Tax question -- whole package price or breakdown?
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Frank Jin
Registered: Jul 21, 2009
Total Posts: 43
Country: United States

For those of you who charge sales tax when you sell a wedding package, do you charge the tax based on total package price? Or do you actually break it down to individual taxable items? For example, you only tax tangible/physical products like an album, but not services like a bridal shoot?

Thanks!



amonline
Registered: Jul 16, 2006
Total Posts: 6761
Country: United States

You have to check with your state. For example, in Florida, I must charge tax on everything tied to the contract - unless it is delivered out of state. The only thing I can skip is if the images are delivered digitally. I do not offer that.



sboerup
Registered: Oct 13, 2005
Total Posts: 9753
Country: United States

AZ requires tax on everything, because the product delivered is dependent on the service rendered.



DigMeTX
Registered: Nov 26, 2010
Total Posts: 1501
Country: United States

In Texas you have to tax the session and everything else if there is a taxable product delivered in the end (prints). If you do a photo session and then you don't sell prints then it doesn't have to be taxed.

brad



amonline
Registered: Jul 16, 2006
Total Posts: 6761
Country: United States

Frank, I believe this holds your answer: http://www.dornc.com/taxes/sales/impnotice_digital_property09.pdf

Also, this: http://www.dor.state.nc.us/practitioner/sales/bulletins/section32.pdf



Scott Mosher
Registered: Oct 23, 2006
Total Posts: 2348
Country: United States

I price the package so sales tax is included. That way I can tell the couple package A is $3500, not $3500 plus sales tax brings it to $3862.59 (or whatever the numbers are.) CA is like AZ.



amonline
Registered: Jul 16, 2006
Total Posts: 6761
Country: United States

Scott Mosher wrote:
I price the package so sales tax is included. That way I can tell the couple package A is $3500, not $3500 plus sales tax brings it to $3862.59 (or whatever the numbers are.) CA is like AZ.


The problem with that is you have to report gross sales. You are now liable to pay tax on $3,500; no less.



sboerup
Registered: Oct 13, 2005
Total Posts: 9753
Country: United States

amonline wrote:
Scott Mosher wrote:
I price the package so sales tax is included. That way I can tell the couple package A is $3500, not $3500 plus sales tax brings it to $3862.59 (or whatever the numbers are.) CA is like AZ.


The problem with that is you have to report gross sales. You are now liable to pay tax on $3,500; no less.


Not if accounted for properly. His revenue is just $3216.50, not $3500.



TTLKurtis
Registered: Jan 31, 2006
Total Posts: 9794
Country: United States

In Texas we have to charge for the service and the tangible products, not just the products.

I use Tave for billing and scheduling, and if I were in a state that doesn't require tax being charged for service-only then I could just mark the coverage portion of my package as non-taxable.



Scott Mosher
Registered: Oct 23, 2006
Total Posts: 2348
Country: United States

sboerup wrote:
amonline wrote:
Scott Mosher wrote:
I price the package so sales tax is included. That way I can tell the couple package A is $3500, not $3500 plus sales tax brings it to $3862.59 (or whatever the numbers are.) CA is like AZ.


The problem with that is you have to report gross sales. You are now liable to pay tax on $3,500; no less.


Not if accounted for properly. His revenue is just $3216.50, not $3500.


Yes, I should have specified that. On the invoice in a nutshell it shows (random numbers chosen):

Package A - $3250
Sales tax - $250
Total price - $3500 (which is what is advertised)



deepbluejh
Registered: Feb 20, 2005
Total Posts: 6889
Country: United States

I don't know of anywhere that allows you to break something like this down and only pay tax on the tangible. The answer I have always seen is that you tax the entire package.

I know for a fact that is the law in Georgia. If other states are different, I would be very interested to hear about it.



RDKirk
Registered: Apr 11, 2004
Total Posts: 8976
Country: United States

States vary, sometimes wildly.

Illinois may be unique: There is a special clause for photographers by which the tax is calculated on only 10% of the total...as long as the fee is not itemized. If the fee is itemized (or if any of your documentation breaks out the components of the fee), then the tax is calculated on the tangible products (Illinois does not tax services).

Thus, the state presumption is that only 10% of a photographic fee is tangible and taxable. In cases where the tangible item would be more than 10% of the fee (as it might for an expensive album or frame), there is less tax to be paid if the photographer charges a flat, non-itemized fee.

http://tax.illinois.gov/legalinformation/letter/rulings/st/2003/sg030013.PDF



Jamesbjenkins
Registered: Mar 23, 2012
Total Posts: 809
Country: United States

deepbluejh wrote:
I don't know of anywhere that allows you to break something like this down and only pay tax on the tangible. The answer I have always seen is that you tax the entire package.

I know for a fact that is the law in Georgia. If other states are different, I would be very interested to hear about it.


Texas only requires you to tax a package if it includes a tangible product.



TTLKurtis
Registered: Jan 31, 2006
Total Posts: 9794
Country: United States

Jamesbjenkins wrote:
deepbluejh wrote:
I don't know of anywhere that allows you to break something like this down and only pay tax on the tangible. The answer I have always seen is that you tax the entire package.

I know for a fact that is the law in Georgia. If other states are different, I would be very interested to hear about it.


Texas only requires you to tax a package if it includes a tangible product.


Which would include a DVD of photos by the way. If you FTP the photos or something, that's another story.



amonline
Registered: Jul 16, 2006
Total Posts: 6761
Country: United States

sboerup wrote:
Not if accounted for properly. His revenue is just $3216.50, not $3500.


Scott Mosher wrote:
Yes, I should have specified that. On the invoice in a nutshell it shows (random numbers chosen):

Package A - $3250
Sales tax - $250
Total price - $3500 (which is what is advertised)


Yea, I really meant that response as consideration for others reading. Sorry.



amonline
Registered: Jul 16, 2006
Total Posts: 6761
Country: United States

TTLKurtis wrote:
Which would include a DVD of photos by the way. If you FTP the photos or something, that's another story.


My state tax rep actually told me to consider delivering that way. However, he also said it was probably a matter of time before big brother changes digital goods to be considered taxable/tangible.



sn805619
Registered: Feb 19, 2012
Total Posts: 41
Country: United States

Jamesbjenkins wrote:
deepbluejh wrote:
I don't know of anywhere that allows you to break something like this down and only pay tax on the tangible. The answer I have always seen is that you tax the entire package.

I know for a fact that is the law in Georgia. If other states are different, I would be very interested to hear about it.


Texas only requires you to tax a package if it includes a tangible product.


Texas Comptroller says different, see para 1 here (and I have talked to them about this): http://www.window.state.tx.us/taxinfo/taxpubs/tx94_176.pdf

Sales tax pertains to photos delivered electronically as well.

Their reasoning is that you're creating 'art', how you deliver the art doesnt matter (since you're receving payment for it).

Oh, and make sure you talk with your CPA and all that jazz



RDKirk
Registered: Apr 11, 2004
Total Posts: 8976
Country: United States

Texas sales taxes...what the heck does this mean?

Those three conditions, although joined by "and," are not mutually compatible...although it seems to imply that a "copyright interest" (whatever that is) has been sold.

If a photographer has retained a copyright in a photograph, sales tax is not due on the sale of a copyright interest in a photograph when:
the photographer has, in writing, reserved title to the photograph in his name;
has transferred a copyright interest in the photograph to the customer; and
the customer is required to either return or destroy their copies of the photograph.

When a photographer sells both the photograph and a copyright interest, a separate charge for the copyright is not subject to sales tax. If a photographer fails to separate the charge for the copyright, however, and the photograph itself is transferred, the entire charge is subject to sales tax.



TTLKurtis
Registered: Jan 31, 2006
Total Posts: 9794
Country: United States

Hmm so could you charge $1 for coverage and the rest is for the copyright, and that amount isn't taxed?



deepbluejh
Registered: Feb 20, 2005
Total Posts: 6889
Country: United States

Jamesbjenkins wrote:
deepbluejh wrote:
I don't know of anywhere that allows you to break something like this down and only pay tax on the tangible. The answer I have always seen is that you tax the entire package.

I know for a fact that is the law in Georgia. If other states are different, I would be very interested to hear about it.


Texas only requires you to tax a package if it includes a tangible product.



You are correct. My statement was incomplete.

Basically if there are tangibles and intangibles, then the whole thing gets taxed. If there are only intangibles, then nothing gets taxed.

That said... in my history of doing business I generally find the kind of people looking to evade sales tax as the kind of clients that I generally do not want. Just do the right thing and make people pay the sales tax they are entitled to.



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