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SportsShooter.com: Member Message Board

sales tax online
Stew Milne, Photographer
Providence | RI | USA | Posted: 10:10 PM on 04.04.05
->> I'm trying to get a feeling of what everyone out there is doing about photo sales online and sales tax. From my eonline experiences, I've never paid sales tax
for any items I've bought online. So, for those of you out there who are selling
photos online, either through a portal like photo reflect, or though their own
website, how are you addressing sales tax issues?

I brought the topic up with my CPA today while doing taxes. He said he would
have to get back to me after tax season.

I can't wait til then, As I am shooting an event before then.

-stew
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Allen Murabayashi, Photographer
New York | NY | USA | Posted: 10:27 PM on 04.04.05
->> i am not an attorney nor a cpa.

tax law on the internet isn't well-defined. states and federal governments have been battling for years to gain additional tax revenue from internet-based sales. most recently, the IRS has come out and stated that it would like to collect taxes off certain e-bay auctions.

for tangible goods, like a camera, the common model is to charge sales tax only if the store and delivery address reside in the same state. this would presumably apply to the selling of imagery.

it is also becoming typical for a cpa to ask whether you purchased any items on the internet in the past fiscal year for which you did not pay sales tax. there are guidelines for this, but no laws. your cpa can act prophylactically on your behalf to avoid scrutiny in the rare event of an audit.

the IRS has, in the past, retroactively penalized people that have used tax shelters, even before they were declared illegal by the IRS. the "son of boss" transaction recently made headlines with $300B in back taxes collected. it is highly unlikely that the IRS would go after people that did not collect sales tax, but since it does not really cost you anything to collect sales tax, i would do so if delivering good to your own state.

cheers.
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Phil Hampel, Photographer
Barrington | IL | USA | Posted: 12:03 AM on 04.05.05
->> Stew,

Check with New York State Department of Revenue. Sales tax has nothing to do with the IRS. I'm based in Illinois and for all online orders from Illinois I collect sales tax based on the tax rate for my office, for out of state orders there is no sales tax. On location I have to file a sales tax return for that temporary location and charge the tax rate for that location. I file and pay the sales tax to the state by the deadlines they setup. Originally it was monthly and last year it was changed to only 1 return for the year.

Good Luck
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Phil Hampel, Photographer
Barrington | IL | USA | Posted: 12:04 AM on 04.05.05
->> oops , Rhode Island Department of Revenue not New York.
Sorry
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Jeff Stanton, Photographer
Tucson | AZ | USA | Posted: 12:42 AM on 04.05.05
->> Purchases I've made with Apple, including iTunes, are taxed if your state collects a sales tax, which most do with the exception of states like New Hampshire and Tennessee, for example.
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Ron Hawkes, Photographer
Camden | Me | USA | Posted: 2:30 PM on 04.05.05
->> Stew
I have been collecting sales tax on sales from my protoreflect site for two years. I only collect tax when the product will be shipped in Maine. Out of state I do not collect tax as I am not a registered business in any other state.
As Phil said the Rhode Island Department of Revenue will be happy to help you.
I file and pay my sales tax semiannual
Ron
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Stew Milne, Photographer
Providence | RI | USA | Posted: 10:51 PM on 04.05.05
->> Ron,

Is this done easily through photoreflect? Since I'm in RI,
most of my sales are out of state and not taxable, but I
would like to collect tax, and avoid any problems, by taxing
those RI residents who do buy photos. Basically, RI
gymnastics isn't very good, so they aren't in the meets I
cover.

Off-topic-sorta. I know that state gov. are trying to get
sales tax from ebay auctions, and the federal govt. is
trying to figure out how to track internet sales for
income tax issues. Besides being an "honest" citizen, is
there anyway for the IRS to track online photo sales
(through photoreflect or any other online portal)? My CPA
mentioned that the only way he could think of is if the IRS
auditted photoreflect.com and then questioned if the photogs
reported online sales. Just wondering. This is a little
different than taking cash from a customer and not reporting
it as income.

-stew
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Landon Finch, Photographer, Assistant
Colorado Springs | CO | USA | Posted: 6:06 PM on 04.06.05
->> Stew, I am not sure how Photoreflect works, but with Printroom they only charge CA orders with sales tax, since they are based in CA (and one other state I believe).

In essence, the way I see it at least, my customers are buying from Printroom.com and I don't have to worry about sales tax--that's Printroom's "problem". I only pay income taxes on the cut I get monthly from Printroom.
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Stew Milne, Photographer
Providence | RI | USA | Posted: 8:09 PM on 04.06.05
->> Landon,

Well, actually, you are utilizing printroom.com to process
your orders. Customers are buying from you, not printroom.
Sure printroom.com pays you a monthly check, but they are
not employing you. You are simply paying them a commission
to process your photo orders. They just take their cut first.
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Landon Finch, Photographer, Assistant
Colorado Springs | CO | USA | Posted: 11:36 PM on 04.06.05
->> Hey Stew,

I don't see it the way you...at least not right now. Maybe I'll change my mind by the time this thread is done;-)

If what you say is true about Printroom (PR) just getting a commission, then why would they charge sales tax to my CA customers?

For illustration purposes, lets say I work in CA. If PR charges my CA customers sales tax, I wouldn't charge them additional sales tax on top of it.

PR charges sales tax b/c they are the ones making the sale not me. Right? My customers get billed by PR, not me. It almost as if PR is using me to sell a product (I know thats a weird way of looking at it).

So if PR is charging sales tax why would I have to charge anyone sales tax, no matter where they live? The only reason most of my customers (CO residents) don't get charged sales tax by PR is b/c they don't live in CA.

I could see having to charge my customers sales tax if I got the prints "wholesale" (tax free) and then sold them to my customers, but Printroom charges sales tax (to its CA customers).

Now this does not answer the question about what some states call a "use tax" (paying sales tax on non-taxed online purchases from another state).

Let me know what you think. Thanks.
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Ron Hawkes, Photographer
Camden | Me | USA | Posted: 8:07 AM on 04.07.05
->> Stew, In photoreflect you set up the states you want to charge sales tax on sales.
You are also correct that Photoreflect is the supplier not the seller. They do not charge tax, because I am not in their state.
Their commission does not touch the sales tax collected. That is all sent to you to report on your sales tax report.
Every two weeks when you receive a check it breaks down the tax, shipping and fee's very well.
I just put the tax in a savings account until they are due.

Landon, not sure about printroom, but I do not think they should be charging you a sales tax. You may want to check your setup and see if you are supposed to pick the state you want to charge tax in.

The law is pretty simple. If you have a business in any state in the country that has sales tax, then you should be charging your customers the correct percentage of sales tax for that state.
You should not be charging a customer sales tax that is out of state if you do not have an office or business registered in that state.

And yes Stew your CPA is correct, Photoreflect or any print company could be audited and that could lead to an audit of your own if sales do not show up on your tax return.
Sales tax in most states are a fact of life. They do not cost you anything but a little time to fill out the paper work or go online and report your sales and pay the tax you collected.

Hope this helps
Ron
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Mike McLaughlin, Photographer
Neptune City | NJ | USA | Posted: 8:14 AM on 04.07.05
->> Landon -

Printroom charges ALL of my customers sales tax, and none of them are in California. I generally have customers from within New Jersey, but have had from other states as well, and all orders have sales tax.
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Mike McLaughlin, Photographer
Neptune City | NJ | USA | Posted: 8:18 AM on 04.07.05
->> Excuse me for a minute while I finish my foot!

I could have sworn I had seen sales tax on my printroom orders. Of course AFTER I posted this I went on to see that Landon is right, there is no tax.

There should be a "Sorry I don't have a clue what I'm talking about" rating that we can check for ourselves.
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Landon Finch, Photographer, Assistant
Colorado Springs | CO | USA | Posted: 9:22 AM on 04.07.05
->> Mike, I can't stand foot for dinner, it's probably my least favorite meal!!!! Hopefully you still have another you can eat sometime in the future;-) Mine have both been gone for a long time and I am only 30.

So, what are we to do?

It seems to me that PR is the seller and that CA (where PR is located) is the point of sale. That's why they only charge sales tax to CA customers.
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Landon Finch, Photographer, Assistant
Colorado Springs | CO | USA | Posted: 10:03 AM on 04.07.05
->> Ron,

Printroom does not have an option of charging sales tax. They just automatically charge tax for orders shipped to CA addresses.

You wrote: "If you have a business in any state in the country that has sales tax, then you should be charging your customers the correct percentage of sales tax for that state."

You're correct, IF I am the one making the sale. But it seems to me that PR is the one making the sale. Maybe I see it this way b/c PR does not give me the option of charging sales tax. If I went with Photoreflect, I would probably see it your way.
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Stew Milne, Photographer
Providence | RI | USA | Posted: 10:22 AM on 04.07.05
->> Ron -- OK, sounds simple enough to set up the
sales tax on photoreflect. i noticed on the report
that comes with your check, this category,
"sales tax recovery" ... different from the "Sales Tax"
category. I wonder what this is for? Maybe, it's to
charge the photog sales tax if they are in the state
that photoreflect operates out of (don't know which
state they are in).

Landon -- not sure how printroom operates, but it
sounds the same as photoreflect. have any of your
customers complained that they were charged sales
tax in CA? i still see printroom and photoreflect
as a third party who are processing our online orders.
with photoreflect, the photog can select a printer
to have the photos automatically sent to, or the photog
can use a local printer. photoreflect does not make
the prints.
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Landon Finch, Photographer, Assistant
Colorado Springs | CO | USA | Posted: 1:18 PM on 04.07.05
->> Below is an email directly from Christopher Hooks with Printroom.com.

In essence, Printroom is the one making the sale, NOT ME, therefore, I don't have to charge sales tax.

I believe Photoreflect is different b/c they only process the orders and are not responsible for printing, shipping, etc.

One more reason to go with Printroom in my opinion.

Email:
"Hi Landon,

Thanks for forwarding that thread from SportsShooter. Your comments on the thread are pretty accurate.

Printroom.com is neither obligated nor permitted to collect sales tax on any purchases, except for customers ordering from the state of California because Printroom.com does not have a "business presence" in any state except California.

Most other states levy a "use tax" on residents who purchase goods from out-of-state vendors. Residents are required to declare use tax on their state tax returns and they can write off use taxes on their federal tax returns. The reality is that many, if not most, purchasers fail to report this use tax. This is why many states want to require out-of-state providers to pay sales tax. To date, Congress has prevented states from doing this.

If a Printroom.com purchaser is an end-customer living in a state not located in California and places an order on the Printroom.com website, Printroom.com does not have any kind of business presence (e.g., office, employees) in the customer's state so Printroom.com does not collect state sales tax. Based on analysis of relevant law, Printroom.com makes sales to the end customer because Printroom.com :

1) takes orders on its servers in CA

2) collects the funds

3) prints the photos or gift items

4) ships the photos

5) takes responsibility for returns, refunds and customer support

If, however, you have a business presence and you make a face-to-face sale, or otherwise conduct a transaction, your business is responsible for collecting and paying sales tax.

Note: A couple of providers collect sales tax because their services do not include order fulfillment or customer support. These providers presume that the photographer's business will perform fulfillment in the same state as the purchaser and are responsible for filing and paying the sales tax.
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Ron Hawkes, Photographer
Camden | Me | USA | Posted: 1:42 PM on 04.07.05
->> "I believe Photoreflect is different b/c they only process the orders and are not responsible for printing, shipping, etc. "

Landon, good job getting that information. And the comment about Photoreflect not processing the orders is 100% accurate.

I would like to know, if I ordered a photo from printroom from your web site and it arrives in the mail does it say it came from you or printroom?
That would be a concern for me if it comes from Printroom. If it says it comes from you with your return address then I wonder how the tax man would look at that sale.
Just a question, not implying anything
Thanks
Ron
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Landon Finch, Photographer, Assistant
Colorado Springs | CO | USA | Posted: 2:41 PM on 04.07.05
->> Ron, I am not totally positive because I have never seen the packaging of others' orders, but I believe the return address is Printroom. The invoice (the ones I have got when I order some of my own photos) says "Finch Fotography thanks you for your business" or something nice like that, but the invoice is clearly from Printroom.
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Stew Milne, Photographer
Providence | RI | USA | Posted: 11:38 AM on 04.08.05
->> Landon -- I see the difference between photoreflect and
printroom. Do you get any tax forms from printroom? 1099
or anything else?

Printroom is a one-stop contractor. Similiar to the
guy who builds your house. You hire them to take care
of everything.

Photoreflect is a contractor who only handles taking
money from customers.
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Landon Finch, Photographer, Assistant
Colorado Springs | CO | USA | Posted: 12:35 PM on 04.08.05
->> Stew,

No, we just get a monthly check...they handle everything else.

I did a lot of research on these companies before I signed up with Printroom, but never realized the sales tax issue. I am glad we got things figure out through this thread.
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Delane B. Rouse, Photographer, Photo Editor
Waldorf | MD | US | Posted: 1:39 PM on 04.08.05
->> With PhotoREflect I can fulfill my orders and they ship from EZ-Prints facility in Norcross, GA.

When a client in Pennsylvania orders from my PA based company...and the end product ships to them from Georgia, should I charge and collect Sales Tax? What about a New Jersey customer purchasing from my PA based company? Do I collect sales tax then?

Fianlly...what if a PA customer orders (1) 5x7 and (1) 20x30 via my storefront on Photoreflect, the 5x7 is printed in Norcross, GA and the 20x30 is printed and shipped from my facility in PA...what then?
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Landon Finch, Photographer, Assistant
Colorado Springs | CO | USA | Posted: 1:49 PM on 04.08.05
->> Delane,

Yes.
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Landon Finch, Photographer, Assistant
Colorado Springs | CO | USA | Posted: 2:12 PM on 04.08.05
->> Seriously, I THINK it would work like this:

{{When a client in Pennsylvania orders from my PA based company...and the end product ships to them from Georgia, should I charge and collect Sales Tax?}}
Yes, if your state collects a "use tax". I think you would be responsible for paying a "use tax" so you should charge your customer for that.

{{What about a New Jersey customer purchasing from my PA based company? Do I collect sales tax then?}}
No, they might have to pay a use tax on their own, but that's not your reponsibility.

{{Fianlly...what if a PA customer orders (1) 5x7 and (1) 20x30 via my storefront on Photoreflect, the 5x7 is printed in Norcross, GA and the 20x30 is printed and shipped from my facility in PA...what then?}}
Yes and yes. On the 5x7 you would have to pay a use tax (if PA collect this sort of tax) and the 20x30 is taxable.

I am not a CPA, so this is just my guess.

PA (and other states) may have something like we have in CO:

[from the CO Dept. of Revenue website: SR-34.5 - PHOTOGRAPHERS

A photographer is performing a service subject to provisions of the Service Enterprises in the Special Regulations. If this services is specifically bargained for without regard to the tangible personal property involved, and if the value of the service is greater than the property transferred, no tax is collected from the purchaser but the photographer must pay tax on purchases of materials used to perform this service. Because the photographer is providing a service and not manufacturing photographs all equipment and cameras used by the photographer are subject to sales tax upon their purchase.]

Essentially, if I understand this right, if I charge $200 for a photo session and that price includes a set of prints worth less than $200, I don't charge sales tax. However, if they buy $250 of prints, I would have to charge sales tax (assuming I don't pay sales tax to have the prints created). BUT all my materials and equipment are taxable.

Wow, what a mess.

Feel free to chime in here if I messed up on something.
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Ron Hawkes, Photographer
Camden | Me | USA | Posted: 2:27 PM on 04.08.05
->> Delane,
With photoreflect, it does not matter where the product is shipped from because it is ordered from you. Photoreflect just acts as a broker per say.

So if you have a business in PA, then you charge tax on any thing sold to a PA address.
If it is being shipped to another state where you do not have an estblished business than you do not charge tax.

If EZ Photo from Georgia had an operation in PA then they would be charging you tax, but because you are out of state they do not.

As we seemed to have established earlier in this thread, that is one of the major diferences between Printroom and Photoreflect.

Does that make sense?
Ron
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Landon Finch, Photographer, Assistant
Colorado Springs | CO | USA | Posted: 2:33 PM on 04.08.05
->> Just to follow up on the previous post: I wrote "Yes, if your state collects a "use tax". I think you would be responsible for paying a "use tax" so you should charge your customer for that."

It doesn't matter that the print was shipped from GA directly to the customer (regardless of where they live). Essentially you are the one buying the print from EZ prints in GA on behalf of your customer. So EZ prints is not going to charge you sales tax (b/c you live in PA), but if PA charges a use tax, you need to pay that and pass that cost on to the customer.

One thing to consider though, is this: You only need to charge the % for the use tax on YOUR cost, not the customers's costs. So if a print costs you $1.00 and you charge a customer $8.00, you would only have to pay the use tax on the $1.00. This assumes your prints are being made outside of your state and that PA has a use tax.

B/c Photoreflect is just processing orders (taking the money and telling you that orders have been placed), you are responible for the use tax for prints made outside your state, if PA has a use tax.

With Printroom, they do 'everything', so Printroom users don't have to worry about such issues.
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Thread Title: sales tax online
Thread Started By: Stew Milne
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