SloPhoto Offline Upload & Sell: Off
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Prettym1k3 wrote:
I spoke directly with the BOE a while back. According to the BOE, it's all about delivery and what you sell. Digital delivery, per the BOE representatives (3 of them) that I spoke to, is not subject to sales tax. Albums, digital files delivered via thumbdrive (even if the client brings you a thumb drive, you load it up with images, and you hand it over to them), etc., are subject to sales tax. If any physical products (albums, thumb drives, prints purchased from you directly, canvases, etc.) change hands, then sales tax is applicable both to the products, and the service.
The confusing part comes into play when you say, "Okay. I shot their wedding. Didn't charge sales tax. I delivered digital files via dropbox, download, etc. Didn't charge sales tax. But now they want an album. So I need to charge sales tax on that, but according to the State, I have to go BACK and charge sales tax on the service I provided, now!"
So, how do I get around this?
I DO NOT charge sales tax on stand alone engagement or family sessions. I deliver digitally. I do not offer albums with these. Problem solved. No physical product ever changes hands.
I ALWAYS charge sales tax on wedding photography, even if they have booked a package where nothing is included. I know that they will buy an album, or digital files, at a later date. That's a 100% certainty over the last 5 years of business. So I charge it up front, and that way when they buy something physical later down the road, it is applicable.
I DO NOT pay sales tax on the income I collect from SmugMug. The only way I sell prints is through an online gallery. I do not order prints on behalf of my clients and mark them up later. Any prints I sell (which isn't much) all go through the online gallery. According to the BOE, this is an acceptable method because technically SmugMug is collecting the income, and charging California Sales Tax. They are simply passing along the remaining income (after sales tax, and their fees) to me as profit.
There is some sort of use rights, or leasing, or something, where sales tax would be applicable even on delivery of the digital files, and I can't recall what it is, but I do recall thinking, "I cannot ever see how this would be applicable to wedding photography or what I do."
I went back and forth a lot with the BOE on this, and this was what I was told. This was my understanding of the situation. And this is what I've been doing for 3 years.
I'm not a lawyer, but have worked in the legal field for 15 years. Based upon the documents the State of California BOE provide regarding sales tax and photography, and my discussions with the BOE, all of the above made perfect sense to me.
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I am glad you did that, I tried but it was insanely difficult to talk to anyone there who knew which way was up.
I did talk to my accountant last year, and while she was not 100% certain on digital delivery, she was fairly certain that a separate later transaction would NOT cause retroactive sales tax. Not sure if she is correct, but I think she would go to bat for me if I was ever hounded for it.
Why do you think a sale through smugmug is different than self fulfilment? They are still ordering a product based on that service.
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