Legal Survival Guide

Lesson 8 of 27

Sales Tax

 

Legal Survival Guide

Lesson 8 of 27

Sales Tax

 

Lesson Info

Sales Tax

We're going to move on to sales tax now again, I don't intend to give much state specific advice on sales tax, but I want to tell you what sales tax is sales tax generally is this creature that that you have to register to collect all right, whatever state you're in, every state has a little different procedure on how to register to collect the sales tax so you'd call your state department of revenue or your state division of taxation and you tell them I am blue steel photography my employer I d number is such and such I want to register to pay sales tax and they will tell you what forms to fill out and they'll give you a state tax I d number now what that means is as we use our quickbooks program and we collect sales tax on our sales it's going to go into a little account in every quarter will remit that sales tax to the state of washington or california or missouri and we'll do that on time they'll give us a sales tax number in some states requires to post a bond uh to get that in ca...

se I don't pay it or leave the state um then they'd go after my bonding company and then my bonding company and come after me so it allows you also to purchase your supplies tax free if they go into the finished product okay, so if you're a photographer and you're running a fancy canon printer, ah picks mma pro or whatever the new one that I want to get is that new fancy one with the big ink tanks. You don't have to pay sales tax on your ink. You don't have to pay sales tax on your paper, because your camera is the machinery that generates the products that you're collecting sales tax on. You don't have to pay sales tax on your camera it's tax exempt those things that go into the finished product we get to purchase tax free so that's one of the benefits of registering to pay sales tax the joy of sales tax it really is kind of annoying sales that you might have to collect sales tax on include the sales of your photographs, your portrait, your prints, your cds, negatives, any kind of tangible, tangible personal property equipment recording, wedding sitting fees that varies by state school pictures may be tax exempt and, of course, out of state sales unless your amazon dot com are generally out of state, if you're selling them to a state where you don't have a brick or mortar location, so any of the internet sales generally or tax free now, I mentioned that because, ah lot of photographers and a lot of online discussion have have offered a lot of theories on the legalities of do I have to collect sales tax and do I not have to collect sales tax? And wherever you look online they always have the same ending they end all of these long discussions about I'm not going to charge sales tax on my sitting fee I'm only going to charge sales tax on this because so and so said it somewhere online all of those online discussions in with some guy saying, yeah, I'm a photographer I got audited by such and such a state and they sent me a bill for thirty thousand dollars because I never collected any sales tax and I hired a lawyer and he told me I had been doing it the wrong way because I listen to some clown online told me I didn't have to and I had to pay it that's horrible it just makes me cringe because I have never had a client say I am not going to hire apple studios photography I'm going to go higher you know dorian photographic stare ian's photographic ce because she didn't charge sales tax it never happens if they want you there used to pay in sales tax you collect it, you remit it life is good, the status happy um there are some core ese sales tax locations for my friends in california if you wanted to know what the rules were regarding sales tax in california you could try to read this fifty one page california state publication that would tell you is a photographer how to do it, but suffice it to say, in california, they've got these concepts of technology transfer agreements where if you are transferring the rights to your client, their taxable it up to two hundred percent of the combined cost of materials and labor. This is what that means in california, let's say I charge ten grand to produce a shoot in the expenses for the shoot were, um, seventy thousand dollars, so I spend seventy two d'oh five day production I get paid ten I got eighty grand in the shoot, the state contacts that at up to two hundred percent of that that's one hundred sixty thousand dollars. How much did I get off the gig? Ten grand? What? They don't want me to remit sales tax on one hundred sixty, those that includes the expenses that were reimbursed by the client. So if you're in california, I don't presume to tell you what the california sales tax law is, but you need to know it, and I point that out. California has a five page flow chart flow chart on how to figure out if you owe sales tax it's insane there's the pdf location it's a national dot com forward slash files etcetera if you buy it, you'll be able to go back and pull that that web link off there are just search california sales tax flow chart probably you'll find it there's this also this concept called use tax if you're not familiar with used tax it's kind of like sales tax but it applies in your state so let's say that I'm just an individual consumer I am craig heidemann non photographer not working my blue steel gig and I go by aa cannon five d mark three from being a jj everybody has probably done that at some point in time or if they haven't, they should do it because it's so satisfying um and uh it will arrive at your house and you'll be taking these marvelous pictures and you won't have paid a penny of sales tax on it, but if you would have gone down your local camera shop, he would have charged to your local sales tax rate. Well, your state chances are has a consumer's used tax and you're required that year to submit a used tax return that is a little bit less than but aboutthe same as the sales tax and they require you to pay it how many of y'all have paid your state used tax returns on your out of state purchases that you bought for your personal day things crickets, crickets I hear the online crickets to no one does, they're usually each state has a unexamined in amount of a thousand or two thousand bucks that you could buy out of state that you don't have to pay on, but once you exceed that limit, you owe it so there's a lot of tax returns out there that aren't being filed that a road in these challenging economic times since we're in the depression or I guess we're coming out of the depression now, a lot of states are really going after these used tax dollars to try and fill up the coffers. In two thousand nine, florida sent out a letter and I went over this in my other tax presentation, but I'll talk about it a little bit more. I've expanded on it. Uh, florida sent in a letter to photographers. Hey, bomb. Did you buy anything out on out of state or online in the last thirty six months? That's three years for you and me. Can you tell me about that? Oh, and you need to sign this under oath and return it in the next thirty days. We're gonna come on out. You. They actually sent this letter out, what would you do if you got one? Here's some information they gave you some information to help you make some decisions. Bob, when you got this letter, if you were a florida photographer if sales tax wasn't paid, the tax burden rests on the photographer via the use tax for the last three years of purchases if sales tax was paid. Prove it, bob, show me all your receipts if you pay the sales tax otherwise we're going to assume that you didn't pay it well, keep in mind everything that you sell is taxable wedding photographers should be collecting sales tax if a wedding payment for coverage is only for an album blah, blah, blah, you know, on one but not the other and you go teo deal are dot my florida dot com forward slash bor they're very helpful. Doesn't that sound like they want to help you? Well, they only sent this to photographers, they didn't send it to other industries. They wanted photographers to pay for all of the cameras and equipment that they were buying out in new york or wherever they were buying it from. And basically they said, if you don't respond to this, uh, you know, you're gonna have some problems. So the people sent out a big blast to all of the people members saying, you've got to respond to this deal with it because that's what the law wass so make make sure that you understand that you might have some use tax obligations uh you can make sales tax work for you by knowing that all of the ingredients and your finished product whatever they are are not or should not be subject to state sales tax including memory cards if you're doing film chemicals, lights, props and sets special effects any of the things that you feel comfortable are you being able to justify as being part of your finished product those air the mission that's the machinery that you use um just like if you were ah baker and you bought an oven we wouldn't pay sales tax on the oven because it's gonna bake the roles that I'm going to sell at the counter that we're going to collect sales tax on um but remember now this is going to apply to lots of folks and it's okay, if you take an item that you've bought tax free and you convert it to a personal use you've changed its use from business too personal and you owe the sales tax on it okay? Or you at least owe it consumers used text on it so this assumes when why talk about it being deductible that it's being used predominantly in business all right that's important to know um moving on the other type of tax so we've given birth to our business we're registered for our our state tax we have to think about unemployment tax it's cheap no worries in missouri we would file an application to determine our liability with the missouri division of employment security you need to write down register for unemployment tax that's gonna vary from state to state on how they do it it's a very low ah payment it's usually paid quarterly that's on ly if you have employees, I recommend if you have no employees that you still register and tell them you have zero employees I recommend that you register for unemployment tax and tell them that you have zero employees again that's paid quarterly the rates vary they're usually very low um next line we're come in missouri, for instance you don't have to have work comp insurance unless you have five employees, including yourself, so that very state to state you can usually do a fairly accurate google search for your state to determine your states were calm prick wire mints make sure that you're getting your information from a dot gov website not a russian bride control reconnect website but generally there's a limitation sometimes it's five sometimes it's four sometimes it's ten uh but getting work comp insurance is relatively easy you have to apply go through underwriting the rates very based on your occupational classifications so somebody working high steel is going to pay higher premiums than somebody that's working in an office uh and then once your rates or set the premiums very by payroll so again that's where come there are certain local licenses and permits these air the fine points we're in the homestretch guys now we've got our work obvious you dealt with we have to figure out whether a local business license is required and in most places it iss if you don't have a local business license either your county level or your city level you're missing out on that one last thing to make you legal my my goal for you guys was to get you legal and to help you stay there right so having that um local business license is super important um sometimes for instance in my jurisdiction there's a county business license king county for instance and then a seattle business license for doing business in the city so when I go to do I live in the county my shot my studios in the county, my studio's in the county when I come to do a wedding show in the city I have to register that year for a city business license just to do a bridal show so make sure that your legal your competitors will use it to embarrass you if you're not in addition, sometimes there are park permits is in our park system has come up with a new ah photographers need to pay one hundred fifty dollars a year to use the parks so we've met with the city and talked with him about it, etcetera, etcetera. But this this is something that you need to think about because nothing is more embarrassing. When you've set up your business, you're making some money, you're out with your clients, and the park ranger comes up and says, have you paid, uh, no, okay, well, you have to leave, and so you take mama and daddy, and they're eighteen little kids and their little white matching shirts and jeans and barefoot take him out of the park because you didn't pay your park permit so more on that later. Um, well, let's, talk about your business location. I do business out of my home, and so I specifically have qualified for, ah home occupation in my my local. If you have county zoning, make sure that your zone properly, um, uh, that is again super important, uh, zoning aspect of it.

Class Description

Ready to turn your creative side project into a thriving business? Join Craig Heidemann for an introduction to the business and accounting principles every creative professional needs to know. 


In this class, Craig will take you step-by-step through the process of setting up, running, and growing a small business. You’ll learn how to use QuickBooks to manage your finances, including managing client contracts and invoices. Craig will also help you navigate the potentially-confusing tax, legal, and copyright issues surrounding small businesses. You’ll also learn how to contract and/or hire people to do the tasks you can’t do yourself. 

Whether you’re just starting out as a business owner or you’re a longtime entrepreneur ready for a refresher course, this course will give you a roadmap to business success.

Reviews

a Creativelive Student
 

I'm literally fresh off the boat, as the saying goes, having moved back to the US after decades of living abroad. I have the photography down (in some measure due to the instructors and courses here at CL), but being new to the business of photography in this environment I was rudderless. This course helped answer all my initial questions and put me on the way to getting established in my region... and beyond! Craig makes legal issues almost fun with his jocular, engaging style. Thanks so much to Chase and the people at CL for knowing what courses real working photographers need.

Andrew V Gonzales
 

This class is amazing (as is the Instructor). Funny, real, and to the point, Craig has a great way of making these aspects of business MUCH less intimidating. Still very applicable even in 2016. Loved it!