So this posting will probably only be of interest to Photographers in California who make a living from their photography.
I am not a sales tax professional and you should read the State Board of Equalization’s Sales Tax Regulations and Contact the State Board of Equalization to determine how you should apply sales tax to your transactions.
I am simply sharing my findings and discoveries so that you may investigate as to whether they apply to you!
Do not rely on this information for your business without first verifying all information with the State Board of Equalization!
(You know… it’s really stupid that we have to do things like the above, because of those select few that never want to take personal responsibility for themselves or their actions!) I am now stepping down from my soapbox and returning to our previously scheduled discussion.
So I just recently found out information that I wanted to share so that if you were also “slightly out of the loop” you could benefit as well!
Whether or not you are aware of this.. You are required to charge sales tax on any photographic job you charge for.
The regulations are somewhat convoluted but to put it in basic terms you are required to charge sales tax on the bottom line of your invoice, all charges, including your fee and all expenses related to the job that you charge for.
Exceptions have historically been if the job is billed and delivered out of state, or if it is for resale and the client delivers a valid signed resale card to you.
Well there is a new exception in town! And it is called Electronic Transfer of Artwork. What this means is that if you deliver your images to a client via FTP / Over the Internet, you may not have to charge sales tax. Again you need to do your due diligence and investigate and verify this on your own, but here is how it went down for me.
As long as I do not deliver ANYTHING tangible, I do not have to charge sales tax. Now that means ANYTHING at ANYTIME! If I deliver all the images from a shoot over the web and then a month later the client wants a print, I have to charge sales tax on the ENTIRE JOB. If I deliver everything over the web and the client wants a physical proof sheet, (not a .pdf) then I have to charge sales tax on the ENTIRE JOB. But if they take delivery of EVERYTHING over the web including .pdf proof sheets, etc. then I do not have to charge sales tax.
Now in the scheme of things it is not like it is any money out of my pocket as the client pays for it all anyway, but by offering this option to clients I can offer them the job for 8.25% less. And on big jobs this can really add up! It also makes me look good for trying to find my clients ways to save money! And I am all about trying to help my clients in any way I can, that way they hopefully keep coming back. We are after all a service industry.
Now I did a lot of letter writing and phone calling to the SBE to verify all of this and they like to cover their own ass and say that the “guidelines” they give offer you no protection in an audit (weasels! – I mean come on! They can’t even commit to their own regulations but force us to be accountable for them!!). But I was just audited and on multiple instances this indeed held up. I am in fact getting a REFUND of sales tax for a job that was deemed to be not a sale of tangible property. (The $ actually belongs to the client who then used it for more photography – with me!)
The regulation that addresses this is Regulation 1540 – check it out.
I also just filed my quarterly tax return this week….. WITH ZERO DUE!