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Old January 7th, 2014, 06:56 AM   #1
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Sales tax on tax exempt clients

I don't do a lot of freelance production. I shot some weddings and I shot a video for a college that is tax exempt. I did not charge the college sales tax. Now it is time to pay the tax men and woman. I don't pay a percentage of that income to the local taxing authority do I? I don't think I do.
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Old January 7th, 2014, 09:07 AM   #2
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Re: Sales tax on tax exempt clients

You need to talk to your accountant.

In my neck of the woods, you don't charge sales tax on your services. You charge sales tax on things like the DVDs or tapes you provide.
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Old January 7th, 2014, 09:11 AM   #3
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Re: Sales tax on tax exempt clients

Quote:
Originally Posted by David W. Jones View Post
In my neck of the woods, you don't charge sales tax on your services. You charge sales tax on things like the DVDs or tapes you provide.
And to complicate things, in MY neck of the woods, if you SUPPLY something tangible like discs or tape you charge tax on everything used to produce them.

Yup... talk to your accountant. In several cases where I was providing services to an agency that has tax exempt status my accountant has advised to charge anyway as anything they pay out becomes an input tax credit for them that they can get back - the rationale being it is easier for a tax exempt agency to deal with the occasional tax input than it is for me to deal with it as seldom as it comes up...
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Old January 7th, 2014, 09:48 AM   #4
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Re: Sales tax on tax exempt clients

Right, but the question wasn't whether one charges sales tax on products but how one handles and exemption for a tax exempt entity. For resale one usually requires the sales tax certificate number of the reseller. For the OP's question I'd call the taxing authority and ask them what they need, although the accountant should have that info as well.
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Old January 7th, 2014, 02:58 PM   #5
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Re: Sales tax on tax exempt clients

Sales tax is usually a "local" issue - and filled with many nuances...

Offhand I would say that a "tax exempt" company probably still pays local "sales" (actually sales and use) taxes, but that's a guess - so as advised, check with a LOCAL accountant or the appropriate tax authorities (maybe see if they have the tax code online?). If you and the client are in different tax zones, there could even be two sets of "rules" to cross check and comply with...

These nuanced technical questions are NOT something you can typically get an answer to online - unless you just happen to find someone else in the exact same locale who has dealt with the same scenario RECENTLY (because tax codes also CHANGE somewhat regularly!).

There's a reason most people HAVE to have an accountant - they stay up on all the details in THEIR industry! If the amounts are significant, it could possibly be a costly mistake not to get proper advice...
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Old January 7th, 2014, 04:02 PM   #6
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Re: Sales tax on tax exempt clients

Thanks. I reached out to another producer located in the same county as myself. I charge everyone sales tax unless they provide a tax exemption form.
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Old January 7th, 2014, 04:03 PM   #7
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Re: Sales tax on tax exempt clients

Quote:
Originally Posted by Jim Michael View Post
Right, but the question wasn't whether one charges sales tax on products but how one handles and exemption for a tax exempt entity.
Jim I would respectfully suggest that everything in my response was on target and appropriate as a (partial and qualified) answer to the original question.
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Old January 7th, 2014, 05:23 PM   #8
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Re: Sales tax on tax exempt clients

Quote:
Originally Posted by Shaun Roemich View Post
Jim I would respectfully suggest that everything in my response was on target and appropriate as a (partial and qualified) answer to the original question.
Yes as your 2nd par. elucidates.

For the OP, google terms: texas sales tax exemption for tax exempt entities

returns this little gem:

FAQ: Texas Sales Tax

which lets you know you need the entity's certificate and you can verify the exempt status via an online search. Pretty cool.
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Old January 7th, 2014, 07:23 PM   #9
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Re: Sales tax on tax exempt clients

There's also this gem in Ch 151 of the Texas tax code:

Quote:
The sale of a motion picture, video, or audio master by the producer of the master is exempt from the taxes imposed by this chapter.
which, if it applies to the situation, saves the trouble of having to worry about the tax status of the buyer. The link is:

TAX CODE CHAPTER 151. LIMITED SALES, EXCISE, AND USE TAX

Just search the word "master" and you'll go right to the paragraph. Note that it must be a master, not multiple copies.

But I have to throw in the standard caveat...don't take tax advice from us non-accountants or anyone else online. Just throwing the link out there as FYI.
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Old January 8th, 2014, 01:17 AM   #10
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Re: Sales tax on tax exempt clients

Here's how it works. You start by asking your accountant. No matter what they say, be prepared to ask the State. Then ask your peers in your state. No matter what they all say, be prepared to defend your actions when audited by having documented backup. Do that now. Your customer may be defunct when you are audited. Have fun.
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