A verification on Sales Tax due

[Gateruner]

I read alot of the tax issue stuff that is printed in here and then did a search to find my answer and I believe I did. I would like to see if the consensus agrees with the following.

I get a contract signed and they pay a retainer. Payment isnt due until 14 days before the event occurs. Is it safe to say the sales tax isn't due until the full payment is made if there haven't been any products delivered until full payment was made? This makes since as the retainer is essentially paid as a deposit to hold the day. If the retainer is non refundable as is the case in most weddings, does that retainer become sales taxable at the time it is rendered? The timing issue is the confusion for me. When is it due? I dont think it makes since to have the tax due on the total bill when the total bill isnt collected until potentially a year later.

I would appreciate any info that you can provide.

Thanks

[boxofrocks]

After talking to the comptroller's office, here is my understanding:

Retainers are taxable only if photos are purchased. Since there is always a chance that the client will bail, the retainer isn't taxable until there is a product delivered (digital or print).

[Gateruner]

Cool, that is helpful. My plans are that there will be no photos delivered until the full payment is made regardless if we do some sort of prior shoot. Then at that time it makes since that you have sales tax due.

[stacie]

I know this is a bit old but I had a related question - if you don't collect sales tax when you collect the retainer, but do collect sales tax on the retainer when you collect the rest of the payment, how do you report it on the sales tax form when you file quarterly? I'm all confused; how does that work if you collect a retainer months in advance but don't do the tax until later?

[boxofrocks]

Not an acct, but here's the way they explained it to me:

A retainer is only taxable when the work is performed. If you collected retainer of $250 in June, and then worked in September for an additional $750, in September you would report $1000 taxable income. You need to make sure you customer know's they'll be taxed on the full amount.

Also, if you are only paid a retainer or sitting fee, but the work is not "completed", or they don't buy prints, that amount is NOT taxable according to the lady I spoke with at the comptroller's office.

[stacie]

OK, that helps. So when you collect the retainer do you need to report that amount somewhere? Even though it's not taxed until later? Or do you just wait?

[boxofrocks]

If you collect it before Dec 31, I would imagine you report it to the Feds, but not for state sales tax purposes until you collect as described above.

Free advice, and worth exactly what you paid for it.

[stacie]

Thanks!