Audit me once, shame on me. Audit me twice…and I’m just one unlucky sap!
Yup, that was the scene over at Cory Shubert Photography in 2006. First, an audit by the IRS looking into my business accounting practices. They found many little things to tag me with and after 4 months of back and forth we settled. I must say, while I wasn’t happy having to pay out, it did bring to light some issues that needed to be corrected and others that I might have continued to let slide had they not been caught. So, I was done, right?
2007 brought the same scene, only this was from the State of MN Revenue Dept. Seems there is this little thing called “use tax” meaning if you buy something online and don’t pay sales tax, then turn around and use in your business and claim it in your taxes as a business expense, the state of MN. wants their cut. MN is one of the first states to go after businesses pretty hard core. The audit went from 2004 to 2007, so I was worried. I mean come on, who hasn’t bought some camera gear or software online? I sure have and continue today, but now I track it and pay a lump sum at the end of the year.
One thing to come out of the MN audit was the sales tax angle that I was missing. Here is the statue as my tax preparer sent it;
“Electronic delivery. When the final photography is transferred electronically to the client, with no physical transfer of prints, negatives, discs, or other tangible items, the entire charge for the photography is exempt. The invoice must clearly state that the photography is transferred electronically. No exemption certificate is necessary.”
Now all my clients get a warning that if they want to save some ching and not get taxed on the shoot they must supply me with ftp info so I can upload the files right to their server, or supply me with a portable HD or thumb drive that I can upload the files to when they are done.
Let’s put it this way, so far all my clients are not paying tax!!!