Tuesday, July 29, 2014

Life Coaches?

Looking North on the Fox River - Fall I

I got this question the other day, and since it combines a couple of issues, here ya go...

"I am a life coach. I coach people in various states via phone or Skype. Are these services taxable? What if I physically go to a client location?"

First of all, are your services taxable?
There are a few states where what you do is taxable. You need to research those states and see for yourself. Keep in mind that they may not use the term "life coaching".  But look deeper at things like training, consulting and professional services.  And a few states tax ALL services by default. So your services are going to be taxable somewhere.
This doesn't necessarily mean you have to tax the services that you perform over the phone or Skype.  This only is necessary, for right now, if you actually have nexus in the state where the buyer is receiving the benefit of your services.  Based on my assumption about your business model (I actually know a couple of life coaches), your only physical presence in a state is going to be YOU.
Are you required to collect taxes in those other states?
If you GO TO THAT STATE and perform services, do marketing, etc., you probably have nexus in that state.  Which means you may have to collect that state's taxes (assuming your services are taxable in that state.   
And if you subsequently perform your services online or on the phone, then you will need to collect taxes on your services for the states where you have nexus.  
Note that, at some point in time, your nexus in a particular state will "wear out" if you don't revisit periodically.  So you got that going for you, which is nice.
So, to summarize

1.  Your services may be taxable, depending on the state.
2.  In those states, if you go there and do work, you'll have to collect and pay the tax
3.  When you perform the services online after you've been to the state, you'll have to collect and pay the tax.

Life sucks, doesn't it?



The Sales Tax Guy http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

Tuesday, July 01, 2014

What's taxable when it comes to photography?

I wonder if I'm holding it in the right direction

There was an link on Sales Tax News and Links today that brought up this topic.  I actually wrote about this originally on July 16, 2009.  Amazingly, the article needed little updating.  But I have changed a few things and applied a little wordsmithing.  So for you professional or semi-professional photographers out there, enjoy.

Photography services

Most states don't broadly tax services - but some do. And photography is also considered the delivery of product (the prints), and that product is usually taxable as the sale of tangible personal property. However, these rules vary enormously from state to state.  So you need to research what YOUR state does.

For example, I'm in Illinois, and photography services aren't taxable. Even the delivery of the prints, if they're part of the photographer's service, like doing a wedding or a portrait session, are still not taxable.

However, in Wisconsin (a popular vacation destination for people from Illinois in case you've never seen Stripes), most photographic services, including shooting those portraits and weddings, are taxable. I bet that just bummed out a bunch of photographers I know in Wisconsin.

Film or print processing

Getting prints from the drug store is taxable in most states. It's the delivery of tangible personal property. And if you order prints online and they're delivered to you, you'll owe use tax if they don't charge tax.

Sale of prints

Just like the sale of any other tangible personal property, sales of photographic prints (eg. at an art show) are taxable.

Delivery of images online

In a few states, the delivery of pictures electronically is taxable. But while many states tax downloaded video, music and books, most states just haven't gotten around to photographs yet.  But that will change over time. And the auditor might try to bluff you, just for grins.

And if you deliver the photographs on a flash drive or a DVD, then you've transferred tangible personal property, and the sale is no longer simply a transfer over the internet but a true sale of TPP.

Special tax breaks

There are a few states that have special exemptions for the sale of art - and this usually includes fine art photography.  Don't get excited though.  Only a few states do this.

Here's the cool part

If you're selling your taxable prints, then the paper and ink that you purchase is usually exempt as purchases for resale (or ingredients if you're thinking manufacturing).  Heck, the inkjet printer might even be exempt as manufacturing equipment.

Please remember that, as you saw with Illinois and Wisconsin, the rules vary widely from state to state.  You gotta look it up for your state.  Because it's going to be different there.



The Sales Tax Guy http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

Friday, June 27, 2014

Golden Rule of Sales and Use Taxes: The Seven Factors that Determine the Taxability of Any Sale

Warning

What state has jurisdiction?


Generally, with few exceptions, the place where the buyer, or the buyer's agent, takes physical possession or control of the goods is the state that has jurisdiction.  When it comes to services, it's a little messier.  It's usually where the services were performed but sometimes it's where the buyer receives the benefit of the services.

This the first question you have to answer.  All of the other answers depend on the delivery state.

If you're the seller, a corollary factor is whether you have nexus in the state.  If you don't, then you probably don't have to worry about the rest this article.  Yay!

Who is the buyer, or the seller?


In most states, there are exemptions for sales to non-profits and government agencies.  And there are usually more limited exemptions for sales by these types of organizations.  In addition, there are often very specific exemptions for certain organizations who have managed to gain special deals based on how wonderful the politicians think they are.

By the way, you'll usually need exemption certificates for this factor.

How will the purchase be used?


There are exemptions for organizations using the purchase for manufacturing, agriculture, research and development, etc.  Or the buyer may not use it at all, which means it's being bought for resale.  

By the way, you'll usually need exemption certificates for this factor as well.

Where will the purchase be used?


Many states establish geographic areas within the state (I generically call them enterprise zones) where there are loads of exemptions.  In addition, there are variations within a state, based on local jurisdiction rules.  I don't even want to go there.  I'm looking at you, Colorado.

When will the purchase be used


Many states have sales tax holidays for things like clothing, school supplies, guns, energy saving appliances and hurricane supplies.  These holidays are usually only for a limited amount of time - a weekend in most cases.  Then you also have to keep in mind that politicians change their minds.  Or want to limit the amount of the damage they do.  So there are always effective dates when new laws go into effect.  And there are often sunset dates on laws, particularly exemptions.

What is the type of the sale?


Is it a rental or long term lease?  Is it a simple sale or installment sale?  Is it a gift?  Or perhaps it's an occasional sale?  And if it's an occasional sale, is it a business that's selling or buying?

What is being sold?


Finally, there are exemptions for things based solely on what the purchase is.  Is it food or drugs?  In a few states, clothing is exempt.  Maybe it's an intangible.  And of course, just about any service you can name is taxable somewhere.



The Sales Tax Guy http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

Wednesday, June 25, 2014

I hate to make you cry...but....

Ice fishing is such a serene experience, on a lonely lake, out in the wilderness, away from the hustle and bustle of the ... oh...wait...

I was doing a seminar in southern state a few years ago.  And there was a young woman in the class who had just been handed the sales tax responsibilities for her company.  She was in AP and, I'm guessing, just a few years out of school.

She was pretty sharp and stayed with me for the whole day.  But at the end, when I started talking about nexus, she looked a little green.  After the class, she came up to me.

Nice woman: "Uh, we sell fishing tackle* and we have only been filing in our state, no others."

Mean me: "Uh, huh - then what you sell is generally going to be taxable"

Nice woman: "Right.  It certainly is in our state.  Uh, we have independent sales reps that are all over the country.  Do we have nexus in all of those states? They're independent contractors if that helps."

Mean me: "Probably in most of them.  And the fact that they're independent contractors generally doesn't make any difference.  Depending on the state, one or two visits a year will be enough to do it.  In other states, they're a little more laid back.  How often to your people visit the states?"

Nice woman: "Oh, way more than a few times a year.  Every state has outdoor shows and fishing tournaments.  Our people are at all of them."

Mean me: "I hate to say it, but I think you've got nexus in pretty much every state that has a sales tax.  All of them."

Nice woman: "But we only sell off our website."

Mean me: "Doesn't make any difference. Sorry."

At this point in time, tears started flowing.  I've been doing these seminars for over a decade and I have never made someone cry.  I can only imagine how terrified she was.  She was going to have to tell her boss that they have to go from filing a return in just one state, to filing returns in 45 more.  Ugh.

I spent about 45 minutes with her after the class talking about her options, giving her names of consultants that could help, and generally how to go about dealing with this.  Essentially, I was patting her on the shoulder and saying "there there."  I truly ruined her day.  And I never heard from her again.

Don't let nexus ruin your day.  If you ship to multiple states, make sure of your nexus status NOW.  Because we don't want your staff crying.

There's no crying in Sales Tax.



*Fishing tackle was not the product. I'm substituting here to protect they're identity. And I used fishing tackle because I have LOTS of fishing pictures.

The Sales Tax Guy http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

Saturday, June 21, 2014

Don't use zip codes for sales tax rate lookups

United States Mail Railway Post Office

Don't use zip codes for sales tax rate lookups.

Happily, at lease two of the rate lookup services use the actual street address. This is the best way, short of the actual GPS coordinates.  But zip codes? Alas, there are couple of sites that use zip codes for look-ups.

Here's an example.  I looked up the rate for my zip code of 60510.  The problem is that there are locations in 60510 that are NOT within the boundaries of the city of Batavia.  So the rate provided isn't accurate unless the "looker-upper" knows that the particular location is inside or outside the city limits. However, using the actual address will give you the accurate information you need.  But the zip code won't work.

As an aside, one particular site says that freight charges aren't taxable. Hmmmm (drumming fingers)...in fact, they ARE taxable in Illinois, depending on several conditions.

Remember that zip codes have no relationship to taxing districts.  The purpose of zip codes was to speed the delivery of catalogs and flyers to your house.  I forgot the name of the organization that does that...they drive little white trucks.  Dang, can't remember the name.  Anyway, zip codes were not intended, nor are they usable, as an accurate means for determining political subdivisions.  And sales taxes are all about political subdivisions.



The Sales Tax Guy http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

Wednesday, June 18, 2014

FAQ - Keeping the Lights On in the Manufacturing Plant

400

This issue comes up a lot in seminars...

Usually, environmental equipment (keeping the lights on, maintaining a comfortable temperature in the plant, etc.) is taxable, even in states that grant exemptions for manufacturing equipment and materials. The problem is that, while necessary, the lights and temperature in the plant don't have a direct impact on the product being processed. If you want to make the argument that you need the lights on to operate the equipment, I'd agree with you. But you also need the sales and marketing department to keep the plant operating. That doesn't make them exempt. The rules are generally that the item must be directly used in the manufacturing process.

What does directly mean?  This is not the rule in the majority of states, but it's my rule of thumb.
In order for an item to be exempt under manufacturing rules, the item must touch the product.
I admit that's strict and most states aren't quite that nuts. But if you're going to argue for an item to be exempt before the Sales Tax Guy Tribunal, you'll need to rationalize from that statement. Good luck.



The Sales Tax Guy http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

Tuesday, June 17, 2014

Sneaky Taxes

Hiding in Sumac
Just because there's no sales tax on a particular item or service, doesn't mean that there might not be another tax lurking around the corner.

States seem to come up with them to trip you up.  Here are three situations that should worry you:

1.  In Illinois, some home rule jurisdictions are trying to tax self-storage.  Generally, there's no state tax on services, or even rentals, in Illinois, so this would be the kind of thing you wouldn't expect.  Sneaky.

2.  In Indiana, there's a very obscure rule on rental of space for massages, dancing etc.  I'd be willing to bet the rule was created as a way to shut down massage parlors.  They probably don't know about it, so the state can get them the way they got Al Capone - taxes!  It's probably easier to do this than to use undercover cops.

3.  But the top of the sneaky pile comes from Rosemont, Illinois (Illinois again...hmmm).  Here's a city that refused to tell a tax professional what the laws were in their fair city.  Think about that for a second.  A city passes a law, and then refuses to tell people about it.  How do you comply with that?  I should also say that Rosemont has a certain "reputation" in the Chicago area.

So, be on the lookout for taxes that might be lurking, ready to trip you up.  Do as much research as you can, but always be prepared to find something else.  I'd also suggest staying in touch with others in your industry and local jurisdiction to get a little advanced warning.



The Sales Tax Guy
    http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars.
    http://www.salestax-usetax.com
    and there's more sales tax news and links here http://salestaxnews.blogspot.com
   

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.