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Old August 31st, 2005, 02:59 PM   #1
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Do you charge sales tax?

I'm working on setting up my wedding videography business in Missouri. I just spoke with the department of revenue concerning a tax ID number, and they told me that I would need to charge sales tax for all my clients. This doesn't sound right to me. I am performing a service more than selling a product, even though there will be a DVD's sold to each client. Do you guys have to charge sales tax in your businesses?
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Old August 31st, 2005, 03:28 PM   #2
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The answer to that question varies from state to state so you need to check with YOUR accountant for the definitive answer. In Illinois, we are charging taxes on the product but NOT the service. But we DO charge for those taxes as I'd rather the customer pay them than for ME to pay them.
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Old August 31st, 2005, 03:59 PM   #3
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Check again with your tax office. Your service couldn't happen without the deliverable (tangible) so the end user is only getting value from the finished production on the disk. Meaning that all the billable work occurs for the handing over of the product.

At least you don't have 2 sales taxes like we do. 15 percent!

Last edited by Jimmy McKenzie; August 31st, 2005 at 08:45 PM.
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Old August 31st, 2005, 05:23 PM   #4
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This can be a gray area, but since I'm not "charging" sales tax, I'm "collecting" sales tax, I prefer to collect on the full amount and pass it right on to the governement.

It might seem logical to only charge tax on the copies sold of the production - the dvd's - but, if for a private customer, the service you are providing is integral to the finished product. There is no finished product without your service, where the bulk of the money is collected.

My accountant would not go on record for any this, but pointed me back to the Texas state agency (comptroller I think?). And of course, they want tax collected on the highest figure possible. That's what I'm doing until I hear a convincing reason to do otherwise.


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Old August 31st, 2005, 05:44 PM   #5
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Quote:
Originally Posted by Dave M. Smith
I'm working on setting up my wedding videography business in Missouri. I just spoke with the department of revenue concerning a tax ID number, and they told me that I would need to charge sales tax for all my clients. This doesn't sound right to me. I am performing a service more than selling a product, even though there will be a DVD's sold to each client. Do you guys have to charge sales tax in your businesses?
Echoing the others, check with your accountant because jurisdictions vary. But if your Revenooers told you that you needed to collect sales tax, I'll bet they're correct -they usually know the law as they're the ones that enforce it. Here in Ontario Canada, it's a tax on sales of both goods and services and there's both a provincial tax, PST, and a federal tax, GST, to consider, each with its own rules. In fact, the acronym "GST" for the federal tax stands for Goods and Services Tax. The way it works here - My present "day job" is training on computer applications, strictly a service and I don't sell or provide any tangible products at all. If I conduct a class as a contract instructor for a firm whose primary business is delivering training such as a career college or computer training firm, that's considered providing a wholesale service and I have to bill GST on my fee but not PST. OTOH, if I book and deliver a class on my own as an independent trainer directly to an end-user client business, billing them myself, that's providing a retail service even though it's not offered to the general public and I have to collect both GST and PST on my billing.
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Old September 1st, 2005, 08:13 AM   #6
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Thanks for the responses, guys. I guess I was under the impression that if I were to set up my business as a sole proprietorship, I wouldn't have to collect sales tax. In fact, I was unaware that I would even need county and city permits to operate out of my home, but that I would just need to register a ficticious business name with the state of Missouri. I thought it was only LLC's, Partnerships, or Corporations that needed the permits, tax ID's, sales tax collection, and all of that. It looks like I may have been wrong about it. I'll talk with my attorney and see what he can tell me. Again, thanks for the information.
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Old September 1st, 2005, 08:50 AM   #7
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Originally Posted by Dave M. Smith
...

I'll talk with my attorney and see what he can tell me. Again, thanks for the information.
Excellent idea! This is one area where common sense and the reality of the law frequently collide with each other and trying to guess what is required can be an incredibly expensive mistake if you happen to guess wrong.
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Old September 6th, 2005, 01:16 PM   #8
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In WA State you have to charge sales tax and pay the department of Revenue the sales tax and use tax if applicable that needs to be paid quarterly..It can all be done online so that's nice..
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