Wednesday, November 09, 2011
A Short Course in Sales and Use Taxes for Artists (Part 1)
A reader (Richard Streitfeld at peaceloveandbusinessplanning.com) recently asked me about sales taxes related to art and artists and I referred him to an article I’d written a while back. We continued to exchange emails and he told me about the writing and training he’s done on this topic. He inspired me to try my own spin on this. In weak moments I think of myself as an artist, so maybe an article for the right-brained folk might be interesting.
I’m going to be writing this article in multiple parts because this is going to take some time. And this should be useful not only for artists but for other entrepreneurs as well. Most of the issues an artist faces will be dealt with by other businesses as well. So this “course” will apply to pretty much everybody.
Some of you may have taken issue with something I said above. Yes, if you’re selling your art, you’re in business. And you should be collecting and paying sales and use taxes as the law requires, just like any business. I’ll make the assumption that you want to do that. Everyone should be paying their fair share, right?
I’m going to avoid some of the theory that I love to talk about it. I will also be omitting, skipping and simplifying to keep the right-brained among you interested. But please see the disclaimer. Get a second opinion; don’t take my word for it. I’m just trying to give you an overview. I strongly urge that you sit down with an accountant and discuss the issues I’ve raised here. And if you don’t have one, you’re making a big mistake.
OK, let’s dive into it.
Things that you sell
I hate to break it to you, but to be very plain spoken, if you’re an artist and you’re in the business of selling your art, you sell stuff*. And sales of stuff are generally taxable. So if you sell a painting, you should be charging tax. And if you sell a photograph, you should be charging tax. If you sell crafts, you should be charging tax. If you're a musician and you're celling CD's at the back of the room, you should be charging tax. It doesn’t make much difference if you sell five pieces a year or 500 a year. If this is your work, then you should be charging tax.
If you sell something from a web site, like Etsy, eBay, or your own web page, you should be charging tax. However, there’s a big exception here. If you’re shipping to someone who's not in your state, then you may not have to charge them tax. And the taxes that apply are based on the state you’re shipping to. If you’re not in that particular state, you probably don’t have to worry about charging taxes for that other state.
However, if you’ve visited clients (or prospective clients), done art shows, worked on an exhibit, have work on consignment at a gallery, or done any other kind of work or performance in that other state, or paid someone else to do so, then you may need to charge that state’s taxes. And yes, if you do that art show in another state, you should be collecting that state’s taxes on any sales you make both during and after the show.
Remember this also means that it's taxable when you sell something to someone who is in the same state you are.
And just charging taxes isn’t enough. You have to send that money to the appropriate state. Which means you must register in that state and start filing sales and use tax returns. You don't just write on a scrap of paper "here's your taxes" and mail them a check. You have to register and then fill out a very left-brained form.
And to make matters even worse, the rules are completely different in every state. So if you do an art show in one state, and then do some production artwork in another, it's not going to be the same.
Are you sure you don’t need an accountant?
That’s enough for today. There’s lots more.
I'll post a link to the next articles as they get posted. Here are all of them published so far.
Part 1 - Introduction and overview
Part 2 - Services that you sell and buy
*My definition of stuff, to make it really easy: A single piece of stuff is something you can hear, see or touch and that can be moved without damage. This isn't complete but it's about 90% of the way there.
The Sales Tax Guy
See the disclaimer - this is for education only. Research these issues thoroughly before making decisions. Remember: there are details that haven't been discussed, and every state is different. Here's more information
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