#Animation Service taxes?
22 messages in this thread
To all animators doing Forensic work in the State of California:
Had an interesting chat with an auditor from the California State Board of
Equalization today on the taxation of animation services.
Seems like the State, in it's infinite wisdom, has decided that animation for
TV commercials is considered a "motion picture derivative" and is not taxable.
However, all animations and graphics for forensics use is subject to CA state
sales tax, and has been for a while – it is specifically called out in the
code!
This means that to do any forensic work, you must have a reseller's permit from
the state, charge all your clients sales tax, and submit it to the state. If
you do not do this, you are personally and professionally liable for all back
taxes owed.
And anything in between these areas is considered a 'gray area' in the law, and
is subject to the auditor's review! Is an architectural animation considered a
commercial? It depends on who you show it to! There are times it should be
taxed, also! We have submitted for an official written interpretation of the
sales tax law.
Has anyone heard of this before?
First time I had heard of anything so ridiculous in my life. How do any other
states treat animations with regard to sales tax?
Animators, unite! Greg Pyros
Greg,
It's the same way on this coast. Forensic Aimation and the like is not
considered to have a direct resale ability and due to that fact is totally
taxable as a good for sale.
Broadcast animation is considered to be sold a number of times, animator to
production company, production company to network, network to market, etc. Due
to this nature, it is generally not taxable. We have a reseller's license and
have to file monthly reports even though we have never done any animation that
we had to charge tax on. (Work for the Federal Gov't is exempt<G>)
Unfortunately it still costs us money because in filing the reports we have to
list every dollar, it's source, and why it's exempt. It keeps our accountants
busy, and thus costs me fees. 🙁
Our accounting firm had the forsight to clarify this with the state a number of
years ago. We've since seen several firms get hit hard from the state for
providing goods without charging state sales tax. It's not a pretty sight.
Paul
Greg,
In the state of Illinois, to my knowledge, animation is not taxable. I had
attended a tax seminar given by the IRS and state tax people and I specifically
asked about it. I must however, (get this), charge tax for the tape I use, lets
see now, a 5 miniute tape bought in bulk costs around .50 cents. I do not
profit off of the tape so I sell the tape for .50 cents, sales tax is 6.25%,
gee, let's see, I have to send the government a check for .31 cents? heh, heh.
I suppose if I was turning alot of SVHS master tapes the tax could add up, but
to date, I still have all the masters as I drag my machine over to the
broadcasting company and we just do a dump to their 3/4.
Merlin
Merlin-
Didn't you pay sales tax for that tape when you bought it?
–Noah
No, when I bought the tape I used my resale tax ID.
Merlin:
So that means that you have to charge sales tax on the tape itself when you
sell it! It might be easier on you at the beginning to just pay the sales tax
when you buy it, so you don't have to go through the hassle of collection and
payment for what amounts to only 5 bucks in sales tax per month!
The states use sales tax as a major source of income, and believe me, they will
audit you someday, and make you pay it then!
The general rule is that in the process from manufacturer to consumer, someone
needs to pay the sales tax. If you didn't pay it when you bought it, you
should make sure that whoever gets it from you does!
Greg Pyros [Pyros Partnership, Inc] gpyros@pyros.com 26-Dec-93 at 7:51a PST
Greg,
It would indeed be easier to pay the tax first, however, I cannot buy the
tape in the are and have to mail order. I guess there is probably someplace in
Chicago, but all of my catalogs are from out of state, hence, I do not pay the
tax at that time. I keep a pretty close eye on the tax stuff because I dislike
prison so. (g) Sometimes though, when I look at my account, I get excited but
then realize that about a third of that does not belong to me. Errrrrr.
Merlin
Happy Holidays to You and Yours!
Merlin:
Well, since you are getting the tape out-of-state, there is no reason to pay
sales tax on it, but you should talk to a tax specialist to determine your
liability. Are you incorporated?
Greg Pyros
Greg,
Yes we are INC. Just got INCed last month. The closer I get to bankrupcy I
thought the need for getting INCed was increasing. (g) In Illinois. I have to
charge sales tax when I sell a tape with animation on it, but no tax on the
animation, just the tape. This info came from a rep of Illinois state tax
department at a seminar.
Merlin
Greg,
Of course, here in California you are leagally obligated to report and pay
sales tax on items purchased out of state by mail order. Tough to enforce but
on the books.
Bruce
Greg,
We have been charging tax on all our animations lately .. unless we know that
it is being resold to another customer (i.e. .. we do something for a
post-house or something). The forensic angle is an interesting one and I'll
have to look at it in MD.
Thanks for bringing it up
Ang
Greg,
We here in Kansas (said with a drawl <G>) charge sales tax on everything! When
your business is as retail oriented as a Blue Print Company (even though
Computer Services is a Division), the accounting would be a NIGHTMARE. When we
started offering consulting services (ie Training, customization, consulting)
that could fall under the professional fees catagory and not be taxable, we
called in our accountant. After looking at the potential investment, the
retail orientation of our business, etc. he felt that the State would rule that
we were not offering a "service", but a "product". These are the two magic
words in Kansas, so we charge sales tax.
Chuck
PS Raincheck on the Fireworks?
Chuck:
Interesting! We have never charged sales tax on services such as training and
installation, and never found it that difficult to keep the accounting straight
(the $9,000 for the MAS-90 accounting package was good for something, I guess!)
But could you see the look on one of our client's face when he got the bill for
a $100,000 animation and saw an additional $7,750 entry for sales tax???
Greg Pyros [Pyros Partnership, Inc] gpyros@pyros.com 21-Dec-93 at 9:30p PST
I California, we don't charge tax on services, only products. I got the big tax
bite when I got the $100,000 upgrade for 3DS to 2.0 remember?(g) And by the
way, if you have any spare $100,000 animation clients, please send them our
way!
Doug,
Just to make life more interesting, in California sales tax is
collectible on service involved with sale of a product, such as installation
services. Good idea is to bill labor on one invoice, product on another. In
case no one's noticed, California State Board of Equalization is getting real
tough on audits.
Kevin Krell – Computer Support Associates
[From] Chuck Mies 72110,1263
[To ] Gregory Pyros, AIA 73027,3632
[Date] 12-22-1993 22:26:20
[Subj] Animation Service taxes?
[Sect] 3/Autodesk 3D Studio
[From] Chuck Mies 72110,1263
[To ] Gregory Pyros, AIA 73027,3632
[Date] 12-22-1993 21:51:10
[Subj] Animation Service taxes?
[Sect] 3/Autodesk 3D Studio
Greg,
>>But could you see the look on one of our client's face when he got the bill
for a $100,000 animation and saw an additional $7,750 entry for sales tax???
No, I could only dream of service numbers that large!! <BG>
Seriously, here is why we tax…
We were told by the State that when we offer a class in our training facility,
and we provide a $9.00 manual for use in a $495.00 training class, that
training is now a "product" (taxable). This also covers installation services
as a part of a computer system, etc. (Silly, but their reasoning.) We don't
offer animation services, so I cannot comment on that.
THIS is the nightmare, and I would not want invoice training on one invoice for
the manual (product) and one for the training (service). I would prefer not to
charge sales tax, but it's not worth the risk.
Retraction — We do not charge sales tax on customization and consulting (I
incorrectly added those issue) as they are a pure service. ( S O R R Y ! )
Chuck
Chuck:
I don't know what you or your nifty-keen (or gear-fab) CIS software is doing
with these [ From] blah blah
[ To] blah blah
[Subject] blah blah
headers that have been appearing on some of your
messages (such as the one to which I'm replying: #73023), but it'd be a good
idea to knock it off before the ASOFT Quote Police (AQP) come after you!<g> I
mean, what do we want to download a bunch of additional message headers for?
Dave
PS Seriously, those AQP guys are _everywhere_! Just ask Greg — he's been
nailed before!<g>
Many times! But I usually ignore them.
Dave,
Point well taken, I had a setting wrong in WINCIS and have corrected it. You
are welcome to "Police" me any time <G>.
Chuck
Well in THAT case … UP AGAINST THE WALL AND ASSUME THE POSITION! You look
like you've been read your Miranda rights a few times before, so I ain't gonna
bother again! Pat him down, boys — I'm bettin' you find him packin' a can of
chew!<g>
Dave
Greg,
I would be interested in any replys that you get on this issue. Please keep me
posted.
Thanks,
Fred
Fred:
Thought you might be interested! I'll be accumulating the info on animation
taxes, and I'll post it as soon as I have a definite answer on it.
BTW, we had dinner with Andy Reese and his wife last night. Fun people! A
good time was had by all!
Greg Pyros