Question on state sales tax???

[Jaggz]

I pay my state sales tax quarterly, and I was curious - when I have a client that wants to reserve a session and pays a "retainer" or partial payment to reserve their day, is the sales tax due in the quarter that the payment is received or is it due in the quarter the session is scheduled for? Make any sense?

{Example}
Let's say a client wants to reserve a session for June 1st...they send in $250 on Feb 1st...and then pay an additional (the balance) in June...when is the sales tax for this event due?

I hope I didn't totally confuse everyone! Thanks in advance!

Jake~

[Kalrog]

I don't think a retainer is a taxable product. Remember the sales tax is on the sale of tangible goods and services. If you get a fee for a photo shoot, but they don't buy anything, then you owe no sales tax. But if they do purchase something, then the whole fee is taxable. And since you don't know right now if they will purchase anything or receive any tangible assets in exchange, the reservation fee would become taxable after the shoot is done and something is delivered. Pay later.

IANAL

[Kym Kilcrease]

If you are CONSULTING WITH THEM and the time the deposit is paid, U owe NO TAXES! All CONSULTING IS NOT TAXABLE!

[jonnydonut]

I'm almost positive it is taxable. In my communication with the comptroller, the only thing not taxable regarding photography is out-of-state, education and non-profit orgs.
(//edit: when dealing with end users)

If you charge $xxx for a session, and $xxx for the files, and deliver only the pictures online digitally, you still have to charge sales tax on both of those, not just prints.

You never have to 'charge' sales tax, you only have to pay it.. So it can always be reversed out. I've had to do this a few times. Say you have a $100 retainer, just do 100/1.0825 and that's your net total (assuming the rate is 8.25%, you get $92.38. Then subtract that from 100... $7.62 is what you owe the comptroller.

(total brought in) / (local rate + 1) = (taxable sales)
(total brought in) - (taxable sales) = (sales tax)


Email them, there responses take a while, but they're always very good.

[brad]

Call the comptroller. They are the only ones that can give you a definitive answer on this. You are going to get differing opinions here.

BUT

Let me put it this way.. if you pay it now, you are sure to be right. They won't penalize you for paying it early.

[bondarnes]

It actually depends on whether your business is set up as a "Cash" or as an "Accrual" type of business. If it is a cash business then you pay taxes when the money is received. If accrual then you pay taxes when the debt is incurred. This is a question for your CPA.

[Jeff Lane]

Call the comptroller. They are the only ones that can give you a definitive answer on this. You are going to get differing opinions here.

This is the best advice -- call the folks who will assessing the taxes. BUT (and it's a big but), also know that when you call the taxing authority, you may also get differing opinions there, too.

Anytime I need to call the IRS for an opinion about something that I can't answer definitively from my own research, I do this: if I don't particularly like the first answer, I wait ten minutes, and call again. If I still don't like the answer, I call again. And again, until I either get an answer I like, or I decide that the rationale I keep getting makes the most sense given what I otherwise know. About a quarter of the time, I wind up getting a different answer on the second or third try. Here's the trick, though -- when you get the answer you like best, ask the representative for their ID, and they'll give you a first name and a number. Keep that person's ID info, take really good notes about the conversation, ask for some kind of reference to the tax code or some IRS publication number to bolster the answer, type all this up in a memo and put it in the file. That way, if you ever get challenged on your actions by someone else at the IRS who didn't like their own representative's approach, they will see that you got a contrary opinion from the IRS itself, and are less likely to be unpleasant (and penal) about it. (But DON'T try to make crap up and pass it off as an IRS answer. They have ways of catching that. I don't know how, but they do. Besides, it's dishonest, and that's not a good way to be in life, much less with the IRS.)

This doesn't work quite as well with the state taxing authorities than with the IRS, because there are fewer agents answering the phone in Austin. But REGARDLESS of what answer you get, take down all the information described above and put it in a memo somewhere, so that you can rely on it in later discussions with the Comptroller.

[boxofrocks]

The state comproller's office has told me that retainers, sitting fees, etc are taxable only when they actually make another purchase. In other words, if they give you a retainer or sitting fee, have (or for that matter don't have) a shoot with you, and then decide they don't want to buy any photos, either prints or digital, then the original fee paid is not taxable.

If they buy anything at all, the fee and the amount of purchase are both taxable.

That's what they told me last year, anyway.

[tresorph]

Originally Posted by bondarnes

It actually depends on whether your business is set up as a "Cash" or as an "Accrual" type of business. If it is a cash business then you pay taxes when the money is received. If accrual then you pay taxes when the debt is incurred. This is a question for your CPA.

Don is correct in this. If your on cash basis, you must calculate sales tax on all taxable sales COLLECTED in that quarter. Accrual, would mean you would calculate sales tax on all taxables sales BOOKED (i.e. signed contracts) in that quarter.

But, also you must recognize what sales are taxable and which are not. I believe that johnny and Tom got the correct answer from the state. Just because it is not a tangible service does not mean you do not pay sales taxes on it. The A/C man comes for a yearly inspection on your unit - but you will still see a sales tax on his work ticket to you. A non taxable consultant charge would be for a business to business transaction, where the end user of the information will pass the sales tax charge to their customer on goods and services they provide. In my case, a session fee is taxable and wouldn't fall under "consulting". My client is the end-user - they won't turn around and pass the sales tax onto anyone else.

Like others have said, carve out 30 minutes from your day and call the state for your peace of mind. The sales tax return is the easiest one to conquer out of all the business obligations. Even if you have a CPA - the buck always will stops with the business owner, and lack of knowledge is not an excuse to the state or the IRS.

[jonnydonut]

That's why I say email instead of call the comptroller, because you have an answer is writing that you can always refer back to. mixed answers=bad. Boxo's reply seems right, but of course the only one who can answer is the comptroller.

[boxofrocks]

Originally Posted by jonnydonut

That's why I say email instead of call the comptroller, because you have an answer is writing that you can always refer back to. mixed answers=bad. Boxo's reply seems right, but of course the only one who can answer is the comptroller.

True--that's what I did. Let me see if I can find the email they sent me....

[boxofrocks]

Nope. Sorry.