question which might benefit more than one member.

I know this from experience:

Each state is different, but the moment you set up a website and charge your first client, regardless of whether you charged sales tax or not.....you are liable to the State.

Are you sure about that? I thought internet businesses were not required to collect sales tax. So far. Changes are coming in the future but, is the future already here?


One thing that is for sure is that sales tax are a local to state thing and you need to check with your local, up to your state government, to figure it out. They are all different and I sure wouldn't go by what anyone here tells me. The fines can be too hefty to trust someone on a forum.

Basically, when you start a business, if your area has a sales tax, you are supposed to collect it and pay it to the proper government agency. There are also a million exemption to that rule which vary depending, again, on your location so it's better to check with your local tax agency.

Hi Cloud,
Yes, about that I am sure and that is what confuses a lot of people. In some states you don't charge for internet revenue. That part is true. Where it's confusing for people is that they assume advertising on the net as being net generated business.

It's not, and the reason why is: You aren't shooting the wedding from the web. You are selling a personal service, just like a plumber. You may have gotten initial interest from the web, but so does that plumber.

What you are referring to, and again, it's a source of vaste confusion is selling TANGIBLES via the net. In other words prints, canvases, albums not included in the original package, etc (NOTE: IN SOME STATES. OTHERS APPLY SALES TAX TO THIS AS WELL AS IN THE INSTANCE OF MY STATE).

Another out (FOR SOME STATES) is shooting destinations. If you cross the state line, you are no longer applicable for sales taxes in your state, however you may have to pay sales taxes in the location state/country.

My advice would be to seek out a tax guy/gal who specializes in Photography. (Photography has some wonky rules that other professions don't). The way I found mine was to contact another local photog who was doing big business.

It was a reality check for sure. Everything that I had been doing prior to talking to him was wrong. And I'm not the only one who was totally confused. That's were it can get dangerous.

 

[c.cloudwalker]

^^^^

Thanks for your response. It probably will have no influence on what I'm doing but it should be helpful to some members who do the internet thing.

 

[Christie Photo]

Another out (FOR SOME STATES) is shooting destinations. If you cross the state line, you are no longer applicable for sales taxes in your state, however you may have to pay sales taxes in the location state/country.

I just had to work this one out with a client of mine in Indiana. I'm in Illinois. The client was concerned since they were recently audited and wanted to be certain they were in compliance.

In Illinois, photographers have a choice: We can call out the cost of photo processing on the invoice and collect tax on that portion, or we collect on 10% of the total. Of course we collect on the entire sale of merchandise (frames, albums, etc.)

One thing to keep in the forefront.... ALWAYS.... is we're collecting tax for the state. It's not our money. It never was. So the state gets REALLY fussy about the matter. Same with payroll withholdings. If you're late paying you own taxes, that's one thing. Just NEVER be late passing on other people's money.

-Pete

 

[bennielou]

Another out (FOR SOME STATES) is shooting destinations. If you cross the state line, you are no longer applicable for sales taxes in your state, however you may have to pay sales taxes in the location state/country.

I just had to work this one out with a client of mine in Indiana. I'm in Illinois. The client was concerned since they were recently audited and wanted to be certain they were in compliance.

In Illinois, photographers have a choice: We can call out the cost of photo processing on the invoice and collect tax on that portion, or we collect on 10% of the total. Of course we collect on the entire sale of merchandise (frames, albums, etc.)

One thing to keep in the forefront.... ALWAYS.... is we're collecting tax for the state. It's not our money. It never was. So the state gets REALLY fussy about the matter. Same with payroll withholdings. If you're late paying you own taxes, that's one thing. Just NEVER be late passing on other people's money.

-Pete

Amen Pete

 

[bennielou]

Another out (FOR SOME STATES) is shooting destinations. If you cross the state line, you are no longer applicable for sales taxes in your state, however you may have to pay sales taxes in the location state/country.

I just had to work this one out with a client of mine in Indiana. I'm in Illinois. The client was concerned since they were recently audited and wanted to be certain they were in compliance.

In Illinois, photographers have a choice: We can call out the cost of photo processing on the invoice and collect tax on that portion, or we collect on 10% of the total. Of course we collect on the entire sale of merchandise (frames, albums, etc.)

One thing to keep in the forefront.... ALWAYS.... is we're collecting tax for the state. It's not our money. It never was. So the state gets REALLY fussy about the matter. Same with payroll withholdings. If you're late paying you own taxes, that's one thing. Just NEVER be late passing on other people's money.

-Pete

Yes Pete,
It is not our money and never was. This is where photogs go wrong and end up losing their homes.