The government, third-party printing sites, and you

[stacyreeves]

I'm not sure how many of you have seen the Texas Comptroller's bulletin on Photographers and Sales Tax (www.window.state.tx.us/taxinfo/taxpubs/tx94_176.pdf), but it reveals some very interesting points. The biggest shocked for me was that we are responsible for collecting and remitting sales taxes on any purchases made via these third-party sites. That means if you use Pictage, Collages.net, ExposureManager, or any other similar site to host your proofs and handle online sales, you must charge, collect, and remit sales taxes on all sales to Texas customers. If your site doesn't do this (which most of them don't), you've got to invoice them a second time on your own for just the sales tax.

The only except to this policy is if you transfer the ownership of the copyright of the images to the third-party site, thus relinquishing your rights to sell the photos yourself. This works if you're a wire service photographer, but not for us wedding-and-portrait types.

For the past few weeks I've been in contact with the Comptroller's office vocally opposing this measure. I think it creates a double standard for artists and puts an unfair burden on photographers, especially in Texas since most other states don't have this law, and thus most third-party sites don't accommodate it.

My reasoning is this: Let's say for example that a person invents a toy of some kind. They don't want to deal with the production and sales of this toy, so they tell Company A "You guys make the toy, promote the toy, sell the toy, and deliver the toy. You keep the cost, plus a chunk of the profits, and send me whatever is left over." Although the original inventor still owns the copyright to the toy, he has nothing to do with the toy-buying transactions, he just collects a check for part of the profits. In this situation, Company A would be responsible for collecting and paying sales tax for their transactions, not the inventor. Then why are photographers being held to a different standard?


The comptroller told me that they are scheduling a meeting to discuss the issue. Hopefully they change the ruling. I just wanted to post about it here to get feedback from other TX photogs. If you're interested in seeing this policy change, send a letter to the Comptroller and let them know!

[keripayne]

I guess I don't really understand. I use instaproofs for proof hosting and ordering. I collect sales tax on all my orders placed through instaproofs and pay sales tax as if the client placed the order in my livingroom. Are you specifically speaking about hosting companies that also print and mail prints directly to the customer?

And since Collages, Exposuremanager, etc., don't tell us what to charge our clients for prints I don't get why they should be responsile for paying sales tax. After all, they're essentially working for US, since we are marketing and selling to clients in order to have prints to show in the first place.

I think I must not be understanding something. Lol. Because I know you know WAY more about this stuff than me Stacy!!!

[Flea77]

Following your toy logic, you don't make the image? You don't promote the image (send links to the customers after the shoot etc)?

I can't see your correlation. The product (the image) is contracted, created, and sold to someone inside the state of Texas. I agree it is a hassle that I would rather not deal with however.

Allan

[stacyreeves]

I'm talking about sites where you have little to nothing to do with the sale, i.e.: invoicing, printing, shipping, etc. For example, I use Exposure Manager, and when I finish proofing a wedding or session I upload the proofs to Exposure Manager, send a link to the client, and that's about the end of my involvement. If the client places on order, ExposureManager charges them, prints their order, and ships it to them. If you're handling the invoicing, printing, and shipping of your proofs, then I'm not sure why you would use a third party proofing site, thus this rule wouldn't really apply to you.

My point is that the end seller / retail storefront should be responsible for collecting and remitting sales tax, not the copyright holder/inventor.

[Tom]

Think about it this way.

When you buy a case of cokes at Costco, Costco obviously got them from Coke.

But Coke doesn't pay the sales tax - Costco does. I'm not buying Costco's product, I am buying coke's product. But Costco is the retailer and is responsible for the sales tax.

[stacyreeves]

Yeah. What Thomas said.

[HeatherLou]

Smugmug has an option now where you can set your sales tax, they collect it for you, then send you a check. It is not a perfect system, but it's something.

[Steelsun]

Yeah, this problem is popping up all over the country right now and states are going both ways. They are trying to create new revenue streams.

On places like exposuremanager, what do they expect us to charge the tax on? The whole price? Or just the section we get. EM explains it in the way that we are selling the image to them (not the copyright) and they are reselling them. The same way a book is sold and resold, a card, a calendar, etc.

[ggeen]

Just to be picky but there is one flaw in your example.

The inventor of the toy LICENSES company A to make and distribute the toy. If you license your image to a third party seller, then that would be the same thing. If you do not, then it is not a level comparison.

-G

[XtremePhoto]

Coupla problems with your analogy here. A photography is not something you are 'inventing' and subsequently licensing or selling the rights to a manufacturer. In the eyes of the Texas tax Code, YOU the photographer are the manufacturer.

The one main example I am going to bring to your attention is the Labs that print for photographers. They do not collect sales tax on your images they print, by law you are required to. Why would these other print houses be any different? You have simply choosen them to do the same type thing that many other labs do, print and drop ship to your client. (Which isn't a very good way to do business in my opinion in the first place.)

It is your responsibility as a business owner to collect the taxes, so why don't you just include it in the sale price, and when you get your payment, you know how much tax to remit on that sale?

Pretty simple. I highly doubt the comptroller's office will change a tax statute because of a complaint by one photographer. But ya never know. Government is government.

[jeffkohn]

I think it should depend on how the prints are invoiced and delivered. If the prints are still coming to your for final inspection before handoff to the customer, that's one thing.

But if all billing, payment, and fulfillment is handled through the hosted site without the photographer ever handling the prints or even seeing the original, full payment, then I don't see why the photographer should be responsible for collecting sales tax. To me this arrangement is much like if the photographer is a sub-contractor of the hosting site who provides content and is paid in commissions. You could easily argue that the photographer is granting a license to the hosting site to print and sell the image.

I guess it might depend on how the prints are invoiced and handled. Whose company name is on the invoice/receipt? Who handles returns/refunds, etc? If the answer to those questions is the hosting company, I think the state's argument is pretty weak. On the other hand, if the print invoice is in the name of the photographer's DBA, the state may have a point.

[jeffkohn]

Originally Posted by XtremePhoto

It is your responsibility as a business owner to collect the taxes, so why don't you just include it in the sale price, and when you get your payment, you know how much tax to remit on that sale?

Pretty simple. I highly doubt the comptroller's office will change a tax statute because of a complaint by one photographer. But ya never know. Government is government.

It's more complicated than that, in the case where the website does the billing and payment processing. My understanding based on some discussions that came up about this in other places is that the TX sales tax has to be an explicit line-item on the invoice. If Exposure Manager (for instance) doesn't support this, you're kind of screwed as you will have to remit a separate invoice to the customer for sales tax. You can't just raise your sales price though the hosting site by 8.25%. IMHO this is an unworkable solution that will cause confusion and frustration for customers, who may very well think they're being ripped off.

[Tom]

In the eyes of the Texas tax Code, YOU the photographer are the manufacturer.

And they are wrong. I don't manufacture the product. Smugmug/BayAreaPhoto manufacturers the product, which is a print.

They do not collect sales tax on your images they print, by law you are required to.

Most sellers across state lines do not charge sales tax. Amazon doesn't charge me when I buy books and toys, even if they were manufactured or invented in Texas.

They changed the rules for one specific industry and ignored all the other ones.

[XtremePhoto]

Originally Posted by Thomas Campbell

And they are wrong. I don't manufacture the product. Smugmug/BayAreaPhoto manufacturers the product, which is a print.

Do you buy your equipment and not pay the sales tax on it, via the Texas Exemption? If you do, then you are a manufacturer. You can't have it one way to benefit you then claim you are not a manufacturer in another instance to avoid having to deal with collecting tax.

Jeff has a real good point, if the invoice is invoiced in your name/company name, YOU are the one responsible. I have only used one company of this type and the invoice has my name on it with the order. (They however charge the specified state sales tax I enter in my profile and remit that to me.)

[XtremePhoto]

Originally Posted by jeffkohn

It's more complicated than that, in the case where the website does the billing and payment processing. My understanding based on some discussions that came up about this in other places is that the TX sales tax has to be an explicit line-item on the invoice. If Exposure Manager (for instance) doesn't support this, you're kind of screwed as you will have to remit a separate invoice to the customer for sales tax. You can't just raise your sales price though the hosting site by 8.25%. IMHO this is an unworkable solution that will cause confusion and frustration for customers, who may very well think they're being ripped off.

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.