Hey guys!

Just ran across a little issue - my husband thinks that I need to charge sales tax above my normal package prices, but I've never done it and frankly, don't know how it's usually done in our biz - please let me know what you do!

Thanks so much
Stacy

PS- Just to clarify - I DO and always have paid sales tax to the government as a legitimate business....I just took it out of my overal profits.

Yes I am charging sales tax on top of my package prices. Just started that this year.

Yes, we charge on top of all of our prices. The only time we have "sales tax included" in prices is for print prices at events, it is just easier than having people try to figure out how much to add.

Hi Stacy,

This is a question for your accountant. What... no accountant? Time to get one.

A lot of new photogs skate under the radar on collecting Sales or VAT tax. Because Sales and VAT tax laws are different from state to state (or vary depending on your province or country) you really need to seek out the help of a good accountant.

My grandfather ran his upholstery business for almost 20 years without collecting any sales tax. One of the state auditors happened to retain his services, and noticed that he didn't have a line for sales tax on the fabric sold as a part of the service. The client suggested that my grandfather call his office the next week after retaining a tax attorney, so he could set up a payment plan. Coming in voluntarily saved him a world of grief.

Ten years later my grandfather made his last payment on the tax settlement.

So... check with a professional on the laws in your area. As my grandfather learned... just because YOU -- the vendor -- didn't collect it, doesn't mean YOU won't have to pay it. If you were supposed to collect it, even if you don't get your business lisence or permit or whatever... YOU are still liable for what you *should* have collected.

Many states do not require tax be collected on services rendered... only on products sold. But, if prints or an album are part of your package, then you have "products" and may need to work through this with the accounting professional.

Be smart... stay legal. State and Fed revenue services are very very good at collecting once they notice an issue.

Right, but if she's paying it out of her profits based on her packages, then she's meeting the requirements, right - she's just basically saying that sales tax is included in package prices? I think for ease, you should talk to an accountant though. You probably just want to make sure that you are accurately recording transactions and the tax for all of them so that if there is ever a problem, you have the documentation

I'm not usually one for semantics, but you are not charging sales tax, you are collecting it. The government is the one charging, and they have made you their agent for a whopping 3% of the collected tax (it's 3% in GA.)

I show sales tax as a separate line item on print and album sales, but not on weddings. I am collecting the tax, but I figure it into the price rather than separating the cost for service from the cost of the goods.

I have been considering breaking it down for the client so they can see where the money is going. I know that these things aren't taken into consideration by most people, at least they do not ask about it. It's one of those hidden costs of doing business that could easily be shown to the client. (I think I just convinced myself to change.)

Troy - I mentioned in my post that I do and always have paid all of the necessairy taxes (including sales tax) for a legitimate business.

I simply wanted to know if yall keep it within the package price:

Ex: Wedding Photography = $2000

OR

Do you guys add it on TOP of the package price:

Ex: Wedding Photography $1895 + Tax

I PERSONALLY have been doing the 1st option all of this time, but my husband thinks I need to separate the tax out for my own accounting purposes - he says it just makes it easier and thought I should check with other photographer.

Thanks for trying to help everybody!

I'd really appreciate a few more people's input if you have a couple seconds to respond - thanks so much!

I am charging it on top of my package price, 3,500.00 plus tax.

The one thing I have not considered is that in some of my packages I offer a print credit, and when they order they are getting taxed again....nobody had said anything yet.

lynn put this really well in another post, and i can't find it now.

BUT, you are not charging sales tax. you are COLLECTING sales tax for the state.

with that said your tax should be on top of your package, unless you have it built in to the price.

like troy said always talk to your accountant! make sure you are allowed to include it in the price - remember you are a tax collector. the state charges the tax, and it's not negotiable.


fwiw our prices are 'plus tax'. and in PA there is tax on all our services and fees.
your state is your state. do not go by PA.

Hey - well, I did speak to our accountant and he said that, of course (as we all knew), you're paying sales tax to the state either way (again, as I always have), however, he said that at least in Texas, it doesn't matter whether you include it in the package price or make it separate. He did, however, say that it makes for better accounting and whatnot to separate it out.

My reason for asking all of this is because I honestly didn't know how other photographers handled the situation. I don't want to tell my clients "the price is $2000 plus tax" and have them go "What?! Nobody else is going to charge me tax." Yes, I understand the semantics of "charging" tax and "collecting" tax - I think I've made it clear that I know that the taxes are paid to the state.

I'm putting a smiley, in case any of this didn't sound nice.

Thanks everyone for your input and I think I've decided to just collect (charge! hehe) it on top of the package prices......

Joy - I also think that you SHOULD collect it on each transaction, however, you situation is a little more fishy. Not sure what I would do, except that I think that nobody is going to notice being taxed twice - once for the print credit, and then for the prints. I can't think of a way that you would get around that....

When we have either album credits or print credits included in a package, the sales tax has already been collected on that portion. So when I write up the order, I subtract the album or print credit before I calculate the sales tax.

On the other hand, when I sell gift certificates, they are for a set amount and do not have tax added on separately, so I calculate the total including tax and then subtract the gift certificate amount.

In our area, it seems that most photographers have it be plus tax, but occasionally I will see it on a photographers price list as tax included.

I have asked my husband about this and after talking to our accountant how he understands it is that you are supposed to charge sales tax on your advertised prices and that you are not supposed to advertise "sales tax included" so if you were to just go ahead and include the sales tax in your prices you just shouldn't advertise it that way. Its so weird and confusing.

I add tax onto my prices. It just makes it so much easier for accounting purposes and I don't worry about a client (particularly a tax auditor or something) thinking that I don't collect/pay sales tax since there isn't a line to add it.

Joy, as far as the print credit, I don't understand how they are being taxed twice - if they are given the credit for it, they should not be paying for them in any way, shape or form while using that print credit. It's money that was already paid, so essentially all you are doing is taking the order of exactly what prints/sizes they want - no money exchanging hands at that time. If it goes above the included credit, then you charge and tax for the amount above the credit, but do not tax for the entire amount. Example - your print credit is $100, you charged the tax on that in the package. They order $150 worth of prints - you add sales tax to the $50 that they went over... not on $150. I do print/album credits as well and they are not getting double taxed.

The print credit that is given to them is through Pictage. And Pictage will charge them tax. I suppose what I could do is minus the print credit amount before calculating the tax on the package.

Ahhh... now I understand. I haven't used credits through Pictage yet.

I think it's great that there are so many that have valuable info.

Is there ANYONE from CA?
Anyone that KNOWS the laws?

I've experienced and heard many times that even the people at the BOE don't agree with each other - or their literature - or with the SBA - or with the city - and that very often accountants 'do it differently' from one another.

Does anyone out there know where to find some clear laws on it all?
.... okay, there's my smiley.
-Eddie

A Print Credit is the same as purchasing a Gift Card. You're "buying money"... sort of. So you don't charge sales tax for the Print Credit. You only charge sales tax when they USE the Print Credit.

We used to include sales tax in our prices, but then we realized we were paying a ton every year out of pocket. So now we ADD sales tax, and the client is responsible for the additional cost.

I don't understand the issue. Let's see, you have $2000 package + $100 print credit and your sales tax is 5%. You have to charge
$2000 + $100 = $2100 + 5% = $2205

Now they order prints on $150. You have to charge them for extra $50 + tax: $150-$100 = $50 + %5 = $52.5.

Then total taxes you collected on prints are $7.5. First time you collected $5 on $100 print credit, then extra $2.5 on $50 over the credit order.

On Top

No, it's different than a gift card. A print credit is a pre-paid order. A gift card is, like you say, just like money. As a pre-paid order, a print credit is taxed as such. Just like if you order a book from a bookstore and they require pre-payment, you pay the sales tax at that time -- not when you pick up the book.

I researdched this last year after a client disagreed with our charginig tax on our services. In California it seems they have a special place in their hearts for photographers. You should be charging tax on EVERYTHING. It's very esoteric and it took me forever to find the statute on it.(I was an attorney in a former life, so I kow where to start looking.) You will often get conflicting optinions at BOE or any government office for that matter.

In my opinion, I'd rather be safe than sorry and charge tax and send it in. I've heard of the BOE coming out and seizing records, etc. of photographers who arent charging tax. When they do that they can come in and take all of your records, and any computers as well for them to investigage to see what you sold and how much tax you should have collected. Yuck. I've only had one client complain abut taxes and seriously challenge whether we can.

I add it on top, unless it's a special deal (or I forgot, which I did on a couple last year...)

If you ever get stuck on that and need to back the tax out of your price, go http://www.csgnetwork.com/salestaxcalc.html for a page that will do it for you.

I will prob do a sales tax included special in April.



I researdched this last year after a client disagreed with our charginig tax on our services. In California it seems they have a special place in their hearts for photographers. You should be charging tax on EVERYTHING. It's very esoteric and it took me forever to find the statute on it.(I was an attorney in a former life, so I kow where to start looking.) You will often get conflicting optinions at BOE or any government office for that matter.

In my opinion, I'd rather be safe than sorry and charge tax and send it in. I've heard of the BOE coming out and seizing records, etc. of photographers who arent charging tax. When they do that they can come in and take all of your records, and any computers as well for them to investigage to see what you sold and how much tax you should have collected. Yuck. I've only had one client complain abut taxes and seriously challenge whether we can.

I add it on top, unless it's a special deal (or I forgot, which I did on a couple last year...)

If you ever get stuck on that and need to back the tax out of your price, go http://www.csgnetwork.com/salestaxcalc.html for a page that will do it for you.

I will prob do a sales tax included special in April.

On top of the package for me...

Every go buy a car and have the dealer explain that they had already built the tax into the price?

Unfortunately, some of the "Knotties" and such think that paying sales tax on a "service" like wedding photography should be tax free. Boy do they get outraged when they want to have everything: Proofs, book, etc included, and you try to add the sales tax on to the bill.

My agreement with the client is written to break out the "professional fee" from the "product credit" so that they see exactly what is being taxed and how much will be collected.

So it's not just me! I've been pulling my hair out about it - and I feel better now. Aaaaahhhh.
-Eddie

CAll the state of CA TAX PEOPLE-they answer all your questions-
pretty thoroughly too-

my understanding is
if your packages do not exchange any goods(ie all sitting fee)-
then you don't collect sales tax
which is not the case for most of us-

and I have not figured out a way yet to separate it so that tax is collected just on the goods exchange part-

In California...
My CPA wife makes me charge tax on everything. Photography is not a service, it is ultimately the creation of a good. Nobody hires you to walk around and take pictures just for the sake of having you there. Ultimately, a print or album or web image will be created and all of those are goods.
Why charge tax for a photographer but not a lawyer/accountant? It is different because they are providing you the service of doing your work for you, they are not creating anything that you wouldn't have had to do otherwise. Tax forms and legal briefs have no value in and of themselves whereas images do.
Save a big headache and charge sales tax on everything. If a client complains tell them that you are creating a good and "don't taxes suck?"

I didn't catch up on the entire thread, but my prices have sales tax included, and as far as I'm aware as long as you advertise those prices as already including the sales tax there should be no problem (I'm not an accountant) If you advertise a price and don't mention tax, then it's assumed tax would be on top of that price, and therefore the government would want their share of the larger price. Just let people know what you're doing on any printed material and either method should be fine. My packages in quickbooks are set to the package price minus tax, so the total invoice comes out to a nice round number and they pay the price they were quoted without either of us having to do math on the spot :-)

In packages, I would charge tax on the taxable portion.
In my portrait pricing, I shoot a la carte. I don't charge tax on the service of the shoot, but it does get charged on top of whatever prints, images on disc, DVDs that they buy...

Sales Tax!

I never charge it and NEVER pay it.

NEVER. EVER.



Well Olor, I live in NH. he he. So, no tax here.

I understand what the conflict is-
however if the people you pay sales tax to talk you through what you owe and tell you that you don't pay sales tax on service(no goods exchanged..ie just sitting fees)-
who are you supposed to believe?
I was told that this may change in the future, but that right now it was not that way....

perhaps I should be collecting names.and keeping them on hand-

Yes. Who DO you believe?

Remember, what may be true for your county may not be true for another. These laws are really screwey sometimes.

In California...

The only thing you can not collect sales tax on is the transfer of a pure license, e.g., you transfer your copyright in a separate transaction, that particular transaction is not taxed. BUT, the second you include a print of the very same photo, you now have to tax the whole transaction. Any services that go into creation of a good (including just an image, in addition to a physical print or album), that service is taxable. And yes, I AM a lawyer...please don't hold it against me!

Somehow lawyers always show up in tax and the music copyright thread... No offense Steph!
Lisa- Steph is right on here. My wife, also Steph, has told me exactly this. She said there might be a loophole if you create two invoices, one with the service, one with products but that would be a very dark gray area and won't let me do it.
The people you call and talk to are not reliable; call 10 times and you get 10 different answers. I used to work as a retail manager and I remember calling up about one of the services we provided and was told we need to charge tax. Not more than a week later some guy came in who worked for the same agency and got all upset that we were charging tax....just goes to show that they are not reliable and in my experience they won't even care if they gave you bad advice, you will still be fined!

Stacy,
Thanks for starting this post. Texas' state taxes are a little different then other places, so it is good to hear that I'm not the only one who has considered just including them. I mean if it was 3% (like in GA) then maybe, but 8.25% can add up on a 2000+ Wedding package.

Anyway, For now I'm going to be adding it on top of my packages, because I figure if my clients are already to the point of signing the contract, then they aren't going to fuss too much about paying the taxes that they know they are going to pay on a cup of coffee. I mean, taxes are taxes, you pay them. the end.

Even blushing brides and giddy grooms understand taxes. I just may grit my teeth when they reach the tax line every time and it totals up to 200 bucks.

Agreed...but that's better than not charging it at all and getting caught later. My first year in business I had reasoned that since photography is a service I didn't need to collect sales tax, then learned otherwise, and had to write a check for almost $3000 out of pocket -- and that was only for the first 6 months of that year!

Edited by popular demand.....


"Just do what your state tells you. Don't ask any questions, just do what you're told."

This discussion doesn't make any sence. Like I said before, call your local state DOR. In WA almost everything is taxable including services and even shipping and handling. It may vary from state to state. And it doesn't matter what YOU think what the photography is - service or not. What matters is what DEPARTMENT OF REVENUE thinks it is. They can tell you how you have to collect their tax.

Eddie,

Your safest course of action is to do as I did when I had a tax question, and write the BOE and ask for a ruling on the matter. They will respond in writing. Should you ever be audited, that document is the only thing that will hold up.

Mine is stored in a SD box.

;-)

Best Regards,

Ed Taylor
APA/ASMP/EP

Stacy, I list my price and say "plus tax". I do this because my price is what I charge, sales tax has nothing to do with me. That's between my customer and the state -- I just collect it and turn it in.

i do & this is why. when i go to a store and see a shirt for 19.99 i know i will be paying tax on top of it atleast in my state we do. if i buy some chips or pop i will be paying tax on top of it. I also on huge wedding amounts dont want to eat the tax on it cuz i will be paying for it. However on sports packages i eat it and dont charge the tax. so many get it wrong i cant deal with it & since they all prepay the headache just isnt worth it, but on anything else sessions, print orders, etc all tax is charged up and beyond.

julie b

Are we sure about this CA rule? Yes, you said it was a special rule just for photographers, but when I get my hair cut, I don't pay tax on it. That's a service.

for the NYers out there, the people i have spoken with have all told me that for the state of NY we only collect sales tax on tangible products and not services. so for the people who have an a la carte type system - you only collect and pay sales tax on the albums and prints you sell. you would not collect sales tax on the time you charge the client.

HOWEVER

in NY if you charge a package and include ANY tangible product in the package, the entire package is taxable. so even if you charged $6,000 for all day coverage and 1 8x10, you'd have to collect sales tax on the entire 6k. if any package of goods and services includes a taxable item you have to pay it on the entire package.

with that said it's best to draw up your invoices dividing everything up. so say you charge 5k for all day coverage and a small leather craftsman album and a proofbook for example. it would make the most sense to divide everything up on the invoice. say you charge LC's at $1200 and you charge $400 for proof books. you would divide up the invoice as

$3400 for all day coverage
$1200 for the album
$400 for the proofbook

$1600 of this package would need to have sales tax collected while $3200 of it would not. it needs to be all specified on the invoices though, and you need to determine what your prices are for these products.

that has been "ok'ed" by an accountant and a sales tax representative in NY for me. i am not a sales tax whiz so if you have questions please call the NY sales tax hotline, but this is how it's broken down to most people in NY.

luke,

That's good advice, and accurate for mor than just ny I think. i know the state of indiana wants the same thing--tax on the whole fee paid to produce the single taxable item. In my case, i give a credit to my clients, then apply that credit to the album and any physical items at a later date. That way, the only thing i collect pre-wedding is my time to shoot and edit.

Though, there is some controversy over the situation where you provide a disc after a shoot; technically, that is a taxable item, so everything needed to create that item (eg the time shooting) would be taxable. Folks shojld for sure ask their accountant what needs to be done to stay legal.

Something that hasn't been mentioned is that some states REQUIRE that you break tax out as a separate line item. Some states will not allow you to "wrap" it into your pricing.

Also, I think breaking it out as a line item shows clients that this is not money you're making. It's one thing when it's a $25 item. But when you're talking about $2500 worth of wedding photography, the amount of sales tax (here in my city/state) is $175 (7%). I don't want clients thinking I'm pocketing that money. It makes me look more expensive than I am.

Karen

I used to have it included... until I started realizing how much I was actually paying out of my pocket. So, I wanted a 6% raise... I started adding it on top of my packages. Example (not real prices... just example):

Old prices.... $2000 Collected = 1886.79 package + 113.21 Sales Tax.
New prices.... $2000 package + 120.00 Salex tax = 2120 Collected.
So, by adding the sales tax on top of the package instead of included in the package, I gave myself a 113.21 raise per wedding.

I have never had any one question it when I put it on their invoice.

I put it on top of my pricing. All my prices lists have a note at the bottom that specifies 6% Florida sales tax will be added.

I do the same as Lacey, except over here in Leon county it's 7.5%. ( Do any of you other FL shooters hate keeping track of the local option taxes as much as I do? Argggh!)

The only thing I don't collect sales tax on is a retainer, since that is purely a service of reserving the date and is non-refundable.

However, as soon as the balance of the package is paid then tax is collected and remitted on the entire amount, including the retainer, since at that point the retainer is "applied" to the package.

Frikking tell me about it man!

Here in Pinellas, I believe there is an exra 1% on top of anything collected over $5000....except....I could be waay wrong!