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  • Do you charge sales tax for design?

    Hello,

    First time on this forum...

    I have been freelancing in California and I was wondering if I am supposed to be charging sales tax for design or photography work?

    I am also curious how others are handling billing? I provide the design work and than outsource to various printers. On my bill I have been showing the price of the printing, the sales tax I pay the printer, s/h, and than my fee for design and production...

    Any helpful suggestions or comments are appreciated...

    Thx!

  • #2
    This may not be directly relevant as my own company operates in Canada, but we are required to charge GST on our services (where the client is also in Canada - otherwise no tax is payable).

    If you are a legally registered business, you will need to file tax reports so should be up on which tax laws apply to you in your specific state. As an independent contractor though (i.e., you're simply working contracts and are not a registered business) I would assume that you would not have any legal ground to collect taxes.

    If you are reselling materials, you need to be registered. You would then apply for tax exemption with your print company so taxes are only charged (and claimed) by a single party.

    If you're not registered, you would be reselling the materials as a private citizen, likely classifiable as 'second-hand' or somesuch, so taxes shouldn't appear anywhere on the invoice.

    Comment


    • #3
      Charging sales tax depends on the state you are living in.

      If you own and operate a business, it's up to you to be aware of all taxes and business filings you need to make in the state where you do business. See if you can find the State's website for their Department of Revenue or State Treasury Department for starters. Then maybe get some Small Business advice. Sometimes there are books available at your local bookstore that tell you how to start up a small business in the state where you live, or night classes offered at local tech schools or high schools or community colleges or Chambers of Commerce.

      It never ceases to amaze me the number of people who start freelancing without a business plan.

      As for your printing services, most states offer what is called a Re-sale certificate. It means you don't pay your printer the sales tax (and you can sometimes get wholesale pricing) but you do have to charge the tax to your non-exempt clients.
      Last edited by PrintDriver; 01-03-2009, 07:43 PM.

      Comment


      • #4
        im kind of in a similar situation. Ive just done my first graphic design as a freelancer here in Florida however the company is in new york. im not a business. its just me and everything is digital. so i guess my question is if im not a company do i still have to include tax in my payment received. if so how do i find out how much.

        Comment


        • #5
          I believe if there's not a tangible product then tax is not charged. Though, I have to admit, I'm no CPA.

          -AS
          "I have the simplest taste. I am always satisfied with the best" -- Oscar Wilde

          Comment


          • #6
            If you are a freelancer and charging for your work you are in business whether you are one person or ten and if the company you work for is in your state or across the country.
            It depends on how your work contract reads with the company in NY, and what your state laws are on charging sales tax. It's up to you to find that out. You are in business.

            Brainchild, you can believe anything you want. But better to check with the local tax authorities...

            Comment


            • #7
              Living in Texas, I am required to charge state/city sales tax for all in-state sales - which is everything from design services to DVD sales. I also have to deal with franchise tax, since I'm an LLC.

              YTMV (your taxing may vary)

              It doesn't matter whether you are a sole proprietor or a huge corporation, there are taxes.

              And don't forget federal income taxes, if you live in the US.

              Comment


              • #8
                Doing work-for-hire for someone in the state of NY, on their payroll, may mean you owe the State of NY taxes as well. Might want to check with their HR on that... In MA, we have to 1099 anyone who we pay over $600 for their service, as contracted freelancer, consultant, or WFH.

                Comment


                • #9
                  You really need to talk to a CPA. In my state, WI, you must pay taxes on any services you charge. But its illegal to charge sales tax if you do not have a tax number, so you have to go through the steps to make sure you're not breaking the law. Talk to a CPA or do a crapload of research.
                  www.jackiecreative.com

                  People who live in glass houses sink ships.

                  Comment


                  • #10
                    Originally posted by PrintDriver View Post
                    If you are a freelancer and charging for your work you are in business whether you are one person or ten and if the company you work for is in your state or across the country.
                    It depends on how your work contract reads with the company in NY, and what your state laws are on charging sales tax. It's up to you to find that out. You are in business.

                    Brainchild, you can believe anything you want. But better to check with the local tax authorities...
                    See below document. I was correct.

                    http://www.aiga.org/resources/conten...ga_5tax_07.pdf
                    Services, as noted above, are
                    usually not subject to tax unless
                    specifically included in a statute
                    or regulation. This is the general
                    category under which to group
                    charges for time and labor;
                    billable time for producing
                    concepts and designs, scanning
                    and manipulation, time spent on
                    press, time spent building and
                    encoding a website and similar
                    billables should be calculated
                    as services and so noted in all
                    contracts and invoice terms.


                    -Aaron
                    "I have the simplest taste. I am always satisfied with the best" -- Oscar Wilde

                    Comment


                    • #11
                      I know in Canada, you do not have to charge GST until your sales in one year reaches a certain point ($30,000 I believe). But as soon as you get your GST number you must charge GST no matter what. But if you are under that number you can get some (if not most) of that money back.
                      Always worth checking into where ever you are...
                      Being honest with yourself, clients and taxman are usually worth it in the long run...
                      Im never gonna get used to the 31st century. Caffeinated bacon? Baconated grapefruit? ADMIRAL Crunch?
                      Fry, Futurama

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                      • #12
                        Originally posted by BrainchildGroup View Post
                        See below document. I was correct.

                        http://www.aiga.org/resources/conten...ga_5tax_07.pdf
                        Services, as noted above, are
                        usually not subject to tax unless
                        specifically included in a statute
                        or regulation.
                        This is the general
                        category under which to group
                        charges for time and labor;
                        billable time for producing
                        concepts and designs, scanning
                        and manipulation, time spent on
                        press, time spent building and
                        encoding a website and similar
                        billables should be calculated
                        as services and so noted in all
                        contracts and invoice terms.
                        Usually not...
                        If you read the 3rd page, that doc was prepared for NY and CA. Not FL or any other state...
                        Last edited by PrintDriver; 01-30-2009, 04:43 PM.

                        Comment


                        • #13
                          And from page 4:
                          Sales tax is a state—and occasionally
                          a local—matter, which prevents
                          AIGA from pursuing a single
                          national clarification of the issue.
                          Statutes and the practice of
                          the taxing authority will vary
                          somewhat from jurisdiction to
                          jurisdiction. In addition, design
                          services are seldom addressed
                          explicitly in state sales tax laws.
                          The many things that graphic
                          design embraces—design services,
                          illustration, printing specifications
                          and delivery of printed matter—
                          are viewed as different forms of
                          property and are treated and
                          grouped differently for tax purpos-
                          esfrom state to state. While AIGA
                          offers a general guide to sales
                          tax principles, dealing with sales
                          tax should be worked out in
                          consultation with an accountant.

                          Comment


                          • #14
                            The information should be available at the same place where you registered your business.

                            Again, I'm speaking from a Canadian perspective, but there are potential benefits here as well (aside from simply being on the up-and-up with the tax man). While we do need to collect GST from our Canadian clients, we're also entitled to claim back every penny of GST we pay out on business expenses. And that can really add up over the course of a year. I don't know if similar arrangements exist in any particular state down there, but it would be in your best interest to find out.

                            AIGA is a highly respectable organization, but go to the source on this one. Check your specific state laws.

                            Comment


                            • #15
                              PrintDriver -- I think you are correct. I'm in California, so what I stated applies to me and I wish I knew more about other state laws.

                              Good catch! ::high five::

                              -Aaron
                              "I have the simplest taste. I am always satisfied with the best" -- Oscar Wilde

                              Comment

                               
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