In my first year of business and trying to figure out the tax stuff. From what I've read online, charging sales tax for a video you create and post online, varies from state to state and is sometimes a blurry line. There is no tangible end product involved.
Which concludes that yes a video production must charge sales tax. But it feels outdated as there is no mention of online delivery and refers to using tapes and disks as the end product. Or perhaps it does say that anytime you create something for someone then no matter what it is, its considered a tangible product? Such as said in this line:
Applying this rule, the Supreme Judicial Court ("SJC") has determined that sales tax applies to the transfer of "an end product conforming to [a customer's] specifications."
I know people say 'ask your CPA', but I feel like this isn't a clear cut thing and want to get my facts right before asking. Plus I dont really hear of production companies charging sales tax for their videos - so that makes me wonder too. Is there anyone who has worked in Massachusetts creating videos for clients and are you charging sales tax for videos that go online and a physical copy is never 'sold'?
The current default rule throughout the United States is that you must collect sales tax on Internet sales to customers in those states where your business has a physical presence. So if you are physically in Massachusetts selling products to Massachusetts residents, you're obligate to charge taxes.
The physical presence rule is based on a 1992 United States Supreme Court decision, Quill Corp. v. North Dakota, that addressed the obligations of mail order businesses to collect sales tax on out-of-state sales; the decision has been extended to include online retailers. Generally speaking, physical presence means having:
a warehouse in the state
a store in the state
an office in the state, or
a sales representative in the state.