Tax Question For Texas Residents

Johnnycb

How do you handle charging taxes for photos purchased on SmugMug by Texas residents?

johnny

David Manning

First, I'm not from Texas, but there is no good legal solution. The closest I have found would be to invoice the customer separately for the taxes or include them in the price. To invoice them separately, would not be perceived as good customer service. I seriously don't want to sound down on SM, but there are several things that pushed me toward another solution. I know this isn't much help. I hope someone here can provide you a solution that is acceptable to you, your customer, and SM.

David

Johnnycb

David,

Thanks for the response.

The problem is that the State of Texas requires that we collect taxes on photos sold to Texas customers (residents) that are sold over the internet.

My concern is that SM and others do not have a method for determining the taxes that should be collected from a customer online and then remitted back to the State of Texas. As in most states that have a sales tax the tax amount varies from city to city.

The only thing that I have come up with is to declare on the front page that due to the requirement from the state of collecting taxes I am unable to sale photos to residents or businesses located in the stae of Texas.

The problem is, if they purchased anyway I would be liable for the taxes of I were ever audited by the state.

johnny

Andy

Johnnycb wrote:

David,

Thanks for the response.

The problem is that the State of Texas requires that we collect taxes on photos sold to Texas customers (residents) that are sold over the internet.

My concern is that SM and others do not have a method for determining the taxes that should be collected from a customer online and then remitted back to the State of Texas. As in most states that have a sales tax the tax amount varies from city to city.

The only thing that I have come up with is to declare on the front page that due to the requirement from the state of collecting taxes I am unable to sale photos to residents or businesses located in the stae of Texas.

The problem is, if they purchased anyway I would be liable for the taxes of I were ever audited by the state.

johnny

But you can build it in, if you wish, and remit. And we give you the customer details (address city state zip) so you'll know the locality.

I've no other comments for now, but we're looking at Texas (and other states) tax stuff right now, it's rather a slippery, nasty thing as you can imagine, the States don't make it easy to deal with them at all.

mercphoto

Johnnycb wrote:

The problem is that the State of Texas requires that we collect taxes on photos sold to Texas customers (residents) that are sold over the internet.

My concern is that SM and others do not have a method for determining the taxes that should be collected from a customer online and then remitted back to the State of Texas. As in most states that have a sales tax the tax amount varies from city to city.

Does the State of Texas require you to collect those taxes even if you, the photographer, are not in Texas? Or are you in Texas yourself? If so the tax you collect is based on where you are, not where they are, so the city to city variance should not be an issue.

David Manning

mercphoto wrote:

Does the State of Texas require you to collect those taxes even if you, the photographer, are not in Texas? Or are you in Texas yourself? If so the tax you collect is based on where you are, not where they are, so the city to city variance should not be an issue.

Again, I'm not in TX, but in Arkansas (because my business is in AR), I must collect City, County, and State taxes based on where the customer lives. When I was with labprints, they knew the state I operated in and charged taxes appropriately based on the shipping address of the customer. When they cut my check, the taxes collected on my behalf were included. Labprints DID NOT remit to my state. I did that.

David Manning

Andy wrote:

But you can build it in, if you wish, and remit. And we give you the customer details (address city state zip) so you'll know the locality.

I've no other comments for now, but we're looking at Texas (and other states) tax stuff right now, it's rather a slippery, nasty thing as you can imagine, the States don't make it easy to deal with them at all.

Probably the simplest solution would be to build it into the price, but that doesn't address the invoicing issue. It's a shame states aren't very helpful, because they have so much to gain. Andy, we know your resources are tight, but we appreciate you looking into this. This is a serious stressor for many of us and many more potential SM customers.

Johnnycb

mercphoto wrote:

Does the State of Texas require you to collect those taxes even if you, the photographer, are not in Texas? Or are you in Texas yourself? If so the tax you collect is based on where you are, not where they are, so the city to city variance should not be an issue.

Bill,

Yes, the state does require that you collect the tax IF the customer resides in Texas or the order ends up in Texas.

Here are a couple of links to check out.

1. http://www.window.state.tx.us/taxinfo/taxpubs/tx96_237_2_06.html#art3b

2. Photographers and Texas Sales Tax Bulletin August 2009
http://www.window.state.tx.us/taxinfo/taxpubs/tx94_176.pdf

3. http://aixtcp.cpa.state.tx.us/opendocs/open14/9510527l.html


jb

mercphoto

Johnnycb wrote:

Bill,

Yes, the state does require that you collect the tax IF the customer resides in Texas or the order ends up in Texas.

I can understand the states wanting to tax Internet orders as a means of replacing lost sales tax revenue, but they certainly aren't making it easy to calculate, collect and remit are they.

mercphoto

Johnnycb wrote:

2. Photographers and Texas Sales Tax Bulletin August 2009
http://www.window.state.tx.us/taxinfo/taxpubs/tx94_176.pdf

On page two is something that applies directly to Smugmug and their competitors in that it is the responsibility of the photographer, not the web hosting company, to collect the sales tax. I wonder if that wording would actually prevent Smugmug from collecting the taxes for us anyway?

Hyperiate

mercphoto wrote:

On page two is something that applies directly to Smugmug and their competitors in that it is the responsibility of the photographer, not the web hosting company, to collect the sales tax. I wonder if that wording would actually prevent Smugmug from collecting the taxes for us anyway?

I'm not a tax professional, but to me that simply says that if you don't collect and remit sales taxes you can't point your finger at SM for not collecting them. They are allowed to collect them for you (you can delegate your responsibility, but that doesn't relieve you of it), but it's your responsibility to make sure they do and send the taxes to you.

Cheers,
Tom B

Johnnycb

Hyperiate wrote:

I'm not a tax professional, but to me that simply says that if you don't collect and remit sales taxes you can't point your finger at SM for not collecting them. They are allowed to collect them for you (you can delegate your responsibility, but that doesn't relieve you of it), but it's your responsibility to make sure they do and send the taxes to you.

Cheers,
Tom B

Here is the scary part from SmugMug and the likes......

A charge by the web hosting company to place, store, and operate a website is subject to Texas sales and use tax as a data processing service. Twenty percent of the charge for data processing services is exempt from Texas tax. See Rule 3.330 for further information regarding data processing services.

This means SmugMug and the likes would owe the state of Texas and other states that have a similar tax code a lot of money since the are looked upon as a data processing center and thus are subject to sales tax and useage tax.

What a racket.


jb

Allen

So if I was a resident of Texas and was at the moment traveling in Ok. and
purchased some photos, which state do the sales tax belong to? Using the
internet there is no way to know what state you purchased in unless they ask
on the order form.

Isn't this the same as you traveling to a different state and buying something
from Walmart and Texas wanting you to pay them sales tax also?

mercphoto

Allen wrote:

So if I was a resident of Texas and was at the moment traveling in Ok. and
purchased some photos, which state do the sales tax belong to? Using the
internet there is no way to know what state you purchased in unless they ask
on the order form.

Isn't this the same as you traveling to a different state and buying something
from Walmart and Texas wanting you to pay them sales tax also?

This is why sales taxes and the Internet are so difficult. Add to that each state and each locality in each state has different rules. And providers like Smugmug are supposed to deal with this? Sure they are...

In your particular case I would think the taxes would be based on the shipping location, not where you were when you actually ordered. But who knows.

I would not be surprised if the Interstate Commerce Clause eventually comes into play here. If the states want sales taxes from the Internet they need to make it reasonably easy to deal with. But the odds of them taking this initiative on their own is very low. This is why I see future Federal regulation on this somewhat likely. I'm usually not much in favor of regulation, but sometimes parties just won't do it on their own.

timk519

So, what are people doing for taxes now? Just go with SM's charging CA tax and leave it at that?

Johnnycb

If they can,,,you can right?

Andy wrote:

But you can build it in, if you wish, and remit. And we give you the customer details (address city state zip) so you'll know the locality.

I've no other comments for now, but we're looking at Texas (and other states) tax stuff right now, it's rather a slippery, nasty thing as you can imagine, the States don't make it easy to deal with them at all.

Hello Johnny,
Thanks for contacting us.
Yes, you can charge sales tax to just Texas addresses. You can set that up by logging in and going to Selling > Sales Tax.

Let us know if you have any further questions.
Regards,

Alan
Zenfolio Customer Support