Charging sales tax in D.C. Maryland and Virginia?

Discussion in 'Wedding and Event' started by jacob_klein|1, Jan 29, 2006.

  1. My accountant has advised me not to charge sales tax for services,
    vice products, in these states. But after talking to another
    service-oriented vendor, I am led to believe that services are taxable
    in D.C. Anyone know the correct answer?
     
  2. Jacob - My studio is in DC. Visit http://cfo.dc.gov/otr to find the correct answers for the sales and use tax.

    You need to register as a DC business for sales and use tax purposes, and you will receive detailed information in the mail. The packet will define the difference between product and service. Basically, a product would be a wedding album, for which you would charge sales tax. However, services are treated differently. Some services are required to charge sales tax for their time, and others are not required. It depends what you are doing. Read the information they send you carefully.

    Once you register, make sure you file your sales tax return each month. Failure to collect and hand over the sales tax is now a felony in D.C.
     
  3. Thanks much for that advice -- though I'm not sure any of that applies to me as a Schedule C filer.

    Does anyone have a rough breakout of what portion of your wedding package is sales-taxable in DC MD and VA?
     
  4. You really need to consult an accountant versused in the tax laws in your target states. The tax man has no mercy with bungling accountants, the peanut gallery, fantasy internet advice. :)<BR><BR> The sales tax divisions of each state are what make the rules. When you cheat them they charge you a penality plus interest. Figure double what you should have collected, and being raked over the coals, and being subject to audits in the future for cheating them.<BR><BR> When they discover your mistakes it is like chuming for sharks with blood. They are a humourous lot, and live for the kill of tax evasion. Having been audited a couple of times in California for sales tax stuff, my advise to you is to contact the horses mouth, not the lay peanut gallery or a lay accountant. <BR><BR>Customers will try to get you to hold the risk with not collecting sales taxes; and will be all long gone during your audit. The tax dept will also make sure you pay the local state taxes on all you out of state camera gear too. Myabe you should consult Capone too?:)
     
  5. Schedule C is a FEDERAL income tax form. This has nothing to do with STATE sales tax. You have to collect sales taxes on your sales taxable sales even if your income after expenses is zero.
     
  6. Notice that Kelly said "collect" sales tax. You're not *charging* sales tax. You're collecting it for the state. That distinction may help alleviate problems you might have with customers who don't think you should "charge" sales tax.

    And if customers are reluctant to pay sales tax, just factor in the difference by raising your rate. When folks don't object to your collecting sales tax you could offer them a discount. If they object, you could pretend to waive it because the cost is already factored into your standard rate.

    It may seem like a silly game but businesses that allow leeway in pricing on a case by case business do this all the time. Pawn shops do it. So do dealers at gun shows, crafts shows, arts shows, etc. Some customers, instead of asking for a discount, will say "I'll buy it if you pay the sales tax." Savvy businesses anticipate this and factor it into their profit margin. It really is no different from simply asking for a lower price, but some folks dicker differently.
     
  7. Yes, you need to consult with a tax accountant!
     
  8. If you're "hiding" the sales tax from the customer, don;t forget that it's still payable by you the vendor. It's easy to fool yourself into thinking the sales tax isn't due to the government.
     
  9. Sandy Vongries

    Sandy Vongries Administrator Staff Member

    This is a 12 year old thread - no idea why it was revived.
     
  10. I don't know why, either, but in recent years tax laws have been changing.

    States are now getting better at collecting tax from mail-order companies, for
    purchases made by state residents.

    In the past, it was not unusual not to have to pay sales tax if you had no physical presence
    (I believe that is what it is called) in the state. I remember for some places, I could buy things
    out of the state of my driver's license, and they wouldn't charge tax. Some would only not charged
    if it was mailed, even if I bought it in person. If the photographer has an office in one, the other
    states might not be able to collect tax, or might not have been in the past. Especially note that
    any prints or albums might be mailed.

    The DC-MD-VA area is somewhat interesting, as many people live in one and shop, or otherwise
    visit, and often work, in another.

    One that I remember from many years ago, which may have changed, is that there is no parking
    ticket reciprocity between MD and DC, such that DC can't enforce payment of parking tickets
    for MD cars. (They might be able to impound the car, though.)
     
  11. Prior to some recent changes, vendors were not required or allowed to collect sales tax on interstate purchases. That is where the purchase took place in the vendors state (even on the phone or over the internet) and the product was delivered to another state. Most states however included a "use tax" on their state income tax returns where you were REQUIRED to report these out of state purchase where you didn't pay sales tax and you had to pay. No body reported this. This is, largely, still the same.

    What has changed is that many vendors now have a multi-state presence. Perhaps a NYC camera store now has a warehouse, shipping center in NJ. Now, NJ residents have to pay NJ sales tax when they buy online from that store. Amazon has a presence in all 50 states. LLBean didn't have that back in the 1980's.

    When we talk about services, such as photography, the law vary based on the sales tax laws of the state or states involved. Print sales will almost always be taxed but there is an argument that interstate sales of prints would still be excluded. Services? Where is the photographer based? Where is the contact signed? Where are the services rendered? One or more jurisdictions are going to have a say in the collection of sales/use taxes.
     

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