Sales Tax?

wxnut · Oct 24, 2011

I realize this will be a state specific question, but wondering if you wedding photogs, senior port. type photogs are paying salse tax on the income you make for the shoot? For the sale of prints of course we pay sales tax, but what about the service of shooting the pictures? I have been paying sales tax on all income so far, but recently was contracted by a car dealership to take photos and upload them to the net. They paid me a flat rate, and I feel I did a service only and didnt sell them anything, so I shouldnt pay sales tax on that income. That got me thinking, what is the difference of shooting a wedding? I charge $xx.xx amount for the wedding, and then give them an album. What do you do?

Thanks,

Doug

sierramister · Oct 24, 2011

It really depends on the state, and their definition of a "service", and whether the service is taxed. In my state, digital files are considered goods, so clients are purchasing goods from me.

shootermcgavin · Oct 24, 2011

Doug I'm in Wisconsin too, you don't pay sales tax on services in WI, supposedly it's possible in some states. You also shouldn't pay sales tax on anything the customer should. I'd talk to an accountant, I think if you shoot a wedding and give them an album it's still a service. You're definitely allowed to give customers gifts so I would think the album could be considered a gift. As long as you don't say the wedding with album is this price and with out is this price. I know a lot of photographers in the area that just charge $250 for a shoot and edit and give the customer digital copies.

wxnut · Oct 24, 2011

So do you think you can seperate the two. IE charge 200 for a shoot. 150 will be for the service of my operating my camera, and 50 for the photos you get? Just wondering. I have a CPA looking into it also. I will advise what I find out, but in the mean time would love to hear more stories.

Doug

wxnut · Oct 24, 2011

Thanks for the input shooter.

Doug

shootermcgavin · Oct 24, 2011

I am dead wrong, sorry I wanted to find out for myself and in WI you pay sales tax on everything, service or not. It doesn't make sense to me and I asked why there is not sales tax on maid services but there would be on photography and they said simply because someone voted to make it that way. No explanation, just that's the way it is. Sorry, but unfortunately those people in my area that are selling it as a package are either paying sales tax out of that or don't realize they are supposed to pay it at all. I would have to say if a wedding photographer had sales tax on a receipt I would definitely be rolling my eyes on that one. You gotta love the government, Wisconsin Dept of Rev went on to tell me although a maid service is not a taxable good, carpet cleaning is. To me they seem the same, and I believe both were passed in 2009 so existing business might have a hard time knowing if they checked before that.

wxnut · Oct 24, 2011

Yuck. Ok, thanks for looking into it.

MLeeK · Oct 24, 2011

Yep. Where I am the service is not taxable, but any tangible good is taxable. If it's a package deal (shoot and product) it's all taxable. So your wedding and album would be all taxable here.
You REALLY should have your tax ID and your legal ducks in a line. That will mean meeting with an accountant who can help you with this, getting your tax ID for your state, business license, meeting with an attorney for contracting help.
The states are so broke they really are trolling the internet looking for illigetimate business and they can nail you for sales tax on the AVERAGE for a photographer for as long as they decide you have been "in business." Better to be safe than sorry.
ANd... there is a lot more to tax than sales tax. There is also the taxes you need to pay that normally your employer would pay... That's roughly 30% of your income after sales tax and COG/CODB.

Be careful with digitals and find out!!! Some states consider them taxable, others don't. If they are on disc they are a tangible good in some states. If they are sent via email they aren't. And then again in some places if they are sent electronically they are taxable... AND... to make matters worse if you ask 3 people in the sales tax division of the gov't in your state you'll probably get 3 different answers.

shootermcgavin · Oct 24, 2011

MLeeK said:
Yep. Where I am the service is not taxable, but any tangible good is taxable. If it's a package deal (shoot and product) it's all taxable. So your wedding and album would be all taxable here.
You REALLY should have your tax ID and your legal ducks in a line. That will mean meeting with an accountant who can help you with this, getting your tax ID for your state, business license, meeting with an attorney for contracting help.
The states are so broke they really are trolling the internet looking for illigetimate business and they can nail you for sales tax on the AVERAGE for a photographer for as long as they decide you have been "in business." Better to be safe than sorry.
ANd... there is a lot more to tax than sales tax. There is also the taxes you need to pay that normally your employer would pay... That's roughly 30% of your income after sales tax and COG/CODB.

Be careful with digitals and find out!!! Some states consider them taxable, others don't. If they are on disc they are a tangible good in some states. If they are sent via email they aren't. And then again in some places if they are sent electronically they are taxable... AND... to make matters worse if you ask 3 people in the sales tax division of the gov't in your state you'll probably get 3 different answers.

The thing with this is most accountants probably don't know as it was changed in 2009. How many people start their business and continually check to see if the law has stayed the same... Odds are they will keep adding other services to it which seems nuts, so on top of income tax there is sales tax on income. A service is really just your income. They might as well tax your employer, add it on to workmans comp, and all the other stuff that to me seems like legalized extortion.

MLeeK · Oct 24, 2011

shootermcgavin said:
The thing with this is most accountants probably don't know as it was changed in 2009. How many people start their business and continually check to see if the law has stayed the same... Odds are they will keep adding other services to it which seems nuts, so on top of income tax there is sales tax on income. A service is really just your income. They might as well tax your employer, add it on to workmans comp, and all the other stuff that to me seems like legalized extortion.

SO TRUE! Here's a law for legalized extortion... In NY they are now trying to pass a law that every bank transaction will be taxed 1%. So you get your paycheck and the state has already taken out it's chunk of change. It's direct deposited in your bank... 1%. You pull out $ from your ATM... 1%. You pay your bills... 1%.
Talk about double indemnity???

wxnut · Oct 24, 2011

For the record MLeek, I do have a tax ID number and have been paying all the taxes so far. I go thru a CPA for income tax and deductions and such, but have been doing sales tax on my own since 2004. I was just wondering if I didnt have to be paying on the sales tax.

Sounds like crap if we do in fact need to pay on the service. I also work part time as a server. Why do I not have to pay sales tax on my tip income? Im doing a service / work, and not selling anything. If I was a server that made and sold the food, would I have to pay sales tax on it all? Hmmm has me thinking. Why not charge $300 for a wedding and ask for a $1500 tip?

shootermcgavin · Oct 24, 2011

MLeeK said:
shootermcgavin said:

The thing with this is most accountants probably don't know as it was changed in 2009. How many people start their business and continually check to see if the law has stayed the same... Odds are they will keep adding other services to it which seems nuts, so on top of income tax there is sales tax on income. A service is really just your income. They might as well tax your employer, add it on to workmans comp, and all the other stuff that to me seems like legalized extortion.

Click to expand...

SO TRUE! Here's a law for legalized extortion... In NY they are now trying to pass a law that every bank transaction will be taxed 1%. So you get your paycheck and the state has already taken out it's chunk of change. It's direct deposited in your bank... 1%. You pull out $ from your ATM... 1%. You pay your bills... 1%.
Talk about double indemnity???

They need a dislike button, I can't even believe that's possible... Although our neighbors in IL are probably on the block for something like that to get back out of debt. I would not have believed a service can be taxed before today, I didn't think it was justifiable. It sounds like it's only a matter of time before all services are taxed, playing devils advocate if I were a politician and got away doing it to one industry why not do it to others, I definitely wouldn't want to start cutting my benefits.

MLeeK · Oct 24, 2011

wxnut said:
For the record MLeek, I do have a tax ID number and have been paying all the taxes so far. I go thru a CPA for income tax and deductions and such, but have been doing sales tax on my own since 2004. I was just wondering if I didnt have to be paying on the sales tax.

Sounds like crap if we do in fact need to pay on the service. I also work part time as a server. Why do I not have to pay sales tax on my tip income? Im doing a service / work, and not selling anything. If I was a server that made and sold the food, would I have to pay sales tax on it all? Hmmm has me thinking. Why not charge $300 for a wedding and ask for a $1500 tip?

SHHHHH! Don't give them any ideas!!! Tips aren't considered paying for a service or a good... but I am sure they could justify it as that somehow if they wanted to. As for now, you are SUPPOSED to report it and pay income tax out the wazoo on it... Cuz the good men and women of the government know that those of us who have to wait tables or tend bar are just rolling in the dough and can afford to give some more to them.

As for the $300 and $1500 tip here's my way around it or what I was told to do...
When you are itemizing your contract for the wedding it is not a package deal, it's each a separate line item.
Wedding photography service $1400
Album $100.
Sales tax 7.5% on $100=$7.50