chapmandu

Hi all,

We have an auditor from the State of Wisconsin (U.S.) trying to tell us that we should be charging sales tax on our visualization services.

Does anyone out there (particularly in the U.S., and in a perfect world - in the State of Wisconsin) have any experience with this.

This seems like an odd request to us.

Thanks in advance.

Jon

louis.cho

I don't know law of Wisconsin but here, Visualisation and other graphic design is like other services and there is taxes on products and services.

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ikinman

Whether or not visualization artists should charge sales tax is a complex issue, and it does vary from state to state. One hard and fast rule, however, is that if you ask an auditor from the state tax authorities whether or not you should collect sales tax, they will always give you the same answer - absolutely.

It's important to remember that you are not 'paying' the sales tax, but are instead essentially acting as the state's agent and collecting it for them.

Most states base sales tax laws on whether or not what you are selling is 'tangible.' And that's where the fun begins, because in the digital age what is tangible? All states obviously view the answer to that question in their favor, however.

In short, the best advice is to collect the sales tax based on what the state laws require. (You'll need to talk to the auditor to get the specifics of your state). Many artists get away with not doing it, but that approach is really more of a financial Russian Roulette - you can get away from it for years, but then you may get socked with thousands or tens of thousands of dollars in tax bills (it's happened before). Again, you are not paying the tax out of your profits, you are merely charging the clients the tax and passing it on to the state. One thing you must do is keep meticulous records (a necessary thing in any case)

Many artists don't do this as they are worried it will cause their prices to appear go up, making one less competitive with no upside gain. In practice, talking with many artists about this very issue, I have not found this to be the case. If a client balks, the answer is simple - get them to to provide a tax-exempt certificate. We don't scream when a restaurant charges sales tax.

There is more information on this topic at the NYSR website, including discussions with lawyers and state officials, necessary forms, etc, though one must be a member to access it. Hey, it pays to be a member....

I hope this helps.

-Ian

chapmandu

This is kind of what I suspected.

OK. Tangible as defined on dictionary.com is 1. capable of being touched; discernible by the touch; material or substantial. If we are talking about animation, you obvisouly can't "touch" it, but many times the animation is delivered via CD or DVD, which you can obviously touch. I wonder if this is where the confusion comes in. In the case of renderings, when a print is delivered, now there is something you can touch, but at the same time, the paper is the "delivery device" not the actual deliverable, which is of course the image.

It looks like I will get a chance to talk to the auditor personally a little later today. We'll see how it goes. I will post any meaningful results.

Thanks Ian,

Jon

ron ll

It definitely varies state to state so you will have to get your state's specific advice. In the state of Washington, we definitely do NOT collect or pay sales tax on the rendering "service". We are required however, to pay it on prints of those renderings. This is on the amount we actually charge the client for the hardcopy, again NOT including the rendering service. As a result, I will very seldom sell prints of my renderings but rather suggest that the client contact a good printing service and I will provide the efiles. On the other hand, I do offer my clients small prints of their renderings as "instruments of service" but I do not charge for those.

Sawyer

I asked around and basically what I was told for CA was that if you hand in a print you need to charge tax for the whole image. But a CD, ftp transfer, email are not taxable. Like Ron I don't offer prints.

This is not legal advice and you should ask a local tax representative.

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chapmandu

So, in your case, if you were offereing a print of your image to your client, then you would charge sales tax not only on the print itself, but also on the creation of the image?

chiquito

Im not in the US, so I can say this.
I was with the same issue, so I hired an accountant who is an expert in taxation, from where I was we figured out what was the best way to inscribe my buisness in terms of tax (I had a gap in a non specific category).
I ended up paying just a percentage of the savings I make on a year to this guy, everything legal and legit. Just being advised by someone that knows what to do and how to do it.
Perhaps theres a difference on hoy you incribe yourself, or you can have a legal adress in one point and a working adress in another... check it out.

ron ll

I would like to reinforce what Ian said above about asking someone at the State. They will usually tell you that you DO have to pay tax, even tho it may not be true. This happened to me many years ago. I don't think they are being dishonest, they just don't take the time to really understand what we do and they tend to err on the side of more revenue. You really need to talk to someone with an opposing view, like a good accountant or tax attorney. But remember, we are not selling a "picture", we are selling a "service" wherein the picture is an instrument of service. Just like an architect sells a service, not the blueprints.

chapmandu

Thanks ron ll - this sounds like good advice.