Salex tax + prints

divamum

I of course add appropriate sales tax to my shoots, and file accordingly.

Most of my shoots don't involve prints, but a couple of recent ones have. The client buys the prints from smug, but I make a profit. Does Smug deduct the sales tax appropriate for my state (as per the info I submitted when I registered to collect the profit), or do I calculate that myself? Or have I missed something entirely and there's something I need to set to make this happen automatically?

Just trying to figure out the most streamlined way of doing this....

Sam

divamum wrote: »

I of course add appropriate sales tax to my shoots, and file accordingly.

Most of my shoots don't involve prints, but a couple of recent ones have. The client buys the prints from smug, but I make a profit. Does Smug deduct the sales tax appropriate for my state (as per the info I submitted when I registered to collect the profit), or do I calculate that myself? Or have I missed something entirely and there's something I need to set to make this happen automatically?

Just trying to figure out the most streamlined way of doing this....

SmugMug is the seller. They are responsible for the taxes, and they have been doing for awhile so thay have it down pat. No worries.

Sam

Pure Energy

Sam wrote: »

SmugMug is the seller. They are responsible for the taxes, and they have been doing for awhile so thay have it down pat. No worries.

Sam

I'd worry if you lived outside the states of California and Washington. As I understand it, SmugMug handles the sales tax for sellers that are from those two states. I take that to mean they add sales tax, when appropriate, to anything you sell through them.

divamum

I am in neither CA and Washington. Therefore... I still need to know the procedure for correctly calculating and collecting if anybody knows what it is Thanks in advance!

Angelo

Mr. Jones is a prolific art collector living in Pittsburgh, PA. If Mr. Jones walks into an art gallery in Pittsburgh and purchases an oil painting, the gallery will add the appropriate sales tax and send Mr. Jones off, happy, peppy and proud of his new acquisition. The artist is never involved in the transaction.

If Mr. Jones calls a gallery in Boston and arranges to purchase a watercolor, that Boston gallery completes the sale but does not include sales tax because they are shipping the painting out-of-state. Again, the artist is not involved in the transaction.

Doesn't it stand to reason that if SMUGMUG (the gallery) sells prints to someone in California, where they are based, they will collect sales tax, but not if they are shipping out-of-state (unless there's reciprocity established with any other particular state)?

Angelo

divamum wrote: »

I am in neither CA and Washington. Therefore... I still need to know the procedure for correctly calculating and collecting if anybody knows what it is Thanks in advance!

you aren't selling anything - why be concerned with collecting sales tax?

photodad1

1. I would contact a CPA in your area and/or contact your department of revenue in the state that you live to find out if you need to charge sales tax or not. If you do need to charge sales tax on Smugmug orders, see item 2.

2. If you need to collect sales tax from SmugMug by enabling the sales tax feature under your Pro setting tab:
Log into your SmugMug account: go to Tools>>>>Control Panel>>>Pro's>>>Sale Tax Tool
You can then select your state and enter the tax percentage for SmugMug to charge.

Please feel to drop me a PM in you want.

kdlanejr

You're right to be concerned. Those telling you that smugmug will take care of it for you are setting you up for failure. You need to contact your state sales tax authority and confirm with them exactly what your responsibility is. Your CPA knows what your federal tax requirements are, but usually doesn't know what to tell you regarding sales tax.

If you look in your Pro tab of your control panel you will see an item called "sales tax tool". This is where you set up your smugmug sales tax options.

In Texas I'm not required to collect and remit sales tax for out of state sales, but I am required to do so for sales occuring in Texas and fulfilled via smugmug, even though their labs are out of state.

Angelo

this is true but much will depend on the framing of the question which is why I believe there has been so much confusion on this matter

divamum

Here's the official statement from the state Comptroller - anybody care to translate?! I can't for the life of me parse what it's supposed to mean. I will of course contact them to clarify as needed, but in case anybody can make sense of it....

================================

(a) Photographic material. ‐‐ The sales and use tax does not apply to a sale of
photographic material for use in the production of an item that is used in:
(1) composition or printing; or
(2) production of another item used in printing.
(b) Printing use. –
(1) The sales and use tax does not apply to a sale of art works, electros, electrotypes,
hand or machine compositions, lithographic plates or negatives, mats, photo engravings,
stereotypes, or typographies:
(i) to a person engaged in the printing of tangible personal property for sale; and
(ii) for direct use by the person to produce that property for sale.
(2) A vendor who sells any item under paragraph (1) of this subsection is not entitled
to any exclusion under § 11‐101(h)(3)(ii) or

kdlanejr

Care to tell us which State?

Dan7312

This stuff is hard to parse, yes...

I think (a) looks like its talking about a seller not having to collect sales tax when they sell the listed materials to someone who makes prints for resale, and (b) is classifying what sort of people are considered to be valid purchasers of the materials listed in (a).

I don't think it is talking about you as an tog'/artist selling prints of your images.

But that's just a guess of course. One of the issues it that sometimes the words/phrases used in these regulations are magic incantations, and with definitions that have little relation to reality.

Just because SmugMug sells the prints it may or may not shield you from collecting sale/use tax from residents of your state that purchase the prints. Some states have laws specifically covering 'togs in their state doing this.

You might be able to clarify things by talking to the tax officials in your state, but you may need a tax accountant/CPA/lawyer who works with 'togs to find out for sure.

Because of the magic incantation factor there is almost no way for you to figure this out on your own. Years ago I was about to sign a contract with a specific date for payment to me. When my lawyer looked at it he said that because the words "time is of the essence" were not included in the contract the buyer could pay me at their leisure.

divamum wrote: »

Here's the official statement from the state Comptroller - anybody care to translate?! I can't for the life of me parse what it's supposed to mean. I will of course contact them to clarify as needed, but in case anybody can make sense of it....

================================

(a) Photographic material. ‐‐ The sales and use tax does not apply to a sale of
photographic material for use in the production of an item that is used in:
(1) composition or printing; or
(2) production of another item used in printing.
(b) Printing use. –
(1) The sales and use tax does not apply to a sale of art works, electros, electrotypes,
hand or machine compositions, lithographic plates or negatives, mats, photo engravings,
stereotypes, or typographies:
(i) to a person engaged in the printing of tangible personal property for sale; and
(ii) for direct use by the person to produce that property for sale.
(2) A vendor who sells any item under paragraph (1) of this subsection is not entitled
to any exclusion under § 11‐101(h)(3)(ii) or

divamum

Dan, I'm laughing out loud at your "magic incantation words" - yes! My husband is great at legalese and he couldn't figure this one out either - we're just scratching our heads as we read through the (allegedly relevant) tax code. I'll just call them - I'm TRYING to give them their money if necessary, so hopefully they will be helpful instead of giving me a hard time....

Sam

Where's Andy when you need him??????

Sam

PS: Be careful of relying on a phone conversation with the tax people. You can get 6 different answers from 6 different people and non of them are valid unless in writing accompanied by an employe photo ID, birth certificate, foot print, and notarized statement from your states head tax collector.

divamum

Ok, short version answer:

Called my accountant who said that there were loads of potential variants; since he is not a Sales & Use Tax specialist, he advised me to call the state.

Having done so, it turns out I do need to apply sales tax to the entire order (because although Smugmug is not based in my state, both I and the client(s) are).

Confused enough yet?

Short version: call your own state's tax office, get a name of who you spoke to, and the relevant section of the tax code. This stuff even confuses the professionals

ETA: Sam, yes, you're right, but I think I did as much as could. Frankly, adding it at the point of sale covers me no matter what the details....

Sam

divamum wrote: »

Ok, short version answer:

Called my accountant who said that there were loads of potential variants; since he is not a Sales & Use Tax specialist, he advised me to call the state.

I rely on my accountant to take care of all those pesky 'variants".

Having done so, it turns out I do need to apply sales tax to the entire order (because although Smugmug is not based in my state, both I and the client(s) are).

I think you asked the wrong question. The question should have been something like, " I am a photographer and I pay SmugMug to host my images on the internet. They provide sales and fulfillment services for me. They are the seller. They sell, print, deliver, pay any sales tax due and handle all warranty / customer service issues. They take 15% percent of the sale and periodically send me the remainder." SmugMug is the seller. I do not directly offer or sell my online images, I do not print or have them printed, I do not deliver any images, I do not have contact with the client. This could be considered a consignment sale.

Under these circumstances how could the state expect me to also collect and pay any sales tax due?

Confused enough yet?
Short version: call your own state's tax office, get a name of who you spoke to, and the relevant section of the tax code. This stuff even confuses the professionals

Do you have this in writing? What answer did you expect? If you ask any tax collecting agency " Do I need to collect and pay tax on (insert almost any situation) they will invariably go on auto response "YES" It is also the safe answer for the tax dept employee.

ETA: Sam, yes, you're right, but I think I did as much as could. Frankly, adding it at the point of sale covers me no matter what the details....

Yes, right or wrong that would be the safe way to go, even if it does require additional effort on your part, and even if in fact no tax was due. The state loves ya.

Sam

divamum

I think you asked the wrong question. The question should have been something like, " I am a photographer and I pay SmugMug to host my images on the internet. They provide sales and fulfillment services for me. They are the seller. They sell, print, deliver, pay any sales tax due and handle all warranty / customer service issues. They take 15% percent of the sale and periodically send me the remainder." SmugMug is the seller. I do not directly offer or sell my online images, I do not print or have them printed, I do not deliver any images, I do not have contact with the client.

Which was precisely the question I asked, framed as you said it above practically word-for-word, and the answer was repeated back to me the same way, as well as providing me with the relevant passage of tax code. I think the agent was entirely clear on what I was asking

Angelo

Sam made the same point as me. I simply cannot understand how any state taxing authority can expect you to collect sales tax for something you DID NOT sell!

I've battled the California authorities (Board of Equalization) on similar matters and won!

I would pose the "gallery owner sales" example and see if you get a different answer or better yet ask a gallery owner directly. I did and was told precisely what I expected to hear - artist has nothing to do with the sales transaction.

Now, if the agency believes that the prints are part of the total photo deal package and Smugmug simply handles order fulfillment then they might have a point - but that isn't or shouldn't be the case. There is a condition to consider. The state tends to apply completion rule to these types of transactions. They deem that a photo session inherently results in the printing of photos. I might argue that the client paid for a sitting fee with the expectation of printing their own photos. How would / could the state attempt to tax those prints or expect you to?

Dan7312

In all states (I'm pretty sure) whenever a resident buys a taxable item there is a sales/use/excise tax due, the only question is how it is collected. In general the state will not attempt to collect that tax directly from the individual resident for small retail sales. However it will go after businesses that make purchases of equipment out of state. When we buy from B&H (I'm in MA) or other internet merchants, for our business we remit the sales tax to the state ourselves. If we didn't the state would figure out from our return that we must be buying equipment somewhere, audit us more closely and collect the tax with a penalty.

Some states by law just don't view a sitting as being separate from purchasing a print. In the case of SmugMug, your tax return shows the income from photography, and they know that involves prints which are taxable. In an audit they can see that SmugMug isn't buying goods from the 'togs, they are just fulfilling the order for them, that is they are just acting as an agent for the 'tog.

Sometimes really small business can just ignore collecting the sales taxes and get away with it, because their returns are relatively small. However our accountant has told us of some of her clients who did this, some out of ignorance and some not, for many years. Eventually that were hit by an audit and had to pay huge fines.

If you actually sold prints to an out of state vendor, for example to an out of state furniture store, and that vendor took possession of them and could not give them back to you, I doubt you would be required to collect the tax when the furniture sold them. But that's quite different for selling though SmugMug.

We've, an MA business, had dealings with the California Board of Equalization. We've had to deal with for some training I did there, through a third party, in concept much like selling prints via SmugMug. It ended up costing us thousands dollars by the time we sorted things out. I applaud your success in dealing with them and am in awe of youbow

Angelo wrote: »

Sam made the same point as me. I simply cannot understand how any state taxing authority can expect you to collect sales tax for something you DID NOT sell!

Angelo

Dan you present some well reasoned points. thanks

divamum

When I purchase retail online from an out-of-state vendor, I am not charged sales tax in this state.

However, as I understand it, while Smug is the agent providing the print - and in another state - both I (effectively the seller) and the buyers are in-state, thus the full amount is taxable.

Here's the relevant tax code for anybody who's interested:

C. Tangible Personal Property Shipped into this State. In those cases in which tangible personal property is shipped into this State pursuant to a contract of sale, the sale will be considered to be made in this State if both of the following tests are met:

(1) The contract of sale is entered into either conditionally or unconditionally in this State by or on account of a nonresident seller who has in this State a place of business from which sales are made or a sales office.
(2) The delivery of the tangible personal property is made by the seller to the buyer in this State. Delivery of tangible personal property will be considered as made in this State if either:
(a) Physical possession of the tangible personal property is transferred by the seller to the buyer in this State; or
(b) The tangible personal property is shipped by the seller from a point outside this State to a buyer in this State either by common carrier or mail, whether the shipment is F.O.B. the seller's place of business or otherwise.

I suppose the definition of "sell" is what could be called into question here (ie, is the profit I generate a "sale" or not?), but for the very small amount of impact this will have on me and my clients, it's really not worth getting into a battle with the state and I will simply hand over the 6%, which is unlikely to buy more than a couple of cups of coffee for somebody. For a photographer whose business is more about the paper than mine there may be a point to argue, but I'll leave it to them to do so on this occasion

I'm just happy to have it worked out (and very pleased this state has implemented an online system, making it MUCH easier to keep track of)

Sam

Here's the relevant tax code for anybody who's interested:

C. Tangible Personal Property Shipped into this State. In those cases in which tangible personal property is shipped into this State pursuant to a contract of sale, the sale will be considered to be made in this State if both of the following tests are met:

(1) The contract of sale is entered into either conditionally or unconditionally in this State by or on account of a nonresident seller who has in this State a place of business from which sales are made or a sales office.
(2) The delivery of the tangible personal property is made by the seller to the buyer in this State. Delivery of tangible personal property will be considered as made in this State if either:
(a) Physical possession of the tangible personal property is transferred by the seller to the buyer in this State; or
(b) The tangible personal property is shipped by the seller from a point outside this State to a buyer in this State either by common carrier or mail, whether the shipment is F.O.B. the seller's place of business or otherwise.

It's really up to you if you to take what ever path you want, but you did ask the question.

If you look at #1, SmugMug, the seller, the one offering the prints, the one invoicing the customer for payment does not have a sales outlet or a place of business in NY.

The sale from SmugMug does meet the criteria of #2.

However by their own tax code The transaction from SmugMug to a client in NY does not meet BOTH #1 and #2.

In ether case YOU are not the entity responsible for sale tax collection or payment.

SmugMug is and they have accountants who know the laws for every state and have been doing this for awhile now.

Sam

AlliOOP

Each state is different about when and where to collect the tax. Some states put the onus on where the buyer legally resides, some where the seller legally resides (or in the case of large companies -- office locations) , some where the item is being delivered and some even have reciprocal agreements with other states to collect tax if the company is "delivering" an item to/from their state (example: internet sales). Rightly or wrongly, following what your state workers told you is in your best interest :-). For more details: http://streamlinedsalestax.org/

Interesting timing that this question came up around the time of this announcement: http://abcnews.go.com/Business/amazon-price-advantage-fade-sales-tax/story?id=16657117#.T-9gqJHRook

sweet caroline

I didn't read all the responses, but I can tell you that Texas has specified that I must charge sales tax on print sales even if they are handled by a lab that is out of state. Your state may have similar rules. I believe it was extremely easy to set up my pro account to collect the sales tax on my behalf. You might have to know the rate for your area. Smugmug sends me a tax check quarterly that is separate from the profits.