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Thread started 16 Jul 2013 (Tuesday) 12:12
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State Sales Tax on Expenses?

 
HiepBuiPhotography
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Jul 16, 2013 12:12 |  #1

Hey guys!

I know I'm supposed to ask an accountant, but I'm going to ask here anyways ;)

I've been thinking about my contract and was wondering if this is the right thing to do. Currently, my contract has my photography fee and my travel expenses in one lump sum. Then, I tack a sales tax on that total. I was thinking and I feel like I've been doing this wrong. I think I should be separating my photography fee and my travel expenses and tacking on the sales tax to the photography fee only. I know the difference isn't large (I sometimes don't even have travel expenses), so it's not that big of a deal, but I'd like to charge my clients the correct amount and pay the state the correct amount. Let me know how you guys handle the state sales tax! Thanks!


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Foodguy
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Jul 16, 2013 12:46 |  #2

Check with your state department of revenue...they typically have a call center to answer specific questions.
FWIW, I charge sales tax on the sub-total of **EVERYTHING** that went into producing a photograph. That even includes client lunches, prop rentals, sub contractors etc.


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Jul 16, 2013 12:51 |  #3

Yeah, you have check on a state-by-state basis. RI doesn't charge sales tax on services, only goods.


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Jul 16, 2013 12:53 as a reply to  @ Foodguy's post |  #4

Every state is different. PA has very good online resources.

The PA state regulation that answers your question is section 32.37, which follows:

ยง 32.37. Photographers and photo finishers.
(a) Scope. Photographers, photo finishers and photo-refinishers are vendors of photographs, materials and services purchased by their customers, whether or not produced to the special order of the customer. The photographer or photo finisher shall collect and remit tax upon the total purchase price charged for the photographs or services, even though the customer may furnish some of the materials. Photo-refinishers shall collect and remit tax upon the total purchase price charged for the rendering of the photo-refinishing service. In determining total purchase price, there may be no deduction for ancillary expenses, including travel time and expenses, telephone calls, salaries or wages paid to assistants, models or narrators, whether or not the expenses are separately stated in billings to purchasers.
(b) Manufacturing exemption. The purchase or use of materials, equipment and supplies by a photographer or photo finisher is exempt from tax if the property is predominantly used directly by him in the photography or photo finishing operation. This exemption is restricted to photographers and photo-finishers and is not available to photo-refinishers.
(1) Property directly used. The following are examples of equipment, parts and accessories, and materials and supplies which when predominantly used directly by a photographer or photo finisher in the operation of photography shall be exempt from tax: cameras, film, camera or flash batteries, processing chemicals, special lighting, tripods, filters, cable release mechanisms, light measuring devices, screens, props, proofing machines, enlargers, developing trays, fixing trays, film and print washing machines, brushes and color crayons, densitometers, enlarging meters and automatic rocker trays.
(2) Property not directly used. The following are examples of equipment, materials and supplies which do not qualify for the manufacturing exemption: camera cases, gadget bags, lens cases, projectors, screens, projection lamps, projection tables, stands, slide files, motion picture reels and cans, viewers, viewing tables, negative files, negative envelopes, bulk film loaders, film cassettes, paper safes and cleaners for film and lenses.
(3) Repairs. The repair of equipment predominantly used directly by the photographer or photo finisher in his photography or photo finishing operation shall be exempt from tax. This exemption also applies to the purchase of replacement parts for the equipment.
(4) Utilities. That portion of the photographers or photo finishers utilities which are directly used in his manufacturing operations shall also be exempt from tax. Fuel or power used to ventilate buildings, for general illumination lighting, air conditioning and other space cooling, and space heating shall be subject to tax unless it is established that the use of these utilities bears an active causal relationship to the photographers or photo finishers manufacturing operations.
(c) Resale exemption. Photographers, photo finishers and photo-refinishers may claim the resale exemption on purchases of tangible personal property which they directly resell or incorporate into products which they resell.

In other words, sales tax is computed and collected on the total amount, whether for your time as a photographer, separately-stated travel expenses or anything else you feel you need to detail on your invoice.

If you feel you need more information, click here (external link) for the link to the specific PA state website.

I hope this helps.

Alex


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gjl711
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Jul 16, 2013 12:53 |  #5

archer1960 wrote in post #16125472 (external link)
Yeah, you have check on a state-by-state basis. RI doesn't charge sales tax on services, only goods.

That is what IL did as well. I didn't know that services were taxed.


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HiepBuiPhotography
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Jul 16, 2013 12:59 |  #6

Thanks guys! It looks like I've been doing it the correct way :lol: No need to change anything! :D


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gjl711
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Jul 16, 2013 13:00 |  #7

WHoa!!! I just looked it up and it's way more complicated than I ever dreamed.


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juicedownload
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Jul 16, 2013 13:08 |  #8

lehmanncpa wrote in post #16125478 (external link)
Every state is different. PA has very good online resources.

The PA state regulation that answers your question is section 32.37, which follows:

In other words, sales tax is computed and collected on the total amount, whether for your time as a photographer, separately-stated travel expenses or anything else you feel you need to detail on your invoice.

If you feel you need more information, click here (external link) for the link to the specific PA state website.

I hope this helps.

Alex

This is good advice. I do like how most of the questions are answered on the PA department of revenue's website. If you do call them, I've found them to be knowledgeable and friendly, plus it is free. I collect sales tax on everything. Unless they complain, like a non-profit. Then I get them to fill out the proper sales tax exemption form to cover myself legally.


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Tom ­ Reichner
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Jul 19, 2013 14:13 |  #9

Alex is absolutely right. I am originally from PA, and did billing/invoicing for 2 different companies while living there.

The tax is to be charged on the total amount, with no deductions (even shipping is something that you have to charge tax on). The exception to this (in PA) is when you are a building contractor doing a bona fide "improvement" to someone's real property. This is for true improvements, and not for property maintenance or upkeep. If it is a true home improvement, then you do not charge state sales tax for it - not for the materials and not for the labor. But, as I said, that is the exception, and has nothing to do with photography - so for any photographic services or products you sell, you need to collect sales tax on the entire amount.

Just curious - why did you think that your expenses might not be taxed?


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Foodguy
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Jul 19, 2013 15:07 as a reply to  @ Tom Reichner's post |  #10

Interesting aside, in some states now, if images are transferred via web (ftp, dropbox, email, etc), sales tax doesn't apply as there's no tangible product. I don't imagine that this will last long, but in the meantime...


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adam8080
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Jul 19, 2013 15:35 |  #11

Foodguy wrote in post #16135362 (external link)
Interesting aside, in some states now, if images are transferred via web (ftp, dropbox, email, etc), sales tax doesn't apply as there's no tangible product. I don't imagine that this will last long, but in the meantime...

Alabama charges sales tax on tangible property but not services. Tangable property in Alabama is anything that can be seen, weighed, measured, felt, or touched, or is in any other manner perceptible to the senses which includes digital images transferred over the web. So be sure to check your states definition of tangible property!


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Shooting
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Jul 19, 2013 21:11 |  #12

Here in WV you have to pay 6% sales tax on any money received no matter what it is for. And for tangible property that is an entire different rate.




  
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HiepBuiPhotography
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Jul 29, 2013 12:49 |  #13

Tom Reichner wrote in post #16135223 (external link)
Just curious - why did you think that your expenses might not be taxed?

I read somewhere that tax is supposed to be only applied on "tangible products".


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Jul 30, 2013 12:04 |  #14

Foodguy wrote in post #16135362 (external link)
Interesting aside, in some states now, if images are transferred via web (ftp, dropbox, email, etc), sales tax doesn't apply as there's no tangible product. I don't imagine that this will last long, but in the meantime...

NJ is this way, I only have to charge tax if i sell a physical print.


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Thomas ­ Campbell
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Jul 30, 2013 12:21 |  #15

Foodguy wrote in post #16135362 (external link)
Interesting aside, in some states now, if images are transferred via web (ftp, dropbox, email, etc), sales tax doesn't apply as there's no tangible product. I don't imagine that this will last long, but in the meantime...

Not in Texas, unfortunately. You have to charge sales tax even if you just email a pic and that is the only tangible thing the customer gets.

The only photography that could be tax free in Texas is if you do a shoot, and the customer elects not to purchase anything later and received nothing tangible as part of the shoot.


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State Sales Tax on Expenses?
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