Taxes? YAWN! Too bad this is important and Few people understand this properly until its too late
Here is the answer directly from the department of equalization.(AKA the government agency responsible for state tax) I have had numerous talks with them over the years and directly consulted them in writing this post.
Every photographer MUST charge/collect sales tax on every sale…every time…& on the FULL transaction.(the service IS taxable too)
The ONLY exceptions not to charge sales tax
1. If no disk or ANY “tangible property” is EVER given to your client. (Meaning you give out nothing to the client) Remember every sales is consider taxable unless you can prove otherwise.
** If you really want to be crafty, at the moment, the state still does not charge tax on electronic transfers. So you can set up a website and have clients just download the images. But the burden of proof is still on you and you’ll have to fight it during an audit. According to the department of equalization, it must be documented in the contract and you will need an electronic receipt of some sort.**
** Also, you can not “give the disk out free” or transfer them to a hard drive to avoid sales tax, it still applies even if it’s the client’s hard drive or CD.**
2. Sales tax is not required to be charged if you are hired by the US government (Federal only & not the state, a subsidiary or contractor). You actually are required to charge tax if you are photographing for the State of California or Department of Equalization themselves. Hospitals, charities and non-profits are not exempt either.
3. No sales tax is required to be charged if the disk of images, albums and everything will be mailed out of state. (This is cool, i didn’t know this one) If there is NO transfer of tangible property in the state of California, the Ca sales tax doesn’t apply. The responsibility of reporting the tax to the state in which it applies is the responsibility of the client, not the photographer. This must be stipulated in the contract and you must keep the shipping receipts.
So, if you have a client in NY flying in for the wedding, and you have documentation that you will be mailing out the everything to them in NY, you don’t charge them sales tax. It is up to them to report it to NY.
4. You also don’t charge tax when you are working for a third party that IS A RESELLER, Such as second shooting for another photographer or the event company is paying you directly. In this case you MUST get a re-seller’s certificate from the client in order to not charge tax. It proves that sales tax is still being collected in the final transaction. The form can be found here : boe230.pdf
More info and documentation
“Portrait, wedding, and other noncommercial photography
When you sell art prints or shoot photographs for noncommercial use, the taxable amount of your charge will generally include all of the following:
• Your charges for the physical product you transfer to your customer.
• Any labor and services involved in producing or fabricating the photograph.
• Any reproduction rights associated with the photograph. “
6012. “Gross receipts.” (a) “Gross receipts” mean the total amount of the sale or lease or rental price, as the case may be, of the retail sales of retailers, valued in money, whether received in money or otherwise, without any deduction on account of any of the following:
(b) The total amount of the sale or lease or rental price includes all of the following:
(1) Any services that are a part of the sale.
Or Here checkout this article : “7 Common Tax Mistakes Made By Photographers” A fantastic read by Grover Sanschagrin.
Still not sure? After you read this if you live in California and want further clarification you can reach the department of equalization directly at 800-400-7115 then press 1.. 5.. 2.. 4 to get through the menu quickly. Tell them you have a question on “Tax & wedding photography” and they will pass you to an expert.
What happens if you don’t charge sales tax?
Imagine having to pay 8.75% of all of your income for the life of your business plus penalties. Sales tax is no joke. The department of equalization will destroy your photography business if you don’t play by the rules. You can’t hide, they eventually will find you. WPPI did an entire lecture series on this a few years back because of the industry wide audits.
*** A warning for clients looking to hire a wedding photographer ***
Make sure your photographer charges sales tax. It’s a great way to make sure your actually are hiring a professional that can deliver what they are promising. Do you really want to risk never getting your photos because they were bankrupted when the government came knocking on their door? it’s not worth the risk. Trust a professional and pay the tax. (I like to imagine them actually fixing our roads or doing something useful with the money) Oh.. and if a photographer tells you it’s included in the package but you don’t see it on the contract, they are either ignorant or lying to you. If your not sure if they are doing things properly, Check: Call the state 800-400-7115 then press 1.. 5.. 2.. 4 to get through the menu quickly. Better safe then sorry later.