Taxes

B

Bryan_Lawler

Well-known member
Hi, I am getting ready to start a video company and setting it up as an LLC. My question is have many of you have to charge state sales tax? I know it depends on the state you are in. I am in Missouri and some people tell me yes and some say no. I haven't heard of any production companies having to charge sales tax before.

Thanks,

Bryan
 
here in pa i have to charge sales tax (a pain) but like you said that varies from state to state.
 
Here in TN I have to charge sales tax on any services or rentals. It's a pain (and costly for some of my clients) but it's what I have to do to make a living.

Matthew
 
The Tax Man Cometh...

The Tax Man Cometh...

Bryan_Lawler said:
Hi, I am getting ready to start a video company and setting it up as an LLC. My question is have many of you have to charge state sales tax? I know it depends on the state you are in. I am in Missouri and some people tell me yes and some say no. I haven't heard of any production companies having to charge sales tax before.

Thanks,

Bryan
Click to expand...

Hi Bryan,

Most States require taxation for product, many also do so for "certain" services, and unfortunately lots of well-meaning folks give bad advice suggesting the later is never taxable. For instance, if you're creating a tangible media such as a DVD (perhaps an event video), it's taxable in many States. Yeah, it seems like we're mostly performing a service but the State Franchise Tax Board just loves taxes so in most places we have to cough up the money (not a pretty picture if we get caught several years after the fact).

That said, if you're purely performing a service involving labor hours with no tangible product, it's quite likely you don't need to tax those services.

But here again, don't try being clever by "unbundling" services versus product charges to avoid taxing most of a common job. In the case of the event video, you can't charge 90% non-taxable services for prep, camera, editing, and 10% taxable for rendering and DVD production. Not that we won't give you a silver star for creative accounting, but the Tax Board will not be impressed.

Bottom line, get a tax professional - the pundits won't be there to reimburse you for bad advice during the audit. In your fair State, you might also want to check out Missouri's Tax website.

Good luck, Michael
 
Thanks Michael,

Wouldn't every project have some sort of tangible media given at the end of a project? Anyway, that's so crazy. I have started talking with a tax professional. Thanks for your comments.

Bryan
 
Bryan_Lawler said:
Thanks Michael,

Wouldn't every project have some sort of tangible media given at the end of a project? Anyway, that's so crazy. I have started talking with a tax professional. Thanks for your comments.

Bryan
Click to expand...

Rehi,

Perhaps you'll only be providing a second camera shooter (wedding, etc) for an event booked by another business, so you're only providing labor here - likely not taxable in most jurisdictions. Or perhaps you have a contract to do an event, retained a booking fee (never call it a "deposit") and the other party backs out - again, you don't have a tangible product. You might also provide consulting services, etc. You get the idea, in some situations you won't be providing a product and may have different laws/exemptions in effect.

Speaking of jurisdictions, you might be also be doing a destination event where you travel to another State - let's say you videotaped a wedding in Florida, providing a Same Day Edit and handed out preliminary DVDs at the event. This one is tricky.

If Florida doesn't tax products, the client is in that State and you're performing the work in that State, you'll probably be incented to arrange the work so you don't have to charge the customer taxes. Here's a muddy situation - separating costs/revenues is dicey, possibly contingent on the contract T&Cs, your CPA, and the whims of individual at the Franchise Tax Board. But momma said these things would happen...

Incidentally, when we do need to charge taxes, we should clearly show those costs in our contract T&Cs, never absorbing these costs or, worse yet, deferring payment - eventually the tax man cometh and it won't be pretty when there's penalties and painful late fees.

Good luck, Michael
 
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Twisted Lincoln, Inc. is a registered corporation in Missouri, so I have a bit of experience in this matter. That said, I'm a salesman, not a lawyer or accountant... Still, no audits or inquires in the almost five years I've been in incorporated.

Here's how I understand it:

You must charge sales tax on any tangile good sold. In MO, service isn't taxable, but items used in the commission of that service are -- if you itemize them. For example, if you convert a VHS tape to DVD for someone, you could charge them a flat rate of $30, and give them the disc for free. No part of that sale is taxable. But if you charge $25 for the labor, and $5 for the disc, you have to charge tax on the $5.

As stated before, however, make sure what you're doing is reasonable. You'd be hard pressed to justify selling an HVX for a dollar, and charging a $4,000 shipping and processing fee...
 
There is another part of the sales tax here in MA and it is called the sales and USE tax. The use refers to our equipment. I got audited for my still photography and they informed me that I owed USE tax for any equipment purchased even if it was on the internet. Don't get caught by this. Thankfully most of my equipment was purchased and the sales tax was paid but some of it was not. I had to pay that portion.
 
Yes, use tax is tax that is owed on purchases which the seller did not charge you sales tax. In PA, you have to file use tax the same schedule as sales tax. Since all of my work results in a person recieving a product (from DVD to web file) I always charge sales tax, unless they are tax exempt.
 
honestly,

Unless you are shooting things for individuals (like weddings), gigs with high liability for slander suits etc, or grossing over $200,000, there is really no reason to incorporate or to form an LLC. Just operate under your name or a DBA (doing business as), then just have your clients 1099 you. Violah, no sales tax. Also, even if you are shooting high-liability gigs, you can still insure yourself against loss.

Now, in looking at your website I say you would probably be eligible to qualify for 501c3 (non-profit) status for the video you do. You can still get paid, you just have to pay yourself either a salary or percentage (i think) However the web work you do would have to be 1099.

-C
 
Not sure about California, but in Missouri, you definitely still have to charge sales tax on products you sell even if you're a sole proprietor. You're not totally exempt from collecting sales tax.

Incorporating or forming an LLC is almost always a good idea. Not only do you have the extra protection against liability, but people take you more seriously when you are a corporation/LLC. Plus, despite popular opinion, the paperwork load is about the same either way when it comes to taxes.

I don't regret incorporating at all. I did all the paperwork myself, drove to the various offices personally (rather than mailing everything in), and managed to get it all done within two and a half hours.
 
I dont sell products and ya can't tax labor in MO.
I have never charged tax... I just pay it. lol
I started an LLC in MO 4 years ago but only offering services, I've found no circumstance where I needed to charge tax a state sales tax.
 
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