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Nexus and Sales Tax when doing production work across state lines

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Rich RubaschNexus and Sales Tax when doing production work across state lines
by on Feb 18, 2016 at 8:26:17 pm

Hi all; We all travel for productions across state lines.....is anyone paying sales tax in other states if you travel there to shoot at a location even if your client is in you home state or a different state entirely? Rules vary from state to state but it seems that we do not travel to a different state specifically to do business with anyone in that state.

Also we do not choose to travel to those states in order to do business, rather we are TOLD that is where we will travel to.

Anyone have anything on paying sales and use tax in states where they travel to shoot videos if the client is in a different state?

Rich Rubasch
Tilt Media Inc.
Video Production, Post, Studio Sound Stage
Founder/President/Editor/Designer/Animator
http://www.tiltmedia.com


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Greg BallRe: Nexus and Sales Tax when doing production work across state lines
by on Feb 18, 2016 at 8:36:33 pm

As far as we're concerned, our business runs from our home location. That's where we pay taxes.

Greg Ball, President
Ball Media Innovations, Inc.
https://www.ballmediainnovations.com


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Rich RubaschRe: Nexus and Sales Tax when doing production work across state lines
by on Feb 18, 2016 at 8:48:12 pm

Here's what I know:

If you are a service provider it is advantageous to understand
whether or not you are required to register for sales and use tax
purposes in the state and locality where you are providing the
service. In most cases, a service provider performing a service in
a taxing jurisdiction creates nexus. In some cases, if the service
you provide is not subject to tax, the state will not require you
to register and obtain a sales tax permit number. However, in the
majority of cases, the taxability of the service is not relevant and
registration is mandatory based on having significant nexus in the
state and locality. Speculatively speaking, the state wants to ensure
that any use tax associated with the tangible personal property that
is sold or used in performing the service is properly accounted for
and remitted to the state.
The other important issue to consider for purposes of nexus is
what the service provider is doing in the state and how long and
how often they are there. The answer to these questions can
determine in many cases whether or not a service provider is
required to (or should) register.
If you are using contract labor to perform a service such as repair
or installation as a part of sales transaction with your customers,
it is extremely important to clearly understand the relationship or
affiliation with the service provider, and to ascertain how the taxing
jurisdiction defines the relationship or affiliation for sales and use
tax nexus purposes.

Rich Rubasch
Tilt Media Inc.
Video Production, Post, Studio Sound Stage
Founder/President/Editor/Designer/Animator
http://www.tiltmedia.com


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Todd TerryRe: Nexus and Sales Tax when doing production work across state lines
by on Feb 18, 2016 at 8:52:19 pm

Well yes, but as far as sales taxes go... if you live in Florida like Greg does and travel up across the state line to my home state of Alabama on a shoot, and choose to buy something here for your shoot (doesn't matter if it is a light bulb or roll of gaffer tape or what), you're going to pay sales tax here. Not much way around that. You're definitely going to pay state sales tax, plus there will usually be a county sales tax, and then a municipal sales tax, depending on whether the store you visited was in an incorporated city limit. If you were visiting here in my city of Huntsville, that would be 8% total (split between state, county, and city).

You can't say "I don't live here, I'm not going to pay any sales taxes here" if you are visiting a retailer here. Just doesn't work that way. Just like I can't travel a few miles where there is a Lowe's that is technically in one city and the Home Depot across the street is technically in another... I can't choose (or refuse) to pay taxes based on the fact that I don't technically live in the city where the store is.

The only thing that really sorta works for is automobiles. We live only about an hour south of the Tennessee state line, and many people drive up to Nashville to buy a new car because they don't have to pay sales tax. True, they don't have to pay Tennessee sales tax, but they get exactly the same tax hit two weeks later when they register the vehicle in Alabama. They are going to get you either way.

You can avoid the sale tax if you have a sales tax deferment ID number because you are purchasing raw materials to be used in creating a product that you will be selling as a taxable item in Alabama... but of course we don't do that so we pay sales tax on anything we buy.

Of course for years we, like many people, did not pay sales tax on items bought from out of state (say, if we bought a camera from B&H)... but the auditors have cracked down on that... and now we do have to pay some sales tax on items purchased elsewhere.

The only other way I can think of to avoid it is if you are working in a state that provides tax credits for film production (some do, some don't), and you want to jump through those hoops.

Sales tax here is a miniscule portion of any given project's budget, so it's nothing we have ever even looked at.

T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com



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Rich RubaschRe: Nexus and Sales Tax when doing production work across state lines
by on Feb 18, 2016 at 9:53:39 pm

See that's not what Nexus means. It means that ANY business you conduct in another state might require you to pay income tax (not sales tax) in that state....as if you had a branch location in that state. State laws vary, but this is info I received from my accountant:
--------------------------------------------------------------------------------------------------
- Sending an employee or subcontractor to perform work in another state can give you nexus, depending on the rules of that state. This is true whether or not the sale is to a client from that state or not, and causes some difficulty in apportioning a specific sale among the amounts of work done on various parts of the project.


- For Sales Tax purposes you need to see if you had nexus in HI, NM, SD, or WV. If so, then we need to find out if there is a sales tax exemption for Film Production, and if so, what that entails. Possibly, you need to file sales tax in those 4 states. You may even have to charge sales tax on items that are not taxable in your home state.


- For Income Tax Purposes, we need to define which states you were in, and find out their rules on nexus for income tax.


- We haven’t even gone this far yet, but if we find you have nexus for income tax purposes, this will likely also mean that the employees you send to those states will have to have their paychecks go to multiple states. As well as having Workers Comp in those states.
------------------------------------------------------------------------------------------------------

So employees would have to have payroll checks issued in the states where we travel?

As you can see it's much more than paying tax on items you buy. Its paying taxes in the state where you performed your duties on the income you made while you were there. In most cases it would be a portion of the entire amount that you billed the client on the final invoice. The state you travel to (in those cases that determine that your company has Nexus there) wants you to pay corporate income tax on the money you made while working there....even having to pay workers comp while you are there.

This seems completely ludicrous given the fact that we are told to travel to those states, not choosing to go there and that we are not selling anything in that state.

Rich Rubasch
Tilt Media Inc.
Video Production, Post, Studio Sound Stage
Founder/President/Editor/Designer/Animator
http://www.tiltmedia.com


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Todd TerryRe: Nexus and Sales Tax when doing production work across state lines
by on Feb 18, 2016 at 10:03:51 pm

[Rich Rubasch] "This seems completely ludicrous given the fact that we are told to travel to those states, not choosing to go there"

I'm not sure you're looking at that part of it the right way, nor is the fact that you are being told to make such a trip a factor in all this voodoo.

No one is making you do anything, yes you are choosing to go there... i.e., you are indeed choosing to go there in order to get a particular job. You could always refuse and say no. So, I don't think that part of it is an argument either way.

As for the rest, yes, that is very complicated. That would fall into the category of stuff that we would hand to our CPA and say "Figure this out, it's what we pay you for."

Pretty complicated.

T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com



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Nick GriffinRe: Nexus and Sales Tax when doing production work across state lines
by on Feb 19, 2016 at 9:30:52 pm

[Todd Terry] "You can avoid the sale tax if you have a sales tax deferment ID number because you are purchasing raw materials to be used in creating a product that you will be selling as a taxable item in Alabama... but of course we don't do that so we pay sales tax on anything we buy."

I believe that, at least where I live, "machinery used in manufacturing" (i.e.- cameras, computers, etc) could be acquired free of tax, BUT...

A few years back I had our accountants provide the forms for doing this here in Maryland. It was one of those multi-page documents that I could only read for a few minutes at a time before seeing spots in front of my eyes. I soon decided that the many, many, many hoops I had to jump through would not offset the amount of non-billable time needed to provide what the state was asking for. Pay the damn tax. Move on and make money.


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Todd TerryRe: Nexus and Sales Tax when doing production work across state lines
by on Feb 19, 2016 at 9:41:26 pm

[Nick Griffin] "Pay the damn tax. Move on and make money."

I think that's generally good advice.

It probably all depends on how you work and the projects you are doing. I can't really conceive of what all it might involve, but sounds to me like Rich is paying boatloads of sales tax on different things... I can't imagine what that would be, but for him it might be a big difference.

As I said, for me, I've never had our GM add it up (maybe I should), but here I would think that sales tax would be a fraction of one percent of any given project's budget... for some projects, it's probably actually zero. For me, I don't know that it has ever fallen outside the "Ehh don't worry about that" realm. It may vary for others.

T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com



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Rich RubaschRe: Nexus and Sales Tax when doing production work across state lines
by on Feb 22, 2016 at 11:25:48 pm

It's not about paying sales tax on things you buy...it's owing a state tax on income you make in that state, rther than paying that tax in the state where you company is located. To determine if you have Nexus in the state you travel and thereby are required to pay income tax to that state, and in some cases pay workers comp for the employees you send there, you have to fill out a Nexus test form for each state you did business in.

I ran the test for all the states we traveled to for shooting and none of them met the requirements for Nexus mostly due to not meeting their minimum sales number, usually $50k.

Look up Nexus requirements for any state that you may have traveled to do a shoot and you may owe taxes in that state just because you went to that state to make money/conduct business there.

Rich Rubasch
Tilt Media Inc.
Video Production, Post, Studio Sound Stage
Founder/President/Editor/Designer/Animator
http://www.tiltmedia.com


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Todd TerryRe: Nexus and Sales Tax when doing production work across state lines
by on Feb 22, 2016 at 11:31:55 pm

Ah... well your original post said sales tax, which did make me wonder "Just how much stuff is he buying??"

Income tax is of course a wildly different thing.

Fortunately we are (mostly) homebodies and have never had to be concerned about anything like that. Work that we do out of state no one really even knows about, except us.

T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com



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Timothy J. AllenRe: Nexus and Sales Tax when doing production work across state lines
by on Feb 24, 2016 at 5:16:20 pm

It sounds like my work is about to become complicated. I'm working on a proposal for subcontracted work to a non-profit organization in Virginia to complete work for the federal government (with agency office headquarters in Washington, D.C) but will travel to Houston to complete the work. I'm proposing the work as consulting services (think onsite technical direction) with no tangible product delivered. There will, however be real-time live video streamed from the Texas site that was "enabled" by my consulting. I expect to do this multiple times in 2016.

This is why I don't plan to do my own accounting. Well, that and the fact that I was a music major in college. I can count to four over and over again, but figuring taxes isn't my forte.


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Rich RubaschRe: Nexus and Sales Tax when doing production work across state lines
by on Feb 24, 2016 at 6:07:11 pm

Here is a link to the Texas form. It does not matter where your client is, who's paying you etc. It is in which state did you work and if your work there (even selling services) meets the test for establishing Nexus in that state while you were working there. Run the test and see if you will qualify for Nexus in Texas!

http://www.cpa.state.tx.us/taxinfo/taxforms/ap-114.pdf

Rich Rubasch
Tilt Media Inc.
Video Production, Post, Studio Sound Stage
Founder/President/Editor/Designer/Animator
http://www.tiltmedia.com


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Timothy J. AllenRe: Nexus and Sales Tax when doing production work across state lines
by on Feb 24, 2016 at 6:56:15 pm

Thanks, Rich!


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