After talking to at least 5 photographers about use tax over the past few weeks, I realized it's something that needs to be discussed yearly on the forum. Florida, and I imagine most other states (except, of course, for Delaware) requires businesses AND individuals to file USE TAX - which is basically SALES TAX on items you bought online from businesses that reside out-of-state. For example: You purchase an awesome computer from Amazon.com. No matter where you live, you don't pay sales tax because Amazon.com is strategically located in Delaware (one of the only - if not the only - state without sales tax). You are required by state law (at least in Florida, but I'm guessing everywhere else) to file and pay USE TAX on that item - the use tax is exactly equal to the sales tax you would have paid if you had bought the item in-state. You usually don't pay use tax on items that you have already paid sales tax on. This is a requirement for businesses AND individuals, but my guess is few, if any, individuals do this because most of us have yet to figure out how to file use tax without being a business.
Use tax applies to anything you buy from out-of-state that you don't pay sales tax on. It applies to orders from business on ebay, and any orders from places such as B&H and Adorama. There are some exceptions, but you can't go wrong filing and paying on all items you haven't paid sales tax on. We have been paying use tax religiously since we first started our business, and I still received a letter requesting proof that I've been paying. When I called, they realized they hadn't read one (yes - just ONE) of my sales tax files correctly and I had, indeed, been paying the correct use tax. What this means is that they are actually studying your returns to insure that you are paying use tax. I highly recommend everyone who isn't already filing look into this in your state and determine if you need to be filing and paying use tax. It's not that expensive and not that much of a pain if you file regularly, but it can probably turn into a financial and logistical nightmare if you haven't been paying. If you are in Florida, they will come after you. I guarantee it. They come after those of us who are paying correctly - and everyone I know who has been in business for over three years has received a letter from the state.
so here's an interesting question... you said "...and everyone I know who has been in business for over three years has received a letter from the state" ... so how does the state know I've been in business?
I just went through all this and can share quite a bit of info on the subject. (at least for Florida peeps) In short (and I won't go into too many specifics in my case), I just paid $1k about six weeks ago for back Use taxes. It was basically three years of Use tax that I had been told (incorrectly) I did not have to pay. (yea, I thought WTF also) Well, that's far from true. EVERY PERSON in all the states that collect sales tax must submit a DR-15 (or similar form for their state) for all items bought online where they did not pay sales tax.
The difference between the regular Joe and us legal-business-license-holding photographers is that when they call/write to audit you, they CAN and WILL research and or audit your purchases. There's no use in trying to hide or avoid it. All they simply have to do is call the big three (B&H, Adorama & New Egg for me) and inquire about your purchase history.
Now, will they do it? Probably not IF you have been paying Use tax with your filing. If you try to say you haven't bought anything in three years (by the way, that's the statute of limitations on Use tax), forget it - they WILL audit you, your bank accounts, credit cards... need I say more? Regardless, they can still audit you if they think you're hiding stuff.
About the only thing you're completely clean on is used gear. Someone already paid tax on it. (you're actually supposed to ask and pay it if they haven't... lol)
Anyway, if anyone has any questions... feel free to ask.
lisy78 wrote:
so here's an interesting question... you said "...and everyone I know who has been in business for over three years has received a letter from the state" ... so how does the state know I've been in business?
This may not be true yet, but they are doing it. The head guy told me the same thing. I just happened to be in the first tier.... and I've only been legal 18 months.
lisy78 wrote:
so here's an interesting question... you said "...and everyone I know who has been in business for over three years has received a letter from the state" ... so how does the state know I've been in business?
Ok, well as soon as I take care of a couple other things I think I need to get all those ducks in a row... for the Florida peeps, any tips on whether there's like I dunno... a guide that tells you exactly what the various things you have to do to be fully "legal?" ... stuff like tax IDs, whatever needs to be done to pay the sales tax that you should be collecting etc. etc. etc.
If so... post up
Oh yes and I know the answer: " your accountant wil know" ... well here's the thing... you know when it's late December eve and there was a leak in the toilet... and you said I'll fix it done, I'll get it done.. I'll get it done...
and suddenly it's Christmas eve and the damn thihng decides to break... and you want to call a plumber, but if you call a plumber NOW it will cost you more than a downpayment on a Ferrari?
Well.... it's Christmas eve and I've got a shovel in my hands.
In May I will shop for an accountant and hopefully not have to worry about this shit again... until then I have to try and get my shit together myself
I would imagine if you depreciate your equipment on your tax returns the state IRS would know exactly what you bought and that you used the equipment for a business.
Brian Virts wrote:
So, if I bought 95% of my gear used on ebay, do I have to pay use tax on it? I definitely plan on claiming it under business expenses.
Brian -
In Florida you can avoid claiming up to about 3 or 4 used gear purchases per year. Just like you can have a few yard sales a year without paying income tax on your earnings. They just haven't met my mother-in-law who regularly makes thousands of dollars off of her yard sales (she's really brilliant in this way). But - if they see that all you're doing is buying used stuff, you need to start paying use tax on it because it's clear that it's no longer an "every once in a while" thing and a regular thing that you do just to get out of paying.
If you buy from a genuine business on eBay, you definitely have to pay.
I don't buy anything from the big three except for film, so they really couldn't do an audit of my stuff and come up with anything. But I buy so much stuff used and from Amazon that I end up still paying quite a bit.
BTW - do they have an income tax there? That's the advantage of Florida and Texas (and a few other states). No income tax!!! Property tax is a bit high, though...
NH No Sales Tax, No Use tax etc, and then on top of all that.
Statute: RSA 77-A
Administrative Rules: Chapter Rev 300
Frequently Asked Questions and Answers
What is it? An 8.5% tax, for taxable periods ending on or after July 1, 2001, is assessed on income from conducting business activity within the state. For multi-state businesses, income is apportioned, using a weighted sales factor of 2 and the payroll and property factors. Organizations operating a unitary business must use combined reporting in filing their NH return.
Who pays it? Any business organization, organized for gain or profit carrying on business activity within the state is subject to this tax.
However, organizations with $50,000 or less of gross business income from all their activities are not required to file a return.
" (1) Property directly used. The following are examples of equipment, parts and accessories, and materials and supplies which when predominantly used directly by a photographer or photofinisher in the operation of photography shall be exempt from tax: cameras, film, camera or flash batteries, processing chemicals, special lighting, tripods, filters, cable release mechanisms, light measuring devices, screens, props, proofing machines, enlargers, developing trays, fixing trays, film and print washing machines, brushes and color crayons, densitometers, enlarging meters and automatic rocker trays. "
Of course I'm not a lawyer (nor an accountant).... but I'm open to hear recommendations for an accountant, mine will not have my business for much longer.
)
we have income tax