Must one charge taxes if they are not selling the USB but simply uploading them to a USB provided

I know that in most states, when you add a tangible product to an invoice, everything must be taxed, including the service fee. What if the client provides the USB and in essence I am not selling any tangible products, simply providing a service and uploading the images on a USB for them?

Luigi1234 wrote in post #18026332
I know that in most states, when you add a tangible product to an invoice, everything must be taxed, including the service fee. What if the client provides the USB and in essence I am not selling any tangible products, simply providing a service and uploading the images on a USB for them?

Tech support is a service, and most of it consists of using other people's hardware. I suspect you're cool.

This will be something you'll have research way more in depth than just getting answers on a forum. For example, the WA State Dept of Revenue states: (apologies on copy/paste formatting)
Washington State law generally treats ​digital photographs an​d tangible photographs​ (i.e., prints or
photo files delivered ​on CD) in the same man​ner for tax purposes.
Digital photographs ar​e considered digital goods when tra​nsferred electronicall​y. "Digital goods" means
sounds, images, data, ​facts, or information,​ or any combination th​ereof, transferred ele​ctronically. Sales
of digital photographs​ are subject to Retail​ing B&O tax and retail​ sales tax.

Excerpted from: http://dor.wa.gov …stspecific/phot​oguide.pdf

These types of things can differ both from state to state as well as be treated differently in some counties.

Probably best to check with your individual state.

In mine like others, unless there's a tangible item that's transferred, then there's no tax...ie: uploading to dropbox or FTP but, I'm not sure what would be the case if the client were to arrive with a drive and we put the images on it as I've not encountered that situation. I have had cases where I've provided a flash drive and consequently charged sales tax on the entire job like in the 'old' days when we provided images on dvd...and in the *really old* days when we delivered film.

Interesting scenario to consider though as I'd guess as lot of tax revenue is being lost with images being uploaded for delivery and I'd guess it's just a matter of time until tax laws change to reflect the current methods of delivery.

Thank you Snydremark.

I spoke with my department and they said as long as they are not receiving anything tangible it is fine, even if the photos are electronically transferred. I will call to morrow to find out about using a USB that belongs to the client.
How do you tax your client if you don't mind me asking? Do you tell them you are adding a tax? How do they respond?
I don't charge enough to simply throw the tax into the total (or at least it's how I feel about it) and thus feel the need to have to charge it separately so they know I'm not keeping that money.

Thanks again for your input.

I see... interesting.

How do you charge tax if you don't mind me asking? Do you give them an option (electronic vs. USB)? Or just add it into their bill without telling them you are taxing them. I know some photographers do that, but I feel like I don't charge enough to also pay a tax they aren't even aware I am not keeping for myself. Does this make sense?

Luigi1234 wrote in post #18026508
Thank you Snydremark.

I spoke with my department and they said as long as they are not receiving anything tangible it is fine, even if the photos are electronically transferred. I will call to morrow to find out about using a USB that belongs to the client.
How do you tax your client if you don't mind me asking? Do you tell them you are adding a tax? How do they respond?
I don't charge enough to simply throw the tax into the total (or at least it's how I feel about it) and thus feel the need to have to charge it separately so they know I'm not keeping that money.

Thanks again for your input.

I don't currently sell my photos; keep 'em to gifts for friends/family; I don't have the patience to work out all the details for setting up a proper business. I do wish you the best of luck!

If I *were* to be doing it, though, I would itemize the tax out so that it appeared separate, as well.

Not sure if your ? was directed to me, but if it was...

I typically have an opportunity prior to the shoot to describe the process and at that time mention files being uploaded to Dropbox. Sometimes I mention the tax implications of delivering the photography that way...but not always.

I've had a few occasions where the client asked me to provide a hard drive and don't recall if I mentioned the tax consequences or not but am certain that I did charge tax at the end of the project. And, fwiw, I charge tax on the entire production i.e. ALL of the elements that went in to the job...fees/crew/props/​lunch, etc. Over the years I've had some clients accounting departments contact me questioning whether they should be taxed this way and I refer them to a directive from the tax department that describes commercial photography in almost 'value added' terms.

Also, I've been told, though have no first hand experience, that in the event of an audit or other inquiry from the tax department, that should they discover situations where you've not collected tax when it was called for, that you could be responsible for that tax.

I would very much keep any tax you need to charge as a separate line item within an invoice.

This does two things (1) makes it clear to the customer the tax portion of the charges and (2) makes it clear to YOU how much you've charged in tax.

For option (1) it prevents the customer from thinking "hmm weird this photographer did not appear to charge me tax, when earlier another photographer XYZ charged me tax for an identical service" which isn't a problem directly but can cause confusion that you do not want.
For option (2) it makes it much easier to keep track of the taxes you are charging so that you can report it correctly in your tax reports to the state. This method also helps in case you get audited because if they don't see it you may have problems.

I wouldn't worry much about a customer's response about tax for taxed products. I've never been asked or had it come up at any point as an issue. For example someone buying a car wouldn't (or at least shouldn't) be pissed at a car dealership for charging them tax on their expensive purchase, it isn't the dealers fault for the states tax requirements.

If you are in a state that charges tax for tangible digital goods but not digitally-provided digital goods, it's pretty easy to explain it to a customer should it ever come up. The only awkward times digital goods tax has ever tripped me up is when I sell/provide digital goods to someone out of state from a state that requires sales tax from the sale. Fortunately Smugmug handles those sales for me and thus handles the tax for those sales themselves. But it's still weird to me to see sales tax on these sales when most other identical sales (for customers in other states) do not get taxed.

Luigi1234 wrote in post #18026508
I don't charge enough to simply throw the tax into the total (or at least it's how I feel about it) and thus feel the need to have to charge it separately so they know I'm not keeping that money. .

Luigi1234 wrote in post #18026511
I see... interesting.

How do you charge tax if you don't mind me asking? Do you give them an option (electronic vs. USB)? Or just add it into their bill without telling them you are taxing them. I know some photographers do that, but I feel like I don't charge enough to also pay a tax they aren't even aware I am not keeping for myself. Does this make sense?

If you are referring to just charging customers what you regularly charge, without the taxed value added in to the overall total, and then simply paying the tax value to the state unbeknownst to the customer... I would highly recommend not doing this.
There will be no proof within the invoice/receipt that a tax was charged to the customer, who is the buyer and therefore the one technically required to pay the tax.
As the seller you are just a vehicle for the tax money, to take it from the customer and directly pay it to the state. In my case I tally what I have received as tax payments, and also compile the taxable income, and report this to the state (along with the tax payment to the state). The money I pay to the State was never my money and never part of the product price.

I have heard that some states technically it is illegal for the seller to pay the sales tax of a sale... although I have never looked into the validity of this claim. It could be possible tho because otherwise it would make auditing a business's sales tax stuff a nightmare, I would think.

Either way, it is not your responsibility to pay for the tax with your profits and even if it is not illegal, it is really a bad business move.
"Nice guy" mistakes like that will add up in a business like this and really take it's toll, making any money selling photos (even just as a side business with small income) is hard enough as it is, you don't want to be paying anything you aren't responsible for.

Charge customers what you think your product/time is worth, add tax to this separately, always.

Luigi1234 wrote in post #18026332
I know that in most states, when you add a tangible product to an invoice, everything must be taxed, including the service fee. What if the client provides the USB and in essence I am not selling any tangible products, simply providing a service and uploading the images on a USB for them?

In Virginia, anything photographic is a product, even if it otherwise appears as a service. Electronic images that are transferred are a product. If you were to take photos with a client's equipment and leave them with the photos on the card in the camera, you are, according to the Commonwealth of VA, selling a product and are subject to collecting normal 6% sales tax and giving it to the state.

Furthermore, when you are collecting sales taxes, you must file with the state every month, whether you had sales or not. Failure to file results in a fine to the state. Photography is potentially big business, and that means revenue to the state. A $5,000 wedding photography job represents $300 in sales tax to VA. Fair or unfair, VA wants their money, and if you get any income as a photographer you're collecting sales tax on that and giving it to the state.

I don't know where you are, but look online at the requirements for your state. Many states (most? all?) have good online resources regarding businesses and taxation. VA seems to me to be onerous regarding photography and taxation, but I suspect it isn't unique.

Thanks Mathogre. I called department of revenue and they advised me it would be only when tangible products were exchanged. I called both Gerogia and Florida since I do business in both.

Luigi1234 wrote in post #18030482
Thanks Mathogre. I called department of revenue and they advised me it would be only when tangible products were exchanged. I called both Gerogia and Florida since I do business in both.

Sounds great. Maybe I need to move!