The government, third-party printing sites, and you

[Tom]

If I bought:
Amazon.com: Lo Mejor De Ti (Spanish Edition) eBook: Joel Osteen: Kindle Store

Joel Osteen's book for the Kindle, I am not charged sales tax. It was invented here, written here. But bought by and distributed by Amazon. Then Osteen gets a cut on the back end.

Same thing with my pics. I took them in Texas (possibly.) But they are bought from and distributed by Smugmug. Then I get a cut on the back end.

But I have to go back and get the taxes, but Osteen doesn't?

Texas is all effed up.

[jeffkohn]

Originally Posted by XtremePhoto

I am not sure how Exposure Manger displays pricing, so you could well be correct. However, on the issue of sales tax being an explicit line item on an invoice, you are right and wrong. That 'explicit' line item can be a statement on your pricing that states: all prices include State Sales Tax of XX.XX%. That was courtesy of a Texas Sales Tax Auditor that visit the business on a "routine" audit. As long as you explicitly state that all items INCLUDE sales tax on your invoice, you are covered.

This is still an unworkable solution though, unless ALL your customers are Texas residents. If you just change your prices and add a blanket statement, you'll be charging sales tax even when you shouldn't (out of state customers).

[Tom]

Originally Posted by jeffkohn

This is still an unworkable solution though, unless ALL your customers are Texas residents. If you just change your prices and add a blanket statement, you'll be charging sales tax even when you shouldn't (out of state customers).

Texas doesn't care if you charge too much sales tax, as long as you give it to them.

[jeffkohn]

Originally Posted by Thomas Campbell

Texas doesn't care if you charge too much sales tax, as long as you give it to them.

Somehow I think out-of-state customers will care.

[DEMDeepEllumMusic]

Simple solution: Use a TEXAS lab to do your fulfilment! That way if the client is outside of Texas they don't pay taxes but if they are in Texas they do.

Think of it this way, as mentioned above, that you take delivery of the "product" to deliver to the customer which would be like any other shop in the state which sells a taxable item.

Now the real question is what sale tax rate do you charge? The rate of the city that the customer is in? the rate of your city? the rate of the city where the shoot took place? (the rate of YOUR city)

If a customer starts screaming about paying sales taxes on your shoot then you need to tell them that it is the law.

[Tom]

Use a TEXAS lab to do your fulfilment!

I'd be happy to if there was something like Smugmug in Texas.

[brad]

Ok, there are several things going on here....

But I think it depends on semantics... if you are selling the images to your print fulfillment company, then they would be required to collect Sales Tax under their local authority... I can see Texas might have an issue with that, but it could be fought on those grounds.

It could also be fought on grounds that you are not actually selling the images - that the fulfillment company is paying you a royalty for the privilege of reselling your photographs. You are essentially receiving a commission on those sales. Since they are providing the hard product, there is grounds for such a battle.

It sounds to me like the State is ruling that you are selling not just the hard goods, but also the service of the photography itself. Under the state tax code, if there is a hard product delivered (including digital files), you have to charge sales tax on the entire amount, including session fee. (If you charge them a session fee and they never receive any product, you don't owe sales tax on the session fee - at least that's the way it used to be.) If they are using that ruling to make this insistence, then... ya, they are right, you are responsible for collecting the tax... because the services that produced the goods were produced in Texas.. and if your fulfillment provider doesn't assist with that, you aren't excused from collecting it.

A better example than the toy one is Software:

If I write software that is available to the general public and sell it via a 3rd party distributor, then I receive royalties on that software and the distributor collects the taxes according to their local laws.

If I write software specific to a customer and sell that through a 3rd party distributor, then I am essentially the one selling it and I am responsible for collecting taxes... because I am also selling the service and the service is taxable here locally.

Using that example, the State is correct.

And no, a lot of those fulfillment houses are not collecting tax for you... and that is one of the reasons I do not sell photos that way.

[Steelsun]

Someone just needs to pound into the state the whole greeting card / calendar analogy. When hallmark sells a card with an image on it taken by a person in Texas, the Texan does not have to charge sales tax.
If you read most of the agreements/TOS of disbursing websites like EM/etc, you'll see that you are actually granting the website a license (although very limited and restricted) to display, sell & print that image.

[brad]

Originally Posted by Steelsun

Someone just needs to pound into the state...

This is the same branch of government that when you call them 2 different people can give you 3 different answers. The tax code is so complicated even THEY don't fully understand it.


And the greeting card analogy breaks down because Hallmark doesn't pay the artist for each individual card that the artist designed... Hallmark licensed the image for resale.

Its an apples and oranges comparison to what we do creating images for a specific end user client.. and then selling those images to that client via a 3rd party's cart system.

In the greeting card situation, the payment to the artist is disconnected from the sale to the card company's customer... a customer that the card company went out and found, not the artist. A customer that the card company made the sale to, not the artist.

It is this difference that the state is seizing on.

[island bound]

From the article above,
we owe tax on the TOTAL ORDER,
not just the commission they send us
PLUS TAX ON THE SHIPPING AND HANDLING:

In many cases, the hosting company will process the Internet orders and print and ship the photographs to the customer.
The company might receive a fee for each picture ordered, or may retain part of the customers’ payments.
In this situation, the photographer, not the hosting company, is responsible for collecting Texas sales tax for photographs sold to Texas residents. Tax is due on the entire charge to a customer in Texas for finished photographs, including any charges for shipping and handling.

[island bound]

and don't forget all travel expenses charged to the customer.

EVERYTHING you bill the client gets sales tax.

[Howard Barlow]

Originally Posted by Thomas Campbell

Texas doesn't care if you charge too much sales tax, as long as you give it to them.

True. If you round up to, say, the next nickel, or to a dollar, to avoid handling pennies, or other coins, you owe that extra to the comptroller, as long as the extra is not stated as product price. IOW, rounded up tax belongs to the state. Or so the local agent told me.

[bondarnes]

I have been through one sales tax audit, and while it wasn't all that unpleasant, I learned enough to institute a policy of "when in doubt collect and forward sales tax." I sometimes forget to enter out of state wedding orders as a separate line and the out of state folks pay sales tax, shipping, and handling. I have only had one complaint in 35 years and since the order was substantial, I refunded her the sales tax and adjusted my next sales tax report to reflect the refund.

[BG Photo]

http://photoreflect.comis a good hosting site. Easy to set up collection of sales tax (not charged to out of state orders). You can view reports of sales tax collected in many different ways to help with bookeeping. Created by Express Digital in Austin. Love it.

[klynam]

However, if the hosting company receives the copyright to pictures sold on its Web site, then the hosting company is considered the seller of the photographs. If the hosting company is engaged in business in Texas as defined by Rule 3.286 section (a) (1) (A – G), then the hosting company, not the photographer, is responsible for collecting the applicable state and local sales and use taxes on all sales shipped into Texas. A charge by the Web hosting company to place, store and operate a Web site is subject to Texas use tax as a data processing service. Twenty percent of the charge for data processing services is exempt from Texas tax. See Rule 3.330 for further information regarding data processing services.

Okay, fine...

1. Photographers are independent contractors.
2. A third-party company owns and operates hosted online image galleries.
3. The third party company allows independent contractors to place images in the image galleries.
4. The third party company allows independent contractors to identity themselves on the image galleries.
5. Independent contractors possess full copyright to any photo he/she creates.
6. Independent contractors grant the third-party company limited use permission to display copyrighted photos in the image galleries.
7. The third-party company manufacturers goods created from images in their online galleries.
8. Anyone viewing third-party company image galleries can purchase goods from the third-party company.
9. To maintain compliance with federal law for reproducing a copyrighted property, the third-party company purchases copyright from the independent contractor for any image(s) used to create manufactured good(s).
10. The purchase price of the copyright is established by the independent contractor as a margin above the manufacturing cost of individual good(s).
11. Once goods are manufactured and delivered to a customer, the independent contractor purchases the copyright back from the third-party company for a predetermined fee.

Texas is free to battle federal interstate commerce law and go after out-of-state labs to collect taxes on sales to Texas residents.