Listing Prices

Ben Moore · October 28th, 2008, 10:39 PM

Well it pays to go direct to the Department of Revenue and ask no matter what state your in. That way you know for sure. Message board info is a lot of times far from accurate.

Tim Harjo · October 28th, 2008, 10:50 PM

Quote:

Originally Posted by Ben Moore

Well it pays to go direct to the Department of Revenue and ask no matter what state your in. That way you know for sure. Message board info is a lot of times far from accurate.

Yes.. Like I said a few posts ago... (as it relates to California)

Quote:

Originally Posted by Tim Harjo

...just check with the Board of Equalization. It's not a gray issue at all. It's only a gray issue if you make your own interpretation of the law. So check with the Board of Equalization if you have a question about this, not your accountant, your lawyer friend or some guy that 'knows stuff'.

Andrew Waite · October 29th, 2008, 01:52 PM

Hey Tim,
I just walked around the block to our Board of Equalization and Assessors office. They said I'm good not charging tax. Like ben said, I explained to them what I do and they considered it a "service" even though I deliver that service on a DVD. I'm paying taxes already on the DVDs and I'm not reselling the dvds, just delivering. I'm good with that answer.

Maybe it's a county thing. But I got names and cards just incase the feds come nocking on my door.

Ethan Cooper · October 29th, 2008, 01:58 PM

Quote:

Originally Posted by Andrew Waite

Hey Tim,
I just walked around the block to our Board of Equalization and Assessors office. They said I'm good not charging tax. Like ben said, I explained to them what I do and they considered it a "service" even though I deliver that service on a DVD. I'm paying taxes already on the DVDs and I'm not reselling the dvds, just delivering.

And that's the problem. Two guys from the same state both talked directly to "officials" from that state and got two different answers.

Tim Harjo · October 29th, 2008, 02:33 PM

Quote:

Originally Posted by Ethan Cooper

And that's the problem. Two guys from the same state both talked directly to "officials" from that state and got two different answers.

hmm.. I see. Well, that's unfortunate that we can't all get the same answers. Good luck to everyone on this one.

Ethan Cooper · October 29th, 2008, 03:16 PM

Quote:

Originally Posted by Tim Harjo

hmm.. I see. Well, that's unfortunate that we can't all get the same answers. Good luck to everyone on this one.

It may very well be unfair to you Tim because you might be paying more tax than you should.

Tim Harjo · October 29th, 2008, 04:35 PM

Quote:

Originally Posted by Ethan Cooper

It may very well be unfair to you Tim because you might be paying more tax than you should.

It's not me... It's the consumer that pays. As far as I know, everyone in the Sacramento area here charges sales tax. I have not heard otherwise. I read on another board (I don't stand behind this because it's 'hear-say') that if you call the BOE in Sacramento, they tend to be more knowledgeable than the ones that work at the field offices.

I'm in no position to give advice other than to contact the source. And since that has taken place and two different answers were given, I'm not getting in the middle of that.

Noa Put · October 29th, 2008, 04:59 PM

[QUOTE=Andrew Waite;957301They said I'm good not charging tax.[/QUOTE]

In Belgium we have to add 21% tax to all our prizes, what I meant to say was that some high prized videographers mention their prizes without tax and in very small print that every prize is ex 21% tax.
ofcourse when the client pays afterwards this 21% gets added.
If you are a company selling to other companies then mentioning prizes without taxes is normal but if your selling to "regular" clients it's not, it's just a trick to mislead the customers because they see a reasonable prize first but find out later it's 21% more.

Andrew Waite · October 29th, 2008, 04:59 PM

Sorry this thread topic has been all over the place. The people I spoke to seemed to know and be confident with the information they gave me. I'm just trusting them and what they said (what can still be wrong), but it's comforting to know that if the feds come to my door I can say Mr. X and Ms. X down at the county building told me this.

I also remember doing a worksheet when I got my business license and tax id number that helped the applicant determine if they needed resale license and sales permit. According to the worksheet video production services didn't count, which I was relieved to find, I really didn't want to have to worry about one more thing when it came to taxes.

Anyway, my 2 cents.

Andrew Waite · October 29th, 2008, 05:04 PM

Noa,
Yikes! 21%! I have visited Belgium, it's a very beautiful place and I would love to return, but glad I'm not a resident with those kinds of taxes! Here in California in my county it's 7% but only on goods, not services or labour.

William Dortignac · October 29th, 2008, 07:34 PM

I just contacted the CA BOE directly and this is what they told me.

If you give your customer a DVD or other storage medium, then yes, your
services in connection with the sale of tangible goods is included in
the amount subject to tax.

This is only what they said, and can be left up to broad interpretation, you can make your media only available to the customer via internet, and then sell them a $.50 DVD Copy seperately, and by all means, pay tax on the $.50. This is legal if you keep the sale seperate

Dave Blackhurst · October 30th, 2008, 02:06 AM

Wasn't there a statistic a while ago that you had a 40% chance of getting a correct answer if you called the IRS for advice?? The problem is that the dang laws are so convoluted that only a psychic could possibly interpret them accurately... if you get my drift.

My take would be you have to charge tax on the deliverables, and you have to separate them on your invoices, labor/services are not taxable - at least that's how it was always handled with repair services. You break out the "parts" and "labor" and charge tax only on the "parts".

Doctors and lawyers don't charge tax on their SERVICES, so why would your professional services be taxed?

And here's where the confusion starts... from the FTB website:
"Retail sales of tangible items in California are generally subject to sales tax.

Examples include furniture, giftware, toys, antiques and clothing. Some labor service and associated costs are subject to sales tax if they are involved in the creation or manufacturing of new personal property."

I'd interpret that to mean that you charge ONLY on the deliverable "tangible" item, the DVD itself, but it's sure worded funny, and could be interpreted the other way if you were a FTB employee hoping to collect VAT instead of sales tax... but CA is not Europe...

If you review the exemptions list, it gets clearer...

Here's straight out of the CA State BOE exemption list:

MASTER RECORDS AND TAPES — The sale and lease of master records or tapes is exempt from tax except for the actual tangible personal property physically incorporated and sold. (SECTION 6362.5)

MOTION PICTURES, QUALIFIED, AND QUALIFIED PRODUCTION SERVICES — For sales and use tax purposes, “sale” and “purchase” do not include the following: (1) any transfer of any qualified motion picture or any interest or rights therein when the transfer is prior to the date that the qualified motion picture is exhibited or broadcast to its general audience, and (2) the performance of qualified production services, as defined, in connection with the production of any qualified motion picture, as defined. (SECTION 6010.6)

SERVICES — The sale of services where no tangible personal property is transferred, or where the transfer of property is incidental, are not subject to sales and use taxes. Persons providing services are consumers of property used in their business activities. However, persons who engage in service operations are retailers of any supplies or other tangible personal property sold to their customers or clients, and tax applies to gross receipts from such sales. Certain services, however, are defined as sales of tangible personal property. For example, the fabrication of tangible personal property for a consumer is defined as a “sale” even when the consumer provides all the tangible personal property used to fabricate the end product.

Even though that last line tries to turn the whole rest on it's ear (and where William's sources no doubt quote from to increase the revenue that pays their salaries...), I'd go with Andrew's sources, based on the above, FWIW.

You and your labor while shooting and editing is NOT "tangible personal property", and the MASTER DVD is not technically either... but the additional copies you then make from that master ARE, and so the copies are taxable if sold "retail" to the customer.

The principle being you CANNOT tax LABOR, and if you break out your services clearly, so that the labor and "product" are separate you are arguably following the letter of the law. The gray area comes where you are taking component parts, assembling a final tangible personal product and the price of that product is not broken down, but expressed as a single figure. Let's say you build furniture, the end user pays tax on a couch and recieves a couch for $599, not parts at $399 and labor at $200 - it's tangible to the final purchaser, thus all taxed.

With a DVD, the actual DVD (the round plastic disk) is incidental and contains nothing tangible other than the results of pure labor! The devil comes in the way that the regulations are worded... but I have to come down on the side that 99.9% of what the videographer is selling is "service", and the DVD you give the client is just a container - put another way, would you pay $2000 for a "DVD" in the store? NO, you aren't paying for the production company, cast and crew, or tax on their labors... you're paying for the disk and a license from the owner for the 1's and 0's on it...

Sorry for the length, but I wanted to offer something complete enough that it would make sense for those in CA at least, other jurisdictions may be completely different...

Tim Harjo · October 30th, 2008, 02:43 AM

Quote:

Originally Posted by Dave Blackhurst

Sorry for the length, but I wanted to offer something complete enough that it would make sense for those in CA at least, other jurisdictions may be completely different...

Great Post! This is the first time since I opened business that I am starting to doubt my pricing system. Part of the problem here is that we are not talking about the difference between zero dollars and Five dollars, we talking about ONE HUNDRED dollars or more per transaction. Per year, that gets into the thousands.

Does anyone know of a public case where it went one way or the other? So many of our laws are defined right in our courts. And I'm talking about a Wedding Videographer in California and sales tax.

It does seem VERY unfair that one person pays thousands while the other pays $56.82 per year... and the government takes both and does not complain. That's my understanding... am I wrong?

Andrew Waite · October 30th, 2008, 10:37 AM

Wow! Thanks Dave... I couldn't have explained it better myself! You really did your homework and I think you helped a lot of us out here... or at least saved us from a lot of extra grief. Thanks.

Dave Blackhurst · October 30th, 2008, 03:51 PM

Glad that it was of some use, I'll have to poke around a bit more and see if there are any rulings/cases/codes that are more specific, but I suspect my analysis (especially if some BOE employees are in agreement) is correct.

Labor = nontaxable

Tangible physical product = taxable, but only to a fair retail value of the tangible product itself.

Be careful how you do your invoicing, and make clear which part is services, include a couple "free" DVD's (with no tax whatsoever, call them masters for good measure), and have a set price scale for additional DVD's so there's no question of how much the tangible product costs after the service/production is complete. I think that would survive a challenge should it ever come up...

October 29th, 2008, 01:52 PM	#48
Andrew Waite Major Player Join Date: May 2007 Location: Bakersfield, CA Posts: 307	Hey Tim, I just walked around the block to our Board of Equalization and Assessors office. They said I'm good not charging tax. Like ben said, I explained to them what I do and they considered it a "service" even though I deliver that service on a DVD. I'm paying taxes already on the DVDs and I'm not reselling the dvds, just delivering. I'm good with that answer. Maybe it's a county thing. But I got names and cards just incase the feds come nocking on my door. __________________ http://www.higherdefinitionmedia.com RED One #6135 "Spartacus"

October 29th, 2008, 04:59 PM	#54
Andrew Waite Major Player Join Date: May 2007 Location: Bakersfield, CA Posts: 307	Sorry this thread topic has been all over the place. The people I spoke to seemed to know and be confident with the information they gave me. I'm just trusting them and what they said (what can still be wrong), but it's comforting to know that if the feds come to my door I can say Mr. X and Ms. X down at the county building told me this. I also remember doing a worksheet when I got my business license and tax id number that helped the applicant determine if they needed resale license and sales permit. According to the worksheet video production services didn't count, which I was relieved to find, I really didn't want to have to worry about one more thing when it came to taxes. Anyway, my 2 cents. __________________ http://www.higherdefinitionmedia.com RED One #6135 "Spartacus"

October 29th, 2008, 05:04 PM	#55
Andrew Waite Major Player Join Date: May 2007 Location: Bakersfield, CA Posts: 307	Noa, Yikes! 21%! I have visited Belgium, it's a very beautiful place and I would love to return, but glad I'm not a resident with those kinds of taxes! Here in California in my county it's 7% but only on goods, not services or labour. __________________ http://www.higherdefinitionmedia.com RED One #6135 "Spartacus"

October 30th, 2008, 10:37 AM	#59
Andrew Waite Major Player Join Date: May 2007 Location: Bakersfield, CA Posts: 307	Wow! Thanks Dave... I couldn't have explained it better myself! You really did your homework and I think you helped a lot of us out here... or at least saved us from a lot of extra grief. Thanks. __________________ http://www.higherdefinitionmedia.com RED One #6135 "Spartacus"

October 28th, 2008, 10:39 PM	#46
Ben Moore Regular Crew Join Date: Nov 2007 Location: Vancouver, WA Posts: 190	Well it pays to go direct to the Department of Revenue and ask no matter what state your in. That way you know for sure. Message board info is a lot of times far from accurate.

October 29th, 2008, 04:59 PM	#53
Noa Put Inner Circle Join Date: Jun 2007 Location: Belgium Posts: 9,509	[QUOTE=Andrew Waite;957301They said I'm good not charging tax.[/QUOTE] In Belgium we have to add 21% tax to all our prizes, what I meant to say was that some high prized videographers mention their prizes without tax and in very small print that every prize is ex 21% tax. ofcourse when the client pays afterwards this 21% gets added. If you are a company selling to other companies then mentioning prizes without taxes is normal but if your selling to "regular" clients it's not, it's just a trick to mislead the customers because they see a reasonable prize first but find out later it's 21% more.

October 29th, 2008, 07:34 PM	#56
William Dortignac Regular Crew Join Date: Jul 2005 Location: Whittier, CA Posts: 40	I just contacted the CA BOE directly and this is what they told me. If you give your customer a DVD or other storage medium, then yes, your services in connection with the sale of tangible goods is included in the amount subject to tax. This is only what they said, and can be left up to broad interpretation, you can make your media only available to the customer via internet, and then sell them a $.50 DVD Copy seperately, and by all means, pay tax on the $.50. This is legal if you keep the sale seperate

October 30th, 2008, 02:06 AM	#57
Dave Blackhurst Inner Circle Join Date: Feb 2007 Location: Apple Valley CA Posts: 4,874	Wasn't there a statistic a while ago that you had a 40% chance of getting a correct answer if you called the IRS for advice?? The problem is that the dang laws are so convoluted that only a psychic could possibly interpret them accurately... if you get my drift. My take would be you have to charge tax on the deliverables, and you have to separate them on your invoices, labor/services are not taxable - at least that's how it was always handled with repair services. You break out the "parts" and "labor" and charge tax only on the "parts". Doctors and lawyers don't charge tax on their SERVICES, so why would your professional services be taxed? And here's where the confusion starts... from the FTB website: "Retail sales of tangible items in California are generally subject to sales tax. Examples include furniture, giftware, toys, antiques and clothing. Some labor service and associated costs are subject to sales tax if they are involved in the creation or manufacturing of new personal property." I'd interpret that to mean that you charge ONLY on the deliverable "tangible" item, the DVD itself, but it's sure worded funny, and could be interpreted the other way if you were a FTB employee hoping to collect VAT instead of sales tax... but CA is not Europe... If you review the exemptions list, it gets clearer... Here's straight out of the CA State BOE exemption list: MASTER RECORDS AND TAPES — The sale and lease of master records or tapes is exempt from tax except for the actual tangible personal property physically incorporated and sold. (SECTION 6362.5) MOTION PICTURES, QUALIFIED, AND QUALIFIED PRODUCTION SERVICES — For sales and use tax purposes, “sale” and “purchase” do not include the following: (1) any transfer of any qualified motion picture or any interest or rights therein when the transfer is prior to the date that the qualified motion picture is exhibited or broadcast to its general audience, and (2) the performance of qualified production services, as defined, in connection with the production of any qualified motion picture, as defined. (SECTION 6010.6) SERVICES — The sale of services where no tangible personal property is transferred, or where the transfer of property is incidental, are not subject to sales and use taxes. Persons providing services are consumers of property used in their business activities. However, persons who engage in service operations are retailers of any supplies or other tangible personal property sold to their customers or clients, and tax applies to gross receipts from such sales. Certain services, however, are defined as sales of tangible personal property. For example, the fabrication of tangible personal property for a consumer is defined as a “sale” even when the consumer provides all the tangible personal property used to fabricate the end product. Even though that last line tries to turn the whole rest on it's ear (and where William's sources no doubt quote from to increase the revenue that pays their salaries...), I'd go with Andrew's sources, based on the above, FWIW. You and your labor while shooting and editing is NOT "tangible personal property", and the MASTER DVD is not technically either... but the additional copies you then make from that master ARE, and so the copies are taxable if sold "retail" to the customer. The principle being you CANNOT tax LABOR, and if you break out your services clearly, so that the labor and "product" are separate you are arguably following the letter of the law. The gray area comes where you are taking component parts, assembling a final tangible personal product and the price of that product is not broken down, but expressed as a single figure. Let's say you build furniture, the end user pays tax on a couch and recieves a couch for $599, not parts at $399 and labor at $200 - it's tangible to the final purchaser, thus all taxed. With a DVD, the actual DVD (the round plastic disk) is incidental and contains nothing tangible other than the results of pure labor! The devil comes in the way that the regulations are worded... but I have to come down on the side that 99.9% of what the videographer is selling is "service", and the DVD you give the client is just a container - put another way, would you pay $2000 for a "DVD" in the store? NO, you aren't paying for the production company, cast and crew, or tax on their labors... you're paying for the disk and a license from the owner for the 1's and 0's on it... Sorry for the length, but I wanted to offer something complete enough that it would make sense for those in CA at least, other jurisdictions may be completely different...

October 30th, 2008, 03:51 PM	#60
Dave Blackhurst Inner Circle Join Date: Feb 2007 Location: Apple Valley CA Posts: 4,874	Glad that it was of some use, I'll have to poke around a bit more and see if there are any rulings/cases/codes that are more specific, but I suspect my analysis (especially if some BOE employees are in agreement) is correct. Labor = nontaxable Tangible physical product = taxable, but only to a fair retail value of the tangible product itself. Be careful how you do your invoicing, and make clear which part is services, include a couple "free" DVD's (with no tax whatsoever, call them masters for good measure), and have a set price scale for additional DVD's so there's no question of how much the tangible product costs after the service/production is complete. I think that would survive a challenge should it ever come up...