I charge state sales tax to out-of-state clients with retail stores in Texas, and you should, too. I wanted to post about the subject on my blog, since my other sales tax posts seem to be some of my most-read posts (even more popular than my celebrity photo shoot posts). Many photogs are confused about when to collect and when not to. While researching for information on this topic, I ran across this statement from an online user named Santa Fe CPA.
According to the “Quill” decision by the Supreme Court of the US of several years ago, unless you have some sort of a physical presence in that State you do not have to collect or pay the sales tax there. Your customer may have a local use tax issue to contend with though.
Mailing a catalog or having a sales rep travel through there does not constitute a physical presence.
Mailing a catalog or having a sales rep travel through there does not constitute a physical presence.
Though he is obviously based in New Mexico, I believe his statement refers to a federal tax law that affects all states and how/when they can collect? With this in mind, I’ll tell you some advice an old photo studio owner gave me once. He said, “I charge sales tax on each and every sale I make, regardless of whether they should or shouldn’t pay it. Unless the client specifically brings it up and hands me the state sales tax exemption form completely filled out, I’m not going to bother asking. They will be paying it.”
This is more of a no-brainer for retail studio shooters. Ninety nine percent of your clients are end-users… they are the consumer. People like me who shoot a ton of stuff for newspapers and magazines, events for non-profits and out-of-state corporate clients… well, it’s a lot less cut and dry for us. However, I still take that old studio photographer’s core lesson to heart.
Plain and simple, make sure you are charging sales tax to your photo clients, if you are ever in doubt. The government won’t go after you for collecting sales tax on a non-taxable sale – they get you when you don’t collect it on a sale where you should’ve.
Now for the tricky part. Let’s say you shot for a corporate client based out-of-state that only has franchisees in Texas. They don’t actually own those retail locations, so are you required to charge state sales tax?!? Hmmm… I’ll have to call my CPA, if I ever run into that situation.