TX state Tax ??

[Gateruner]

To me it is easier to just state that sales tax is not included in my pricing. It is a fact of life and people generally know that they need to pay a sales tax. My thought is charge for it and send it to the state. My big question is when to pay it. For example you get a non refundable retainer a year in advance of the event and then the clients make payments during that time. When is sales tax due and on what portion? This is fairly routine for me right now so I will probably call the state or a CPA to get a clarification.

[Wendyp]

I've heard that the tax should be collected from the client when they make the deposit. So if you require a $400 deposit, you should collect $400 plus tax. Then I would guess you pay it back to the state that year, since it was money you collected.

[Wendyp]

I haven't been charging tax on the shipping....oops! Wonder if it is something I should just starting doing, or if I need to go back and refigure all the receipts on items I charged shipping.

But, what if actual shipping charges are just passed on? Does sales tax need to be collected? USPS does not charge sales tax. If it actually cost 1.64 to mail a CD, could I just charge 1.64 to the client? Why would the client have to pay a tax on that amount?

[MicWayWal]

Originally Posted by Wendyp

I've heard that the tax should be collected from the client when they make the deposit. So if you require a $400 deposit, you should collect $400 plus tax. Then I would guess you pay it back to the state that year, since it was money you collected.

You are correct. You report the Sales Tax in the period when you received the money.

[MicWayWal]

Originally Posted by Wendyp

I haven't been charging tax on the shipping....oops! Wonder if it is something I should just starting doing, or if I need to go back and refigure all the receipts on items I charged shipping.

Legally I am sure you are supposed to report it. I don't know what to tell you about the past amounts, but you should start at this point for the future.

Originally Posted by Wendyp

But, what if actual shipping charges are just passed on? Does sales tax need to be collected? USPS does not charge sales tax. If it actually cost 1.64 to mail a CD, could I just charge 1.64 to the client? Why would the client have to pay a tax on that amount?

You might want to call on all of these issues. Really they have been nice to me on the phone when I have tried to get information. I would think you would still charge Sales Tax even if you passed it on simply because no one along the line to the customer has paid any tax. Someone has to collect Sales Tax before it gets to the customer. You might ask if UPS or whatever doesn't already have the Sales Tax in their charges.

[superdex]

I work for a direct mail & political consulting agency, so I deal with a lot of these tax issues. My rule of thumb is when in doubt charge the sales tax. Otherwise if you're audited, you're the one on the hook for the tax plus penalty. That being said, as I understand it, if your business is set up on the accrual system, you are liable for the sales tax amount when the invoice is generated (even if it has not been paid by the client). If it's a deadbeat client who never pays, you have to fill out an amended form requesting the refund. Because of this we have elected to stay on a cash based accounting system. This means you are liable for the tax once you "receive" payment for your invoice. So whatever date you "receive" it in your system or ledger is the date the state would go by. Of course, deposit date should be fairly standard.

Postage is NOT a taxable item. The only caveat to that is if you have a bundled line item price, i.e. photo package prints shipped for $500. Then 100% of the $500 would be taxed. But if you styled your invoice to read the package is $500 plus $10 for postage, the $10 postage is not taxed. Remember postage refers only to U.S. Postmaster postage. (see ruling "d") Postage and shipping are two totally separate things.

Shipping charges (whether a straight reimbursement or marked-up) are always taxed. I didn't know this for some time myself. (see ruling "a") Here is a ruling from the Secretary of State's website regarding Delivery Charges: RULE §3.303

"(a) Transportation charges for taxable items. The sales tax applies to all transportation or delivery charges to a customer when a taxable item is sold, leased or rented on or after October 1, 1987, and delivery charges are billed by the seller or lessor to the purchaser or lessee. The charges for transportation or delivery, both before and after the sale, are taxable even if stated separately from the sales price of a taxable item. These charges are considered to be services or expenses connected to the sale.

(b) Charges by third party carriers. A third party carrier (separate legal entity) will not be responsible for collecting or remitting tax as long as the third party carrier only provides transportation and does not sell the taxable item being delivered.

(c) Common terminology. The term "transportation and delivery charges' includes all other terms used by common or contract carries to describe transportation, such as freight, shipping, delivery, or postage.

(d) Postage charges. Separately stated charges for postage are not taxable when billed by the seller to a client if the cost of the postage was incurred by the seller at the request of the client to distribute taxable items to third party recipients designated by the seller's client."

Yeah, a lot of legalese. Here's a very useful website regarding sales tax issues: http://www.window.state.tx.us/taxinfo/sales/

In regards to calling the state, don't worry about trying to hide who you are. It's pointless. Their volume is so high they are not worried about "flagging" your tax id account to follow up. Just be prepared to stay on hold and try to explain your specific situation with as much detail as possible so the agent can give you a correct answer. The reality is that even if an agent gives you a wrong answer, it is NOT a defense for you in case of an audit. As they say, ignorance of the law is no excuse. When talking to an agent, it's a good idea to write down their full name to document the call and information for your own records. Also ask for a ruling number and even request they direct you to that ruling on the SOS website, so you can print it for your records. I keep a file where I highlight the rulings that pertain to my business.

Regarding out of state customers, if they purchase the photos in Texas, the sale is taxable. If you sell the photos to an end user who resides out of state and the product is shipped out of state it's non-taxable. You may have specific nuances to this scenario, in which case I would call the Comptroller's Office and get the exact ruling. Last election cycle, we printed around 400,000 mailpieces for the U.S. Chamber of Commerce for a congressional race in Ohio. The piece was printed and prepared here in Houston, then trucked to Ohio where it was deposited into the mail stream. This project was not taxable, because the end user (the mail recipients) were not Texans. Also for the U.S. Chamber we did a mail project for the TX-22 district. This project WAS taxable (everything but the postage amount). This was the same client for both projects and this client is in Washington, DC, but it boils down to where the "end user" resides.

Over the years, I have built up my "rulings file" so I can easily refer to it for a client or a stubborn sales rep who thinks I'm trying to screw over his client. For our agency most everything is taxable except for consulting fees and postage. Printing, shipping, mailshop services, list rental, database services, art design, website design and hosting are all taxable.

When in doubt, definately call the Comptroller's Office for the correct answer. Straight as a pretzel?

[superdex]

Originally Posted by Breezy

Yeah I know about the state tax since this is the first state we have lived in with out it. But it is much simpler with state income tax lol.
I just think it sucks that we charge it for out of state buyers that is what I think sucks about it.

See my previous post, but I think every state is the same. When I go on vacation to Florida, every shop I patronize there charges me Florida state sales tax. We went to California a few years back and bought a guitar directly from the manufacturer's shop in LA. We had it shipped back to Houston therefore not paying California state sales tax, but paying shipping charges. The clerk said if we took it with us that day, we'd have to pay the sales tax. Governments must all be subsidized in some form or fashion. I don't know why people get bent out of shape on sales tax. It's just a fact of life. I've never heard of people complaining about sales tax when buying a pair of jeans, but when it comes to certain services like photography people get in an uproar. I guess many people don't see it as a tangible item. Just arm yourself with the rulings and blame everything on the government.