Starting a photography business in Washington State

I am thinking of starting a photography business in Washington

State. I am thinking of doing this for 2 reasons: first, I am

planning a major upgrade in equipment that will probably cost $4000

over about a year and I would rather not pay sales tax on it, and I

am more frequently selling prints so why not. My question is: is

this more of a hastle than it is worth? Our sales tax may be

approaching 10% after this election, so we're talking about $400 for

the equipment purchase and then money saved on taxes for processing,

printing, etc. This would be a secondary job and really not planning

on making any real money, but maybe enough to help pay for my own

photography pursuits. I don't want to set myself up for a paper work

nighmare that will end up taking more time than its worth on the

money I save. Does anyone have experience with this here in

Washington State?

 

David

David:

 

In most states with sales tax, you'd still have to pay sales tax for camera equipment, lights etc. The only things you can buy sales tax-free are items you plan to re-sell. But, to make sure check with your local Department of Revenue. Depending on what you mean by "start a business" that CAN be more hassle than it is worth, especially if the only real reason is to avoid paying sales tax... In Nebraska where I am located and incorporated I pay sales or use tax on every piece of equipment I buy unless specifically for resale and since I don't sell prints I don't even get to buy the photo paper tax-free!

I spent 10,000 on equipment last year and paid sales tax on everything I did not plan to sell....with one exception: I did not pay sales tax for online purchases.

 

Every time I start up my truck, it's a business expense. When I drive up to Flagstaff and spend the night, it's a business expense. I always take at least one camera wherever I go and plan to take some photos. I actually make a little money doing this, but not much. In this economy, I plan to keep my day job in hopes that the photo art business will get better.

You should use a better source of information than this forum (a book on starting a business in your state would do), however note the following points: (a) The way use save money is by deducting the cost of

equipment from revenue, not by saving on sales tax. There are fairly

complex rules on how to do so.

(b) I don't know about Washington, but in California the situation about

sales tax is exactly the opposite of what you expect. In theory, everybody who didn't pay

sales tax (because they bought from out of state) has to pay "use tax"

which is the same amount. In practice, this is not enforceable for items used

personally, but businesses have to be careful about the use tax since

they have to itemize their purchases to benefit from the deduction mentioned in (a). © There are penalties if after a few years the IRS

determines that your business was in fact a hobby.

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All the above is largely correct, and there is more. I was in the photo business in LA for nearly 4 decades, and CA is a sales tax state. In all that time, I was audited once by the IRS and once by the State Board of Equalization, and the latter made the former look like amateurs. They put me throughthe eye of a needle, but found NOTHING after a solid WEEK!!! Believe me, they (both the Feds and the State) know ALL the tricks and dodges, so be advised. As a retailer, and that's what you'll be, there will be certain fees, permits, and deposits; you MUST keep accurate and comprehensive books, and you just can't go on forever not showing a profit....it won't fly. If you try to conduct a business from your home in a residential zone, you may, repeat MAY, have problems, but many do; I did for nearly 3 years.

Buy your $4,000 worth of gear in Oregon. No sales tax, and it's right next to Washington.

David:

 

The state of Washington does indeed have use tax ( http://dor.wa.gov/content/home/qa/tax_QA_Use.aspx ) which means that, just like Quang-Tuang stated, even if you buy your equipment out of state you need to remit the use tax to your state dept of Revenue.

Buy your gear from B&H or Adorama, or equivalent. There is no sales tax for internet orders (as long as the retailer is not in the state you reside) and shipping is usually smaller than tax (especially for large ticket items) You pay taxes on everything you do not sell. Think of it way, the state wants the greater tax. if you buy a 8x10 print for $2.00, tax would be $0.12. If you sold that 8x10 to a customer for $25.00, tax would be $1.50 (@ 6%)

Not only do you pay sales or use tax, but you pay an annual tax on your equipment. Washington taxes equipment used in a business as personal property. Just like the tax on your home.

 

You REALLY need to talk to an accountant that handles small business. Washington does allow you to operate as a business without having to register or pay B&O tax. Most cities require you to have a business license no matter what.

 

Doing business in Washington really sucks. It is even worse if you are withing a city limits.

Very good info in this thread. As someone who has for almost 2 years attempted to run a photography business (LLC) from my home part-time (I have a different day job), let me share some advice. If you don't have enough paying business coming in, it is a waste of time and money. You will have increased cost due to licensing, business expenses, etc. etc., plus you'll spend time managing a business instead of taking pictures.

 

If you are reasonbly confident that you can bring in enough business to cover your costs (eventually - IRS is going to cut you a break for a couple of years), then go for it. But you should enlist the help of qualified and experienced people like attorneys and accountants, and you better be a great business person.

 

I'm not trying to be pessimistic, but you don't just decide to open a business one day. It takes planning, execution, desire, and lots of work. If you only want to start the business to avoid paying sales tax, you are in it for the wrong reason (not to mention your reason is not legitimate, as others have pointed out).