The big questions I see over and over again relate to the issue of when do photographers charge sales tax to clients in other states? I have written several articles about a term called “nexus” but it is such a complicated area for so many people, I thought I would bring it up again. Nexus is a general means of connection. It describes a situation in which a business has a “presence” in a state and is therefore subject to sales tax within that state. This business activity, which creates a presence in a jurisdiction, can give rise to an obligation to collect and remit sales tax. States may use different terms for this concept. For example, some states use the terminology “engaged in business.”
In general, if you qualify as engaging in one or more of the following business activities in a state, that means that you are engaged in business in the state, and subsequently you have a sales and use tax obligation in the state (i.e. you need to register and collect sales tax):
- Physical location in the state
- Providing services in the state
- Business property located in the state
- Sales people in the state
- Independent contractors in the state
- Soliciting orders at trade shows in the state for more than three days in one year
Again, the requirements listed above vary from state to state, but in general these are the main activities which create the obligation to collects sales and use tax in a state.
Basically we all know that we have a “home state” which is the state where we live and run our business. That’s easy because your studio is located there, you live there, and you provide services there. What if we travel to other states to photograph portraits or weddings? This could mean that you have to collect sales tax on transactions in other states, in addition to your home state.
It may come as a complete surprise that if you are a photographer engaged in business in Massachusetts, but also photograph weddings in Vermont, Rhode Island and Maine and have clients located in those states, you may also be obligated to collect sales tax in those states. This book will provide some basic information regarding potential issues, but I very strongly recommend that you don’t rely solely on these examples.
This can be a highly complex area of tax and could be very specific to the individual details of your business transactions. You need to look at your business and determine both your business obligations and the taxability of these transactions taking into account your location, the location of your clients, and the location at which sales tax should be calculated.
Important things to know:
When you step foot into a state to photograph a wedding, or a portrait session, you are doing business in that state. This is because you are physically standing there, on that state’s soil, engaging in a business activity. For example, if you have stepped into Rhode Island to photograph a wedding in that state, based on Rhode Island law, you are now engaged in business in Rhode Island. This can vary by state, for example, some states may not consider you engaged in business in their state unless you physically do business in a state three times or more in a one year period. This action may trigger a tax obligation.
Sales tax is not necessarily charged based on where the wedding or portrait session is photographed, it is based on the location where the tangible personal property or taxable property is given to the client, so this is either the location of the client (you mail drive of images to their house) or your studio if they come and pick up the item there.
I have included various examples of how to handle nexus situations in Super Simple Sales Tax for Photographers. If you are not sure how to treat your sales tax transactions, this comprehensive sales tax guide will surely help. And if you have questions after reading the guide, just get in touch. I am on a mission to make sure photographers know how to deal with sales and use tax issues, so that they don’t have to pay for their mistakes down the line…