IL Sales Tax

KellyJohnson

I am confused about what is done with sales tax and pro orders. Does SM charge my customers sales tax on my orders when my customers check out? Am I supposed to be building tax into my prices? Am I the one who pays the sales tax to the state for these orders or is SM supposed to pay it? I am so confused and new at this, any help is appreciated.

Andy

Hi, since we are technically the seller, we only charge, and remit to the State of CA, tax on orders from customers that are from California - where we are based.

Sledhed

KellyJohnson wrote:

I am confused about what is done with sales tax and pro orders. Does SM charge my customers sales tax on my orders when my customers check out? Am I supposed to be building tax into my prices? Am I the one who pays the sales tax to the state for these orders or is SM supposed to pay it? I am so confused and new at this, any help is appreciated.

Kelly,

I'm in Illinois too, you do not have to pay sales tax to the state. As Andy said they are technically the seller. Currently for internet sales you only have to pay sales tax if it is shipped to an address within that state. It's just like if you purchased something from B&H in NY, they only charge sales tax to NY residents. When it's shipped out of state, no sales tax.

impressivepix

You REALLY need to recheck your laws on this. We were told by the state of Florida that you have to pay sales tax on the 1099 form that we receive from Smugmug.. PLUS, you have to pay sales tax on the items you buy from B&H on your sales and use tax every quarter (or month) that is just what we were told, you really need to call the tax agency in your state and find out for sure. We got a form saying they are cracking down on photographers because there are tons of them out there not charging or paying sales tax. They said EVERYTHING you sell, even the sitting fees are taxable and need to be taxed and paid.

This is just FYI, this is what we were told for Florida.

SamirD

Sledhed wrote:

Currently for internet sales you only have to pay sales tax if it is shipped to an address within that state.

This varies from state to state. And even within cities and counties in a state. Check with your local government as well as attorneys and accountants. If you're lucky, they'll all give you the same answer.

I'd also check how these tax laws are being enforced. That's something that's good to know. I paid taxes accurately in my last business only to find out that they don't really care. It took at least 2hrs to fill out the paperwork each month. I want the two days of my life back.

Allen

Just a through, if you do not have a Pro account your photos are still being
sold at base without profit to you. Do these states want you to pay sales tax
on those sales and why wouldn't they? Would hack off every standard and
power account holder.

Pros, do you only report sales tax on your profit, yours + Smugmug profit, or
entire sale price including base? Seems you pay income tax on profit (1099)
and you also pay sales tax on this. Double tax?

Dan7312

When a store blows out some inventory at below cost do they collect sales tax? I'm pretty sure that they do. In places states are trying to collect sales tax on yard sales where almost everything is sold at below cost by people who aren't really in any kind of business... so I'm not sure profit is the main factor in sales tax... one of those things best left to accounts and lawyers.

Allen wrote:

Just a through, if you do not have a Pro account your photos are still being
sold at base without profit to you. Do these states want you to pay sales tax
on those sales and why wouldn't they? Would hack off every standard and
power account holder.

Pros, do you only report sales tax on your profit, yours + Smugmug profit, or
entire sale price including base? Seems you pay income tax on profit (1099)
and you also pay sales tax on this. Double tax?

SamirD

Allen wrote:

Just a through, if you do not have a Pro account your photos are still being sold at base without profit to you. Do these states want you to pay sales tax
on those sales and why wouldn't they? Would hack off every standard and
power account holder.

In the state of Alabama, technically, yes. If you sell anything, you have to collect sales tax unless you have documentation indicating it is a wholesale sale.

Allen wrote:

Pros, do you only report sales tax on your profit, yours + Smugmug profit, or entire sale price including base? Seems you pay income tax on profit (1099) and you also pay sales tax on this. Double tax?

Whatever the 1099 says is your taxable income. Typically this same amount is taxed for sales, but there's variations depending on discounts and individual state laws.

It's supposed to be single tax liability since the sales tax burden is passed on to the consumer. But with SM not set up to collect individual state, county, city, and whatever else taxes, it is the responsibility of the pro to additionally collect these. And then it even gets more complicated in a state like Alabama which requires the consumer to file 'use' taxes at the same rate as sales tax for anything taxable purchased that did not have sales tax collected.

It gets overly complicated. It should just be tabulated and remitted daily. Every business has a daily sales report. This should just be submitted electronically like credit card processing to the proper places and the appropriate amount deducted or billed. It would make life a lot simpler.

SamirD

Dan7312 wrote:

When a store blows out some inventory at below cost do they collect sales tax? I'm pretty sure that they do. In places states are trying to collect sales tax on yard sales where almost everything is sold at below cost by people who aren't really in any kind of business... so I'm not sure profit is the main factor in sales tax... one of those things best left to accounts and lawyers.

Yeah, it's a bit crazy. Anything sold has to be taxed, have a license, etc, etc. But then there's those that run without these things, not intentionally, but by accident because the law is so complicated. And the fees for those that are complying is increased to compensate for those that aren't.

I wasn't refunded $450 from the city when I closed one of my businesses. The license fee was based on sales. We projected a certain amount of sales, but then decided to close the business in the first month of the year. We were not given a prorated refund because other people are operating without a license and the excess helps cover them.

xxclixxx

In Rhode Island, if a single affiliate sells more than a specified amount than the affiliate site is expected to pay sales tax on all purchases made from all affiliates to customers living in Rhode Island. Because of this Amazon no longer allows me to be an affiliate. Hoorah!

Essentially their thinking is once any single person is making more than a certain amount of money, they are considered to be a physical location of that company and no longer an affiliate. Which then means ALL sales in the state need to have sales tax, whether through that person or not.

http://www.projo.com/news/content/AMAZON_TAX_06-30-09_9AESSDT_v17.3a61e5a.html

I've wondered how this affects Smugmug sales..

HoofClix

impressivepix wrote:

You REALLY need to recheck your laws on this. We were told by the state of Florida that you have to pay sales tax on the 1099 form that we receive from Smugmug...

Incorrect! My business operates in four states, including Florida, and I have to file the sales tax returns each month for each of four states. The only taxable sales I have in Florida are those for which I receive direct payment while actually within Florida, sales which do not clear via Smugmug in any way. I must charge sales tax on location in Florida while making those sales, then report it to FL and send them the money. Once I cross outside of Florida, if I make a direct sale to any customer outside of SC, receiving payment in my home state of SC, that is now considered by SC to be an out-of-state sale, and I don't have to collect sales tax on that. I do have to report it as non-taxable sales to the SC DepRev.. This is exactly the same for you who are living in Florida.

In the case of any sale made on line via my Smugmug shopping cart, no matter where the customer is, Smugmug is the legal entity that is the seller. In that case Smugmug is the entity that must follow the sales tax rules (which they do!) We essentially license Smugmug to sell out copyrighted work, and in return what they do is to send us a commission check, which is not a taxable sale on our part. Smugmug writes you a 1099 so that they can deduct that cost for themselves. Smugmug is already reporting this revenue as sales within CA, either taxable or non-taxable, so any reporting in your home state would be double accounting. If you are claiming your Smugmug commission as taxable sales, you are losing money unnecessarily! Explain it to your tax accountant....

impressivepix wrote:

PLUS, you have to pay sales tax on the items you buy from B&H on your sales and use tax every quarter (or month)

This is correct in most all states, and does also apply to SC. It applies to both purchases made by businesses or individuals. If I buy a camera from B&H, they don't charge sales tax, there is a line for me to admit to this purchase on my monthly SC sales tax return and pay the appropriate 6% sales tax to SC. That is something that varies from state to state, so each of you need to know how your state handles this.

impressivepix wrote:

that is just what we were told, you really need to call the tax agency in your state and find out for sure. We got a form saying they are cracking down on photographers because there are tons of them out there not charging or paying sales tax.

You are probably not explaining this correctly to your tax agency. Discuss this thoroughly with a tax accountant and you will get the correct answer.

impressivepix wrote:

They said EVERYTHING you sell, even the sitting fees are taxable and need to be taxed and paid.

This is just FYI, this is what we were told for Florida.

Explain correctly that in the case of sales made via your shopping cart, the seller is not you, but Smugmug....

Andy

xxclixxx wrote:

In Rhode Island, if a single affiliate sells more than a specified amount than the affiliate site is expected to pay sales tax on all purchases made from all affiliates to customers living in Rhode Island. Because of this Amazon no longer allows me to be an affiliate. Hoorah!

Essentially their thinking is once any single person is making more than a certain amount of money, they are considered to be a physical location of that company and no longer an affiliate. Which then means ALL sales in the state need to have sales tax, whether through that person or not.

http://www.projo.com/news/content/AMAZON_TAX_06-30-09_9AESSDT_v17.3a61e5a.html

I've wondered how this affects Smugmug sales..

but you are not part of our company - you are you, part of your company

SamirD

HoofClix wrote:

Incorrect! My business operates in four states, including Florida, and I have to file the sales tax returns each month for each of four states. The only taxable sales I have in Florida are those for which I receive direct payment while actually within Florida, sales which do not clear via Smugmug in any way. I must charge sales tax on location in Florida while making those sales, then report it to FL and send them the money. Once I cross outside of Florida, if I make a direct sale to any customer outside of SC, receiving payment in my home state of SC, that is now considered by SC to be an out-of-state sale, and I don't have to collect sales tax on that. I do have to report it as non-taxable sales to the SC DepRev.. This is exactly the same for you who are living in Florida.

In the case of any sale made on line via my Smugmug shopping cart, no matter where the customer is, Smugmug is the legal entity that is the seller. In that case Smugmug is the entity that must follow the sales tax rules (which they do!) We essentially license Smugmug to sell out copyrighted work, and in return what they do is to send us a commission check, which is not a taxable sale on our part. Smugmug writes you a 1099 so that they can deduct that cost for themselves. Smugmug is already reporting this revenue as sales within CA, either taxable or non-taxable, so any reporting in your home state would be double accounting. If you are claiming your Smugmug commission as taxable sales, you are losing money unnecessarily! Explain it to your tax accountant....


This is correct in most all states, and does also apply to SC. It applies to both purchases made by businesses or individuals. If I buy a camera from B&H, they don't charge sales tax, there is a line for me to admit to this purchase on my monthly SC sales tax return and pay the appropriate 6% sales tax to SC. That is something that varies from state to state, so each of you need to know how your state handles this.

You are probably not explaining this correctly to your tax agency. Discuss this thoroughly with a tax accountant and you will get the correct answer.

Explain correctly that in the case of sales made via your shopping cart, the seller is not you, but Smugmug....

Excellent info! This is the type of information each of us has to research in each area we do business. The laws are detailed in what they tax and do not tax, and we have to figure it out.

Now, when it comes to federal income tax, I believe the amount on the 1099 is subject to income tax. This is different than sales tax.

xxclixxx

Andy wrote:

but you are not part of our company - you are you, part of your company

I'm not a part of Amazon either..

The point is the law says that it doesn't have to be part of the company, it just has to be a person living in the state who is paid by that company and physical products being sold. I'm not sure if Smugmug sales would be considered "commissions" or "royalties" or something else, and if that makes a difference.

Your comment is why many are calling it unconstitutional. If a company has no employees in a state then how does that state get to tax it.

HoofClix

The analogy in the Rhode Island case, worded from Smugmug's pov, would be that RI would have SM collect RI sales tax for any sales shipped to RI. In Amazon's case, it's affiliates would not have to pay sales tax to RI, but Amazon would. Same issue for we who would be sort of SM affiliates. I'm sure that in the deep caverns of the halls of Smugmug there are people considering this issue, but it doesn't mean that we need to collect sales tax on something that we didn't sell.

(And it's another issue that those RI affiliates dropped by Amazon have now had all these months to be welcomed to the great state of Delaware, or other states happy to now regain the income tax base that RI once had!)