Sales Tax

C

ctb1010

Well-known member
Hello everybody,

I shoot weddings in NYC and recently incorporated my business. Everything is getting official now and I am trying to figure out if I need to charge my clients sales tax. Services are not taxable in New York, however the final product the client receives is a DVD. Films and film production are subject to sales tax in New York.

The question is where do I fall? Am I delivering a film? A service? A Product? Has anyone else had this question definitively answered and if so what was the answer?

Thanks!
 
I can only speak for CA, but it might be similar. If I do a one-off master of a production, then no sales tax is involved, as I am not selling the actual disc, I am selling the service and the disc is included. But if I am required to make copies to provide to the client, then the copies are taxable, if he is going to turn around and sell them, that is if he made an order for XX number of copies and pays me for those copies on a per disc rate.

One thing I do is speak to the client about this. A disc if sold outright costs.....10 cents + your labor to burn it? Do they know exactly how many they need? Come to an agreement on if you provide the discs "free", how much you will be allowed to inflate your service fee. Eat the cost of the disc (no sales tax then, and bump your service rate to compensate for both the disc and labor.

Edit: but you must itemize that up front "20 copies of final provided free of charge" on the estimate. It will be a package deal.

Now, what I will advise, talk to a NY tax specialist for the real skinny.
 
I've always wondered if the government cares as much about whether you charge sales tax as much as whether you pay it. In other words, if based on your business, you owe 500 dollars in sales tax. Do they care whether you charged that to your clients or whether you just eat it, as long as they get their check.
 
Gov't couldn't care less what you charge someone else, so long as the gov't gets what they consider their taste of the transaction.
 
Hi CTB,
Good question. I am still trying to figure out the answer to that... We include a number of free copies, but generally charge sales tax except when performing work for registered 501c3s.

We do business in NJ, NY, PA and CT. I have had clients push back on sales tax, even to the point of refusing to pay the difference of 1% (argument based on what state the actual 'transaction' took place). In cases like these, it has been our practice to pay the sales tax difference ourselves. If our company is ever audited, its likely that the State and Federal government would uncover accidental errors in our accounting, but more likely that such errors will be in their favor.

I have heard horror stories of back taxes and interest swamping both business and personal finance. It is alarming how quickly those charges can add up. That is why we do the right thing, even at the detriment to our profit.

Most importantly, solicit advice from a CPA or tax attorney. We have consulted multiple and it seems that the law can be up to interpretation. It is better to rely on sound advice from men and women who are educated in the intricacies of tax law.



Jason
 
Thanks for the tips guys! I have spoken with my accountant about it and he referred me to Pub 28 A Guide To Sales Tax for the Film Industry. I guess what I am doing can in some ways be considered filmmaking, but in a lot of ways isn't. I guess I'll just suck it up, follow his advice and start charging sales tax.
 
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