Missouri Sales Tax Issues for Professional Photographers

Missouri has special rules for sales taxes for photographers

Professional photographers have unique issues when it comes to Missouri sales taxes.


I work with quite a few professional photographers and I’m always being asked about Missouri sales tax.  There seem to be different answers about what is considered taxable and non-taxable here in Missouri.  Well, I decided to get to the bottom of this – I called the Missouri Department of Revenue and this is what they told me.


Service – is not subject to sales tax.  So if you perform the service of photographing a wedding (for example) the service portion of your work is not subject to sales tax.


Product – is subject to sales tax.  So, if you produce a tangible product that you can hold in your hand – like a wedding album – that product is subject to sales tax.  Even if you ship that product out of the state–it’s going to be subject to Missouri sales tax.  Note – that’s for photographers only!  Let’s say you manufacture a product – like wedding garters for example.  You sell those garters online to people all over the country.  If you sell that garter in Missouri, yes, that’s subject to tax, but if you sell it to someone outside of the state – then there is no Missouri sales tax.  Photographers are treated differently on this issue.


Combined service/product is subject to sales tax.  Let’s say you are going to photograph a wedding and the fee is $5,000 and that includes a wedding album book that you provide the bride and groom with at the end. In a situation like this – because the service and the product are priced as one unit – then the whole thing is taxed!


What’s the lesson here?  You separate out the price of your service from your product!  So if that album is worth $500 – then you say the service of taking the photos is $4,500 and the album is $500.  You need to break it out so that your clients will not be taxed on your service of photographing the event.


Here’s a few more things to consider:


Electronic downloads are not taxable.  If your client can purchase the photos by downloading them online – the photos are not subject to sales tax.  It doesn’t matter if the downloads occur across state lines or in Missouri  – downloads are not subject to sales tax.  (That would include things like video games or apps as well.)


One more thing – if you paid sales tax on the product instead of using your business exemption – then you don’t have to charge sales tax on that product!  So if you take the photos and have the wedding book printed up by someplace that charges you sales tax – then you don’t have to charge sales tax when you sell the book!  Remember, even in this situation, you still need to break out the service fee from the product!


Some other thoughts –


What about saying the service is $5,000 and the album is free?  My opinion is that would make the whole thing taxable.   Your clients are basically getting the wedding book for $5,000 and I believe that would make your service taxable.


Okay, so what if I said the service is $5,000 and the wedding album is a penny?  Once again, I would think that would still make your service taxable.  Being realistic, the wedding album is worth more than a penny.  I think you need to price the album at a fair market rate to pass Missouri scrutiny.


The big take away here though is that you must separate out your service fee from your product fee or else you’ll be paying sales tax on all of your work.



Using the Sales Tax Deduction Calculator for a Better Refund

Tax Calculator and Pen

Photo by Dave Dugdale on Flickr.com

To see more photography by Dave Dugdale, see http://www.learningdslrvideo.com/


I was working on a tax return the other day and I called the client to tell him about his refund.  “How did you do it?”  He asked, “When I did it myself on Turbo Tax I owed $600!”


Well, to be honest, my first go round on his tax return I showed him owing $600 too.  What I do is go back and look for little tweaks that I may have missed the first time around.  The sales tax deduction is one place to check and you can do this yourself.


Most people who live in states with an income tax don’t use the sales tax deduction.  For most people, the income tax deduction is the higher deduction.  But if the sales tax deduction is something you use, you want to know about this.  You need to check for a local sales tax.


Let me explain.  Here in Missouri, the state sales tax is 4.225%.  If you’re working in Turbo Tax or just about any other software, it will figure your sales tax deduction based upon the state rate.  What I used to do in the past was go to the department of revenue website and look up the local sales tax rates for each locality and add that to my equation.  Chesterfield, the next suburb over has a 3.7% local sales tax.  You see how that can almost double your sales tax deduction?


But it’s even easier to figure your local rate these days with the IRS sales tax deduction calculator.  Here’s a link:  http://apps.irs.gov/app/stdc/


It’s so easy to use.  You start with the tax year.  They want your income range, the number of exemptions you’re claiming and if you bought any special items like a car.  Then you’ll have to input your zip code.  My zip code has a couple of different sales tax rates so I’ve got to check that I’m in Maryland Heights, MO so they get the right tax rate.  Then it asks if I’ve moved—because if you move they’ll calculate the sales tax deduction for the two areas.


Then you’ll get a chance to check your answers and edit it if you made any typos or anything.   Click continue and it tells you what your sales tax deduction is including your local sales tax rate.  You can print that page out and it will be your back up for the entry that you put in your tax return.


Let me give you an example:  I used an income between $100,000 and $120,000 and I used my city, Maryland Heights, Missouri.  If I just use the regular software program—it would give me a sales tax deduction of $776.  By using the IRS calculator, the sales tax deduction is $1,412.  That’s a difference of $636.  For someone in the 25% tax bracket, it would save them $159 in taxes.


This little tax trick is not going to give you enormous savings, but it’s not a bad return for 5 minutes of your time.