Smugmug Sales Tax Collection Issue

Teetime

I am considering upgrading to a pro account and selling my photos. However, I just checked with my North Carolina sales tax department and they indicate the tax rate is based on the purchaser's location, not the seller's location. In NC, sales tax rates vary by county. But, Smugmug only allows us to enter a single tax rate for the state. I asked the NC sales tax department if I should just use the maximum county tax rate for all NC purchases and they said no, can't do that. So basically, the SM pro sales tax tool appears to be flawed, at least for North Carolina and other states where rates vary by county. I'm curious what other photographers are doing regarding collection of sales tax.

It would be great if SM would just let us specify our taxable state(s) and then perform a live lookup of the sales tax rate based on the purchaser's address. There are a number of companies that provide this service (e.g., Avalar).

/jerry

Teetime

If you also see this as an issue you can vote for it here.

Teetime wrote: »

I am considering upgrading to a pro account and selling my photos. However, I just checked with my North Carolina sales tax department and they indicate the tax rate is based on the purchaser's location, not the seller's location. In NC, sales tax rates vary by county. But, Smugmug only allows us to enter a single tax rate for the state. I asked the NC sales tax department if I should just use the maximum county tax rate for all NC purchases and they said no, can't do that. So basically, the SM pro sales tax tool appears to be flawed, at least for North Carolina and other states where rates vary by county. I'm curious what other photographers are doing regarding collection of sales tax.

It would be great if SM would just let us specify our taxable state(s) and then perform a live lookup of the sales tax rate based on the purchaser's address. There are a number of companies that provide this service (e.g., Avalar).

/jerry

Andy

Teetime wrote: »

It would be great if SM would just let us specify our taxable state(s) and then perform a live lookup of the sales tax rate based on the purchaser's address. There are a number of companies that provide this service (e.g., Avalar).

/jerry

It's a great idea and I concur wholeheartedly. Stay tuned.

adbsgicom

I have the same issue (also in NC). Just had a long chat with the State Revenue Department about it, and there really isn't a solution w/o SmugMug doing the right thing. Based on the law, it is illegal for me to eat any of the tax (pay for it out of my pocket) and it is illegal (and silly) for me to over-collect tax.

The system does appear to notice that a shipment is going someplace that isn't NC and not charge tax, so that part works...

FWIW, NC has 3 or 4 different groups for tax collection. Making it automated off one of the services would be absolutely great. A distant second would be requiring that I enter zip codes that are exceptions to a default....

Added my votes on the feature list....

SamirD

Alabama operates the same way, except you have not only county, but municipalities as well. It comes out to a little over 10,000 different tax rates. I faced this in another business and I was spending hours making spreadsheets to help me file the almost 40 returns a month.

But what's more important here is to bring up who is responsible for the tax? Smugmug is receiving the payment directly, and is processing it. In a lot of states, this makes SM ultimately responsible for the taxes, not us as the photographer. This gets into the whole interstate taxation issue, which unfortunately still doesn't have a clear solution.

adbsgicom

NC is a little easier, there is a form to simplify it (supposedly). However, I still need SM to get the collection rate right...

SyBerGuy

Sales Tax Collection, NY State
Hello,

I have similar questions on Sales Tax for New York State, NY Counties, NY City... and about sales tax for other clients throughout the USA or Europe Etc...each with different tax rates. Has SmugMug come up with an answer to this? I am an individual and will get a 1099 form for photo profits to me. And also I will get information about what tax SmugMug has collected on my behalf and will send the money direct deposited into my checking account? Further, I have not checked off "Yes" collect taxes on the SM screen.... until I hear from SmugMug and/ or my accountant...

So my question is; Has SmugMug resolved these basic sales tax collections issues (to date, for the past 2012 and upcoming 2013 tax year)?

Any comments, thoughts would be helpful.

SyBerGuy

MarkHNC

Short answer, no
I had an e-mail exchange with SmugMug this week about this issue, and was referred back to their feedback forum. Since, with my new vote, there's only 11 votes, and the conversations I've seen about this go back over a year, I don't hold out much hope for seeing any movement.

http://feedback.smugmug.com/forums/17723-smugmug/suggestions/2201071-allow-different-sales-tax-rates

daylightimages

Here's the part that befuddles me... As photographers, we should not even be involved in the sales tax discussion. That is a SmugMug issue. They ultimately sell the photos. We, the photographers, provide SmugMug with content as contractors (thus the 1099) -- our fee for providing the photo that SmugMug ultimately sells is referred to as our markup, but in its technical form it the cost we charge SmugMug to provide a photo for SmugMug to sell. We are not actually receiving money from individual purchasers as sellers, we are receiving money from Smug as contractors.

What am I missing here?

MarkHNC

If I understand their thinking: to them, SmugMug appears as a service provider to me. In other words, rather than me being the contractor, I believe they see SmugMug, and the producing lab who dropships, as the contractors who work for me. The final nail in that particular coffin would likely be that I'm setting up a custom domain that takes you straight to my SmugMug galleries. As a result, to the consumer, it appears to be me, not SmugMug, that is selling photos.

They probably see it much like eBay, where eBay provides the platform, but the seller is the person offering the item. eBay may, such as through PayPal, process the payment, but the person offering the item for sale is the seller. They would also probably point to the fact that we set prices, not SmugMug, and are paying SmugMug a "wholesale" price to deliver to our customer a "retail" product.

I found my interim solution on Monday evening, when I spent a lot of time poring over the actual NC Sales and Use Tax law, rather than depending on what I'd read on forums. I paste in an excerpt from the text that is relevant to my interim solution:

§ 105-164.7. Retailer to collect sales tax from purchaser as trustee for State.
. . . The tax must be stated and charged separately on the invoices or other documents of the retailer given to the purchaser at the time of the sale except for either of the following:

(1) Vending machine sales.

(2) Where a retailer displays a statement indicating the sales price includes the tax.

So, I will have to set my prices to include the sales tax, post a notice to that effect, and then do a calculation to determine the sales tax to send to the state. I will have to register with the state and submit either monthly or quarterly forms/payment. Do I like the extra work on me? Of course not, but at least I can get started until SmugMug realizes that the writing is on the wall, and adds sales tax calculation per county.

I do find it interesting that Shutterfly calculates and submits the tax regardless of your U.S. location, but they have a consumer retail face of their own. I just couldn't bear to take such pride in my photography, and then have the subpar visual quality/customer experience and shortage of features found on Shutterfly.

SamirD

daylightimages wrote: »

Here's the part that befuddles me... As photographers, we should not even be involved in the sales tax discussion. That is a SmugMug issue. They ultimately sell the photos. We, the photographers, provide SmugMug with content as contractors (thus the 1099) -- our fee for providing the photo that SmugMug ultimately sells is referred to as our markup, but in its technical form it the cost we charge SmugMug to provide a photo for SmugMug to sell. We are not actually receiving money from individual purchasers as sellers, we are receiving money from Smug as contractors.

What am I missing here?

That's the way I see it. The 1099 puts that in stone as far as the IRS and most state taxing authorities are concerned.

imagerinDenver

Needs a Fix!!!
They should collect and pay the taxes directly for us. If I sell my products on Amazon I do not need to know tax law nationwide and collect it and pay it. Sorry Smugmug you probably do not want to hear this, but if you do not provide a way for us to correctly collect the tax rate how do you think you will be able to say it is our responsibility when you end up in tax court with us. In Colorado there are probably 20 different tax rates. I don't know them all because I have always sold products at my location so I only know the tax rate at my location.

The only alternative for me to be legal with the tax man right now is to have clients pick up products at my location. If that is the case, why should I not order my prints directly from the lab and cut you out of the loop. Smugmug is not the lab or the photographer, they are the middle man to make the online sale. I love Smugmug and my clients love their online galleries, but if you want the job of being our point of sale in return for a cut of the profits you cannot leave me with all the tax headaches.